<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 2-75174
'40 Act File No. 811-3338
================================================================================
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. 30 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 31 [x]
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
PATRICIA R. HATLER, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus.
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on November 16, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
<PAGE> 2
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
<S> <C> <C>
N-4 ITEM CAPTION
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
SUPPLEMENT DATED NOVEMBER 16, 2000 TO
PROSPECTUS DATED MAY 1, 2000 FOR
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
THE PURPOSE OF THIS SUPPLEMENT IS TO INFORM YOU OF THE CHANGE OF GENERAL
DISTRIBUTOR FROM NATIONWIDE INVESTMENT SERVICES CORPORATION TO SECURITY
DISTRIBUTORS, INC. NATIONWIDE LIFE INSURANCE COMPANY IS THE ISSUER OF THE
CONTRACTS AND REMAINS OBLIGATED UNDER THE TERMS OF THE CONTRACT. YOU SHOULD KNOW
THAT THERE NO CHANGES IN YOUR CONTRACTUAL RIGHTS AS A RESULT OF THE CHANGE IN
GENERAL DISTRIBUTOR. SHOULD YOU HAVE ANY QUESTIONS WITH REGARD TO THE CHANGE IN
GENERAL DISTRIBUTOR, YOU MAY CALL 1-800-848-6331, TDD 1-800-238-3035 OR WRITE
TO:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 182437
COLUMBUS, OH 43216
THE PARAGRAPH UNDER THE HEADING "NATIONWIDE INVESTMENT SERVICES CORPORATION" ON
PAGE 12 OF YOUR PROSPECTUS IS DELETED AND REPLACED WITH THE FOLLOWING:
SECURITY DISTRIBUTORS, INC.
The contracts are distributed by the general distributor, Security
Distributors, Inc. ("SDI"), 700 SW Harrison Street, Topeka, Kansas
66636-0001. SDI is registered as a broker/dealer with the NASD and is a
wholly-owned subsidiary of Security Benefit Group, Inc., a financial
services holding company wholly owned by Security Benefit Life Insurance
Company.
THE LAST PARAGRAPH UNDER THE HEADING "LEGAL PROCEEDINGS" PROVISION ON PAGE 40 IS
DELETED AND REPLACED WITH THE FOLLOWING:
The general distributor, SDI, is not engaged in any litigation of a
material nature.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY
Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its Nationwide
Multi-Flex Variable Account
The date of this prospectus is May 1, 2000.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Variable annuities are complex investment products with unique benefits and
advantages that may be particularly useful to many investors in meeting
long-term savings and retirement needs. There are, however, costs and charges
associated with some of these unique benefits - costs and charges that do not
exist or are not present with other investment products. With help from
financial consultants or advisers, investors are encouraged to compare and
contrast the costs and benefits of the variable annuity described in this
prospectus with those of other investment products, including other variable
annuity or variable life insurance products offered by Nationwide Life Insurance
Company and its affiliates. This process will aid in determining whether the
purchase of the contract described in this prospectus is consistent with an
individual's goals, risk tolerance, time horizon, marital status, tax situation,
and other personal characteristics and needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THE CONTRACTS
BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
--------------------------------------------------------------------------------
The following underlying mutual funds are available under the contracts:
AIM VARIABLE INSURANCE FUNDS, INC.
- AIM V.I. Capital Appreciation Fund
- AIM V.I. International Equity Fund
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
- American Century VP Advantage
- American Century VP Balanced
- American Century VP Income & Growth
DREYFUS
- Dreyfus Stock Index Fund, Inc.
- The Dreyfus Socially Responsible Growth Fund, Inc.
DREYFUS VARIABLE INVESTMENT FUND
- Appreciation Portfolio (formerly, Capital Appreciation Portfolio)
- Quality Bond Portfolio
- Small Cap Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- VIP Equity-Income Portfolio
- VIP High Income Portfolio*
JANUS ASPEN SERIES
- International Growth Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
- Government Bond Fund
- Money Market Fund
- Nationwide High Income Bond Fund (subadviser: Federated Investment
Counseling)
- Total Return Fund
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- AMT Balanced Portfolio
STRONG OPPORTUNITY FUND II, INC.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- Templeton International Securities Fund: Class 1
THE FOLLOWING UNDERLYING MUTUAL FUND IS 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.
- American Century VP Capital Appreciation*
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
1
<PAGE> 5
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Multi-Flex Variable Account ("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 43.
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; or
- required Nationwide forms,
call:
1-800-451-0070
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 182437
COLUMBUS, OHIO 43216
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
THIS ANNUITY IS NOT:
- A BANK DEPOSIT - FEDERALLY INSURED
- ENDORSED BY A BANK - AVAILABLE IN EVERY STATE
OR GOVERNMENT AGENCY
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 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 used to calculate the variable payment annuity
payments.
CONTRACT VALUE- The total 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.
NATIONWIDE- Nationwide Life Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
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.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408(k) 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 Multi-Flex Variable Account, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
3
<PAGE> 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.................................
INVESTING IN THE CONTRACT..........................
The Variable Account and Underlying
Mutual Funds
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS....................
Contract Maintenance Charge
Contingent Deferred Sales Charge
Variable Account Charges for Contracts
Issued Before November 3, 1997
Variable Account Charges for Contracts
Issued On or After November 3, 1997
School District Processing Fee
Contract Exchange Fee
Premium Taxes
CONTRACT OWNERSHIP.................................
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT..........................
Minimum Initial and Subsequent Purchase
Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE....................................
SURRENDER (REDEMPTION).............................
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Texas Optional
Retirement Program
Surrenders Under a Qualified Plan or
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
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
Death Benefit Payment
REQUIRED DISTRIBUTIONS.............................
Required Distributions for Non-Qualified
Contracts
Required Distributions for Qualified Plans
and Tax Sheltered Annuities
4
<PAGE> 8
Required Distributions for IRAs and
SEP IRAs
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........
5
<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
the lesser of purchase payments or
amounts 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%
--------------------------------------------------------
MAXIMUM ANNUAL CONTRACT
MAINTENANCE CHARGE.............................$30(2)
(1)Starting with the second contract year, the contract owner may withdraw
without a CDSC the greater of:
a) 10% of 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.
(2)Nationwide deducts the contract maintenance charge on each contract
anniversary and on the date of surrender when the contract is surrendered
in full. Nationwide will waive the contract maintenance charge under some
circumstances (see "Contract Maintenance Charge").
VARIABLE ACCOUNT CHARGES(3)
(as a percentage of daily net assets of the variable account)
Actuarial Risk Fee...........................1.30%(4)
Total Variable Account Charges..........1.30%
MAXIMUM CONTRACT EXCHANGE FEE(5)
(when applicable)...............................$40
MAXIMUM SCHOOL DISTRICT PROCESSING FEE(6)
(when applicable).................greater of $30 or
0.40% of contract value
(3)These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account. They are charged on a daily basis at
the annual rate noted above.
(4)For contracts issued before November 3, 1997 or in states that have not
approved the applicable contract modifications, Nationwide will deduct:
a) a mortality and expense risk charge of 1.25% of the daily net assets of
the variable account; and
b) an administration charge of 0.05% of the daily net assets of the
variable account.
See "Expenses of the Variable Account for Contracts Issued Before November 3,
1997."
For contracts issued on or after the later of November 3, 1997, or the date on
which state insurance authorities approve contract modifications, Nationwide
will deduct an actuarial risk fee equal to 1.30% of the daily net assets of the
variable account (see "Expenses of the Variable Account for Contracts Issued On
or After November 3, 1997").
(5)Nationwide may assess a contract exchange fee upon exchange of the contract
for another Nationwide contract (see "Contract Exchange Fee").
(6)Nationwide may assess a school district processing fee to reimburse it for
charges
6
<PAGE> 10
assessed to Nationwide by individual school districts for the processing of
employee payroll deductions (see "School District Processing Fee").
Nationwide may assess a loan processing fee at the time each new loan is
processed. Loans are only available for contracts issued as Qualified Contracts
and Tax Sheltered Annuities. Loans are not available in all states. In addition,
some states may not permit Nationwide to assess a loan processing fee (see "Loan
Privilege").
7
<PAGE> 11
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>
AIM Variable Insurance Funds, Inc. - AIM V.I. Capital 0.62% 0.11% 0.00% 0.73%
Appreciation Fund
AIM Variable Insurance Funds, Inc. - AIM V.I. International 0.75% 0.22% 0.00% 0.97%
Equity Fund
American Century Variable Portfolios, Inc. - American Century 1.00% 0.00% 0.00% 1.00%
VP Advantage
American Century Variable Portfolios, Inc. - American Century 0.90% 0.00% 0.00% 0.90%
VP Balanced
American Century Variable Portfolios, Inc. - American Century 1.00% 0.00% 0.00% 1.00%
VP Capital Appreciation
American Century Variable Portfolios, Inc. - American Century 0.70% 0.00% 0.00% 0.70%
VP Income & Growth
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.04% 0.00% 0.79%
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 - Quality Bond Portfolio 0.65% 0.09% 0.00% 0.74%
Dreyfus Variable Investment Fund - Small Cap Portfolio 0.75% 0.03% 0.00% 0.78%
Fidelity VIP Equity-Income Portfolio 0.48% 0.08% 0.00% 0.56%
Fidelity VIP High Income Portfolio 0.58% 0.11% 0.00% 0.69%
Janus Aspen Series - International Growth Portfolio 0.65% 0.11% 0.00% 0.76%
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 High Income Bond Fund 0.80% 0.15% 0.00% 0.95%
NSAT Total Return Fund 0.58% 0.14% 0.00% 0.72%
Neuberger Berman AMT Balanced Portfolio 0.85% 0.17% 0.00% 1.02%
Strong Opportunity Fund II, Inc. 1.00% 0.14% 0.00% 1.14%
Templeton Variable Products Series Fund - Templeton 0.65% 0.20% 0.00% 0.85%
International Securities Fund: Class 1
-------------------------------------------------------------------------------------------------------------------------------
</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>
Fidelity VIP Equity-Income Portfolio 0.48% 0.09% 0.00% 0.57%
NSAT Nationwide High Income Bond Fund 0.80% 0.50% 0.00% 1.30%
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<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 CDSC, variable account charges of 1.30%, and
the contract maintenance charge, expressed as a percentage of average account
value. Since the average contract value is greater than $1,000, the expense
effect of the contract maintenance charge is reduced accordingly. Deductions for
premium taxes are not reflected but may apply.
For certain contracts which are exchanged for other contracts issued by
Nationwide or an affiliate of Nationwide, the CDSC may be waived and a Contract
Exchange Fee not to exceed $40 may be assessed (see "Contract Exchange Fee").
Under such circumstances, the expenses that follow would be adjusted to reflect
the contract exchange fee and the waiver of the CDSC.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your
at the end of the applicable contract at the end of the
time period applicable time period
----------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs.
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc. 93 116 148 259 23 71 121 259
- AIM V.I. Capital Appreciation Fund
AIM Variable Insurance Funds, Inc. 95 123 160 284 25 78 133 284
- AIM V.I. International Equity Fund
American Century Variable 96 124 162 287 26 79 135 287
Portfolios, Inc. - American Century
VP Advantage
American Century Variable 95 121 157 277 25 76 130 277
Portfolios, Inc. - American Century
VP Balanced
American Century Variable 96 124 162 287 26 79 135 287
Portfolios, Inc. - American Century
VP Capital Appreciation
American Century Variable 93 115 146 256 23 70 119 256
Portfolios, Inc. - American Century
VP Income & Growth
Dreyfus Stock Index Fund, Inc. 88 101 123 208 18 56 96 208
The Dreyfus Socially Responsible 94 117 151 265 24 72 124 265
Growth Fund, Inc.
Dreyfus Variable Investment Fund 93 117 150 264 23 72 123 264
-Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund -
Capital Appreciation Portfolio)
Dreyfus Variable Investment Fund - 93 116 148 260 23 71 121 260
Quality Bond Portfolio
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
If you annuitize your contract
at the end of the applicable
time period
------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc. * 71 121 259
- AIM V.I. Capital Appreciation Fund
AIM Variable Insurance Funds, Inc. * 78 133 284
- AIM V.I. International Equity Fund
American Century Variable * 79 135 287
Portfolios, Inc. - American Century
VP Advantage
American Century Variable * 76 130 277
Portfolios, Inc. - American Century
VP Balanced
American Century Variable * 79 135 287
Portfolios, Inc. - American Century
VP Capital Appreciation
American Century Variable * 70 119 256
Portfolios, Inc. - American Century
VP Income & Growth
Dreyfus Stock Index Fund, Inc. * 56 96 208
The Dreyfus Socially Responsible * 72 124 265
Growth Fund, Inc.
Dreyfus Variable Investment Fund * 72 123 264
-Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund -
Capital Appreciation Portfolio)
Dreyfus Variable Investment Fund - * 71 121 260
Quality Bond Portfolio
------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your
at the end of the applicable contract at the end of the
time period applicable time period
-----------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs.
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dreyfus Variable Investment Fund - 93 117 150 264 23 72 123 264
Small Cap Portfolio
Fidelity VIP Equity-Income 91 110 139 241 21 65 112 241
Portfolio
Fidelity VIP High Income Portfolio 92 114 146 255 22 69 119 255
Janus Aspen Series - International 93 116 149 262 23 71 122 262
Growth Portfolio
NSAT Government Bond Fund 92 113 144 250 22 68 117 250
NSAT Money Market Fund 91 110 138 239 21 65 111 239
NSAT Nationwide High Income Bond 95 122 159 282 25 77 132 282
Fund
NSAT Total Return Fund 93 115 147 258 23 70 120 258
Neuberger Berman AMT Balanced 96 125 163 289 26 80 136 289
Portfolio
Strong Opportunity Fund II, Inc. 97 128 169 302 27 83 142 302
Templeton Variable Products Series 94 119 154 272 24 74 127 282
Fund - Templeton International
Securities Fund: Class 1
-----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
If you annuitize your contract
at the end of the applicable
time period
--------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Variable Investment Fund - * 72 123 264
Small Cap Portfolio
Fidelity VIP Equity-Income * 65 112 241
Portfolio
Fidelity VIP High Income Portfolio * 69 119 255
Janus Aspen Series - International * 71 122 262
Growth Portfolio
NSAT Government Bond Fund * 68 117 250
NSAT Money Market Fund * 65 111 239
NSAT Nationwide High Income Bond * 77 132 282
Fund
NSAT Total Return Fund * 70 120 258
Neuberger Berman AMT Balanced * 80 136 289
Portfolio
Strong Opportunity Fund II, Inc. * 83 142 302
Templeton Variable Products Series * 74 127 272
Fund - Templeton International
Securities Fund: Class 1
--------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are flexible 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
references to "contract owner" will mean "participant" unless otherwise
indicated in the plan.
The contracts can be categorized as:
- Non-Qualified;
- Individual Retirement Annuities (IRAs);
- Roth IRAs;
- SEP IRAs;
- Tax Sheltered Annuities; and
- Qualified.
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 PAYMENT SUBSEQUENT
TYPE PAYMENTS
-------------------------------------------------------
Non-Qualified $1,500 $10
IRA $0 $0
Roth IRA $0 $0
SEP IRA $0 $0
Tax Sheltered $0 $0
Annuity
Qualified $0 $0
-------------------------------------------------------
10
<PAGE> 14
Nationwide may lower the subsequent purchase payment minimum for employer
sponsored deduction programs.
CHARGES AND EXPENSES
For contracts issued before November 3, 1997 or in states which have not
approved applicable contract modifications, Nationwide will deduct:
a) a mortality and expense risk charge of 1.25% of the daily net assets of
the variable account; and
b) an administration charge of 0.05% of the daily net assets of the variable
account.
See "Expenses of the Variable Account for Contracts Issued Before November 3,
1997."
For contracts issued on or after the later of November 3, 1997 or the date state
insurance authorities approve corresponding contract modifications, Nationwide
will deduct an actuarial risk fee of 1.30% of the daily net assets of the
variable account for actuarial risks assumed by Nationwide (see "Expenses of the
Variable Account for Contracts Issued On or After November 3, 1997").
A maximum contract maintenance charge of $30 is assessed against each contract
on the contract anniversary. This charge reimburses Nationwide for
administrative expenses related to contract issuance and maintenance (see
"Contract Maintenance Charge"). Nationwide will waive the contract maintenance
charge for:
1) Tax Sheltered Annuities issued on or after the later of May 1, 1997, or
the date state insurance authorities in a state having a Unified Billing
Authority approve corresponding contract modifications; or
2) contracts issued to fund Qualified Plans (as defined by Section 401(k) of
the Internal Revenue Code) on or after the later of November 3, 1997, or
the date state insurance authorities approve corresponding contract
modifications.
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.
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of the underlying mutual funds and the assessment of a variable
account charge which may vary from contract to contract (for more information on
the calculation of accumulation unit values, see "Determining Variable Account
Value - Valuing an Accumulation Unit"). Please refer to Appendix B
11
<PAGE> 15
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. Nationwide is a member of the Nationwide group of companies 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 Investment Svcs. Corporation.) NISC is a wholly owned subsidiary of
Nationwide Life Insurance Company.
TYPES OF CONTRACTS
The following is a general description of the types of annuity contracts, and is
intended to provide only general information of the various types of contracts;
it is not intended to be comprehensive. The eligibility requirements, tax
benefits, limitations, and other features of these contracts differ one from the
other.
Non-Qualified Annuity Contract
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 a Traditional
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 the statutory period.
Non-Qualified Annuity contracts that are owned by natural persons can defer the
incidence 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 (IRAs) 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 contribution from other IRAs, from Tax Sheltered
Annuities, and from qualified retirement plans, including 401(k) plans.
For further details regarding IRAs, please refer to the disclosure statement
that should have been received when the IRA was established.
Roth IRAs
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
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<PAGE> 16
- 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 a 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.
Qualified Plans
Contracts that are owned by Qualified Plans are not intended to confer tax
benefits on the beneficiaries of the plan; they are used as investment vehicles
for the plan. The income tax consequences to the beneficiary of a Qualified Plan
are controlled by the operation of the plan, not by operation of the assets in
which the plan invests.
Beneficiaries of Qualified Plans should contact their employer and/or trustee of
the plan to obtain and review the plan, trust, summary plan description and
other documents for the tax and other consequences of being a participant in a
qualified plan.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Multi-Flex Variable Account 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
13
<PAGE> 17
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, Roth IRAs, SEP IRAs, Tax Sheltered Annuities, and
Qualified Contracts.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it 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.
14
<PAGE> 18
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC.
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 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 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 guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3.0%
per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any applicable charges including
CDSC.
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<PAGE> 19
STANDARD CHARGES AND DEDUCTIONS
CONTRACT MAINTENANCE CHARGE
Each contract anniversary (and on the date of surrender upon full surrender of
the contract), Nationwide will deduct a contract maintenance charge of $30 to
reimburse it for administrative expenses relating to contract issuance and
maintenance.
For Tax Sheltered Annuities issued on or after the later of May 1, 1997, or the
date on which state insurance authorities approve corresponding contract
modifications, Nationwide will waive the contract maintenance charge for
contracts issued in those states that use a unified billing authority program
(or any similar program) to process purchase payments.
Nationwide will also waive the contract maintenance charge for Qualified Plans
(as defined by Section 401(k) of the Internal Revenue Code) issued on or after
the later of November 3, 1997, or the date state insurance authorities approve
corresponding contract modifications.
The deduction of the contract maintenance charge will be taken proportionately
from each sub-account and the fixed account based on the value in each option as
compared to the total contract value.
Nationwide will not increase the contract maintenance charge. Nationwide will
not reduce or eliminate the contract maintenance charge where it would be
discriminatory or unlawful.
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 the
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. Earnings are not subject to the CDSC, 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.)
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 9%
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
contract maintenance charge and the mortality and expense risk charge or, if
applicable, the actuarial risk fee, since Nationwide may generate a profit from
these charges.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes (see "Non-Qualified Contracts - Natural Persons as Contract
Owners").
Waiver of Contingent Deferred Sales Charge
Starting with the second contract year, the contract owner may withdraw without
a CDSC the greater of:
(a) 10% of each purchase payment; or
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<PAGE> 20
(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.
For Tax Sheltered Annuities, Qualified Contracts and SEP IRAs, Nationwide will
waive the CDSC when:
- the plan participant has participated in the contract for 10 years of
active deferrals;
- the plan participant dies;
- the plan participant experiences a hardship (as provided in Internal
Revenue Code Section 403(b) and as defined by Internal Revenue Code
Section 401(k)), provided that any hardship surrender may not include any
income from salary reduction contributions;
- the plan participant annuitizes after completing 2 years in the contract;
- the plan participant separates from service (as defined in Internal
Revenue Code Section 401(k)(2)(B)) and has participated in the contract
for 5 years; or
- the plan participant becomes disabled (within the meaning of Internal
Revenue Code Section 72(m)(7)).
No CDSC applies to transfers among sub-accounts or between or among the fixed
account and/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 and Nationwide may assess a Contract Exchange
Fee not to exceed $40 (see "Contract Exchange Fee").
The CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
VARIABLE ACCOUNT CHARGES FOR CONTRACTS ISSUED BEFORE NOVEMBER 3, 1997 (OR BEFORE
THE DATE STATE INSURANCE AUTHORITIES APPROVE CONTRACT MODIFICATIONS)
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 charges (0.80%) compensate Nationwide for guaranteeing the
annuity rate of the contracts. This guarantee ensures that the annuity rates
will not change regardless of the death rates of annuity payees or the general
population.
The expense risk charges (0.45%) compensate Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If the mortality and expense risk charge is insufficient to cover actual
expenses, the loss is borne by Nationwide.
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 0.05% of
the daily net assets of the variable account.
The administration charge compensates Nationwide for administrative expenses.
If this charge is insufficient to cover actual expenses, the loss is borne by
Nationwide.
VARIABLE ACCOUNT CHARGES FOR CONTRACTS ISSUED ON OR AFTER NOVEMBER 3, 1997 (OR
THE DATE STATE INSURANCE AUTHORITIES APPROVE CONTRACT MODIFICATIONS)
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<PAGE> 21
Actuarial Risk Fee
Nationwide deducts an actuarial risk fee from the variable account. This amount
is computed on a daily basis and is equal to an annual rate of 1.30% of the
daily net assets of the variable account.
The actuarial risk fee compensates Nationwide for actuarial risks, including
administration expenses relating to contract issuance and maintenance, and
mortality risk expenses.
SCHOOL DISTRICT PROCESSING FEE
For contracts issued on or after the later of November 3, 1997 or the date state
insurance authorities approve corresponding contract modifications, Nationwide
may charge against the contract any charges assessed to Nationwide by individual
school districts for the processing of employee payroll deductions.
This charge will not exceed the greater of $30 or 0.40% of the contract value.
This charge will never exceed the exact amount billed to Nationwide by school
districts for this service.
Nationwide will deduct these charges from the contract:
1) at the time the contract is surrendered;
2) annually;
3) at annuitization; or
4) on any other date Nationwide becomes subject to these charges.
Nationwide will determine the method that will be used to recoup these expenses.
It will be at Nationwide's sole discretion and may be changed without notice to
contract owners.
CONTRACT EXCHANGE FEE
If a contract owner chooses to exchange the contract for another Nationwide
contract (or a contract of any of its affiliates), Nationwide will make a
determination as to the eligibility of such an exchange. In making the
determination, Nationwide will apply its rules and regulations, which may
include assessing a reasonable processing fee for the exchange. This fee will
never exceed $40. The contract exchange fee will be in addition to any contract
maintenance charge that may be applicable.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
5.0%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes. Premium
taxes may be deducted from death benefit proceeds.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract. Purchasers who name
someone other than themselves as the contract owner will have no rights under
the contract.
Contract owners 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:
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<PAGE> 22
- on a Nationwide form;
- signed by the contract owner; and
- received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. 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.
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.
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 78 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. The contract owner can name more
than one beneficiary. Multiple beneficiaries will share the death benefit
equally, unless otherwise specified.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
-------------------------------------------------------
MINIMUM
CONTRACT MINIMUM INITIAL SUBSEQUENT
TYPE PURCHASE PAYMENT PAYMENTS
-------------------------------------------------------
Non-Qualified $1,500 $10
IRA $0 $0
Roth IRA $0 $0
SEP IRA $0 $0
Tax Sheltered $0 $0
Annuity
Qualified $0 $0
-------------------------------------------------------
Nationwide may lower the subsequent purchase payment minimum for employer
sponsored deduction programs.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The
19
<PAGE> 23
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 and/or the fixed account
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 and the fixed account. 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. 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; and
2) amounts allocated to the fixed account.
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 and the fixed account based on current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
(1) the net asset value of the underlying mutual fund as of the end of the
current valuation period; and
(2) the per share amount of any dividend or income distributions made by
the underlying mutual fund (if the ex-dividend date occurs during the
current valuation period).
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(b) is the net asset value of the underlying mutual fund determined as of the
end of the preceding valuation period.
(c) is a factor representing the daily variable account charges. The factor
is equal to an annual rate of 1.30% 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.
TRANSFERS
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. Under no circumstances will
the maximum transferable amount be less than 10% of the fixed account allocation
reaching the end of an interest rate guarantee period. Transfers of the fixed
account allocations must be made within 45 days after reaching the end of an
interest rate guarantee period.
Contract owners who use dollar cost averaging may transfer from the fixed
account to the variable account (but not to Guaranteed Term Options) under the
terms of that program (see "Dollar Cost Averaging").
Transfers to the Fixed Account
Variable account allocations may be transferred to the fixed account at any
time. Normally, Nationwide will not restrict transfers from the variable account
to the fixed account; however, Nationwide may establish a maximum transfer limit
from the variable account to the fixed account. Except as noted below, under no
circumstances will the transfer limit be less than 10% of the current value of
the variable account, less any transfers made in the 12 months preceding the
date the transfer is requested, but not including transfers made prior to the
imposition of the transfer limit. However, where permitted by state law,
Nationwide reserves the right to refuse transfers or purchase payments to the
fixed account 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.
Transfer Requests
Nationwide will accept transfer requests in writing or, in those states that
allow them, over the telephone. Nationwide will use reasonable procedures to
confirm that telephone instructions are genuine and will not be liable for
following telephone instructions that it reasonably determined to be genuine.
Nationwide may withdraw the telephone exchange privilege upon 30 days written
notice to contract owners.
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
Interest Rate Guarantee Period
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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. 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, 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.
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.
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
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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, SEP 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.
SURRENDER (REDEMPTION)
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. 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 TEXAS OPTIONAL RETIREMENT PROGRAM
Redemption restrictions apply to contracts issued under the Texas Optional
Retirement Program.
The Texas Attorney General has ruled that participants in contracts issued under
the Texas Optional Retirement Program may only take withdrawals if:
- the participant dies;
- the participant retires;
- the participant terminates employment due to total disability; or
- the participant that works in a Texas public institution of higher education
terminates employment.
Due to the restrictions described above, a participant under this plan will not
be able to withdraw cash values from the contract unless one of the applicable
conditions is met. However, contract value may be transferred to other carriers,
subject to any CDSC.
Nationwide issues this contract to participants in the Texas Optional Retirement
Program in reliance upon and in compliance with Rule 6c-7 of the Investment
Company Act of 1940.
SURRENDERS UNDER A QUALIFIED PLAN OR TAX SHELTERED ANNUITY
Contract owners of a Qualified Plan or Tax Sheltered Annuity may surrender part
or all of their contract value before the earlier of the
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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 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.
When the contract is issued to fund a Qualified Plan, plan terms and the
Internal Revenue Code may modify these surrender provisions.
LOAN PRIVILEGE
The loan privilege is ONLY available to owners of Qualified Contracts and 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:
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-------------------------------------------------------
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, this fee compensates Nationwide for expenses related to
administering and processing loans.
The fee is taken from the sub-accounts and the fixed account in proportion to
the contract value at the time the loan is processed.
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. 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. It is guaranteed never to fall
below 3.0%.
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.
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
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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.
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.
IRAs, Roth IRAs, SEP IRAs, Qualified Contracts, and Tax Sheltered Annuities may
not be assigned, pledged or otherwise transferred except where allowed by law.
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.
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. 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 Qualified Plan or 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 the fixed account and certain sub-accounts into other
sub-accounts. Contract owners may participate in this program if their contract
value is $5,000 or more. 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 Nationwide High Income Bond Fund, and NSAT Money Market Fund to any
other underlying mutual fund.
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Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new dollar cost averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested. A dollar cost
averaging program which transfers amounts from the fixed account to the variable
account is not the same as an enhanced rate dollar cost averaging program.
Contract owners that wish to utilize dollar cost averaging from the fixed
account should first inquire whether any enhanced rate dollar cost averaging
programs are available.
Enhanced Rate Dollar Cost Averaging
Nationwide may, from time to time, offer enhanced rate dollar cost averaging
programs. 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.
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.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greater of:
1) 10% of all purchase payments made to the contract as of the withdrawal
date; or
2) an amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code.
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.
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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
Qualified Plan or Tax Sheltered Annuity, 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.
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
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a
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variable payment annuity. An assumed investment rate is the percentage rate of
return required to maintain level variable annuity payments. Subsequent variable
annuity payments may be more or less than the first payment based on whether
actual investment performance 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 $500, in which case Nationwide
may make one lump sum payment of the contract value; or
- an annuity payment would be less than $20, in which case Nationwide can
change the frequency of payments to intervals that will result in payments
of at least $20. 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. Qualified Contracts, IRAs, SEP IRAs, and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the plan, contract, and the Internal Revenue Code.
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DEATH BENEFITS
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
If the contract owner who is not the annuitant dies before the annuitization
date, the contingent owner becomes the contract owner. If no contingent owner is
named, the annuitant becomes the contract owner, unless the contract owner at
the time of application, named his or her estate to receive the contract.
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.
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.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
If no beneficiaries survive the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
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.
DEATH BENEFIT PAYMENT
The death benefit value is determined as of the date Nationwide receives:
(1) proper proof of the annuitant's death;
(2) an election specifying the distribution method; and
(3) any state required form(s).
For contracts issued on or after the later of November 3, 1997, or the date
state insurance authorities approve contract modifications, if the annuitant
dies before the first day of the calendar month following his or her 75th
birthday, the death benefit will be the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the contract value as of the most recent five year contract anniversary
before the annuitant's 75th birthday, less an adjustment for amounts
surrendered, plus purchase payments received after that five year contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrenders.
For contracts issued before November 3, 1997 or the date state insurance
authorities approve contract modifications, if the annuitant dies
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before the first day of the calendar month after his or her 75th birthday, the
death benefit will be the greater of:
1) the total of all purchase payments, increased at an annual rate of 5%
simple interest from the date of each purchase payment for each full year
the payment has been in force, less any amounts surrendered; or
2) the contract value.
Insurance regulations in the states of New York and North Carolina prohibit the
death benefit described immediately above. For contracts issued in the states of
New York and North Carolina, the death benefit will be the greater of:
1) the sum of all purchase payments, less any amounts previously surrendered;
or
2) the contract value.
For Tax Sheltered Annuities issued on or after the later of May 1, 1997, or the
date state insurance authorities approve applicable contract modifications and
before May 1, 1998, or the date insurance authorities approve applicable
contract modifications, in states the use a Unified Billing Authority to process
purchase payments, the death benefit will be the greater of:
1) the total of all purchase payments, less any amounts surrendered; or
2) the contract value.
For Tax Sheltered Annuities issued on or after May 1, 1998, or the date
insurance authorities approve applicable contract modifications in states that
use a Unified Billing Authority to process purchase payments, the death benefit
will be the greater of;
1) the total of all purchase payments, less an adjustment for amounts
surrendered; or
2) the contract value.
The adjustment for amounts surrendered will reduce item (1) above in the same
proportion that the contract value was reduced on the date(s) of the partial
surrender(s).
If the annuitant dies after the first day of the calendar month after his or her
75th birthday and before the annuitization date, the death benefit will equal
the contract value.
If the annuitant dies after the annuitization date, payment will be determined
according to the selected annuity payment option.
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; and
b) if the designated beneficiary is the surviving spouse of the deceased
contract owner, the spouse can choose to become the contract owner
instead of receiving a death benefit. Any distributions required
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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 QUALIFIED PLANS AND TAX SHELTERED ANNUITIES
Distributions from Qualified Plans and 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 Qualified Plan or 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.
Distribution commencing on the required distribution date must satisfy MDIB
provisions set forth in the Internal Revenue Code. Those provisions require that
distributions cannot be less than the amount determined by dividing the
annuitant's interest in the Tax Sheltered Annuity determined 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 Qualified
Plan or 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
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payments over his or her life (or a period not longer than his or her life
expectancy) beginning no later than December 31 of the year following the
year in which the annuitant dies.
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 IRAS AND SEP IRAS
Distributions from an IRAs or SEP IRAs 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 IRA
must be distributed by December 31 of the calendar year in which the fifth
anniversary of the contract owner's death occurs, unless:
a) the contract owner names his or her surviving spouse as the beneficiary
and such spouse chooses to:
1) treat the contract as an IRA or SEP IRA established for his or her
benefit; or
2) receive distribution of the contract in substantially equal payments
over his or her life (or a period not longer than his or her life
expectancy) and beginning no later than December 31 of the year in
which the contract owner would have reached age 70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a period
not longer than his or her life expectancy) beginning no later than
December 31 of the year following the year of the contract owner's death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another IRA or SEP IRA 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)(i) 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 IRA or SEP IRA must
annually report the amount of non-deductible purchase payments, the amount of
any distribution, the amount by which non-deductible purchase payments for all
years exceed nontaxable distributions for all years, and the total balance of
all IRAs.
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IRA and SEP IRA 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 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 "non-qualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- 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.
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The Internal Revenue Code sets forth different income tax rules for the
following types of annuity contracts:
- IRAs;
- Roth IRAs;
- SEP IRAs;
- Tax Sheltered Annuities; and
- "Non-Qualified Annuities."
IRAs and SEP IRAs
Distributions from IRAs and SEP IRAs 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 a 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;
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- 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.
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.
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A special rule applies to distributions from contracts that have investments
that were made prior to August 14, 1982. For those contracts, distributions that
are made prior to the annuitization date are treated first as a recovery of the
investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Internal Revenue Code imposes a penalty tax if a distribution is made before
the contract owner reaches age 59 1/2. The amount of the penalty is 10% of the
portion of any distribution that is includible in gross income. The penalty tax
does not apply if the distribution is:
- the result of a contract owner's death;
- the result of a contract owner's disability, as defined in the Internal
Revenue Code;
- one of a series of substantially equal periodic payments made over the life
(or life expectancy) of the contract owner or the joint lives (or joint life
expectancies) of the contract owner and the beneficiary selected by the
contract owner to receive payment under the annuity payment option selected
by the contract owner; or
- is allocable to an investment in the contract before August 14, 1982.
Non-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; or
- 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;
- 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).
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Mandatory back-up withholding rates are 31% of income that is distributed.
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NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in accordance
with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross income
for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
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
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requirements will not be treated as an annuity, unless
- the failure to diversify was accidental;
- the failure is corrected; and
- a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail 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
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27, 1998, the District Court denied, in part, and granted, in part, motions to
dismiss the complaint filed by Nationwide and American Century. The remaining
claims against Nationwide allege securities fraud, common law fraud, civil
conspiracy, and breach of contract. The District Court, on December 2, 1998,
issued an order denying plaintiffs' motion for class certification and the
appeals court declined to review the order denying class certification upon
interlocutory appeal. On June 11, 1999, the District Court denied the
plaintiffs' motion to amend their complaint and reconsider class certification.
In January 2000, Nationwide and American Century settled this lawsuit now
limited to the claims of the two named plaintiffs. On February 9, 2000 the court
dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended complaint seeks
unspecified compensatory and punitive damages. No class has been certified. On
June 11, 1999, Nationwide and the other named defendants filed a motion to
dismiss the amended complaint. On March 8, 2000, the court denied the motion to
dismiss the amended complaint filed by Nationwide and other named defendants.
Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, NISC, is not engaged in any litigation of any material
nature.
ADVERTISING 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;
41
<PAGE> 45
- 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 Magaine;
- Financial World;
- Consumer Reports;
- Business Week;
- Time;
- Newsweek;
- National Underwriter; and
- News and World Report;
- LIMRA;
- Value;
- Best's Agent Guide;
- Western Annuity Guide;
- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
- Variable Annuity Research & Data Service
(The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
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 deduction of all charges
that could be made to the contract, 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 $10,000 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
42
<PAGE> 46
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. 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 $10,000 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. If
the underlying mutual fund has been available in the variable account for less
than one year (or if the underlying mutual fund is effective for less than one
year), standardized and non-standardized return is not annualized. 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.
43
<PAGE> 47
SUB-ACCOUNT PERFORMANCE SUMMARY
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------------------------------------------------------------------------------
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/99 to 12/31/99 to 12/31/99 Account
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc. - AIM V.I. Capital 32.74% N/A 17.96% 11/03/97
Appreciation Fund
AIM Variable Insurance Funds, Inc. - AIM V.I. 43.03% N/A 22.75% 11/03/97
International Equity Fund
American Century Variable Portfolios, Inc. - American 3.27% 9.74% 6.05% 08/15/91
Century VP Advantage
American Century Variable Portfolios, Inc. - American 52.39% 9.71% 7.43% 02/14/91
Century VP Capital Appreciation
American Century Variable Portfolios, Inc. - American 6.49% N/A 15.47% 11/03/97
Century VP Income & Growth
Dreyfus Stock Index Fund, Inc. 9.04% 24.33% 18.20% 09/20/93
The Dreyfus Socially Responsible Growth Fund, Inc. 18.39% 24.75% 21.00% 05/02/94
Dreyfus Variable Investment Fund -Appreciation 0.01% N/A 12.85% 11/03/97
Portfolio (formerly, Dreyfus Variable Investment Fund
- Capital Appreciation Portfolio)
Dreyfus Variable Investment Fund - Quality Bond -10.84% N/A 0.06% 09/01/95
Portfolio
Dreyfus Variable Investment Fund - Small Cap Portfolio 11.55% 11.81% 10.61% 05/02/94
Fidelity VIP Equity-Income Portfolio -5.05% 14.67% 12.05% 09/02/93
Fidelity VIP High Income Portfolio -3.25% 6.57% 5.02% 05/02/94
Janus Aspen Series - International Growth Portfolio 69.91% N/A 34.00% 11/03/97
NSAT Government Bond Fund -13.15% 2.97% 3.88% 12/17/82
NSAT Money Market Fund -6.51% 0.40% 0.75% 12/07/82
NSAT Nationwide High Income Bond Fund -8.07% N/A -2.43% 11/03/97
NSAT Total Return Fund -4.45% 16.85% 11.08% 12/21/82
Neuberger Berman AMT Balanced Portfolio 21.83% 14.54% 9.24% 02/14/91
Strong Opportunity Fund II, Inc. 23.16% N/A 17.24% 09/01/95
Templeton Variable Products Series Fund - Templeton 12.01% 12.97% 10.59% 05/02/94
International Fund: Class 1
-------------------------------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE> 48
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/99
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/99 to 12/31/99 Fund Effective
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc. - AIM V.I. Capital 42.44% 23.76% 20.54% 05/05/93
Appreciation Fund
AIM Variable Insurance Funds, Inc. - AIM V.I. 52.73% 20.12% 17.05% 05/05/93
International Equity Fund
American Century Variable Portfolios, Inc. - American 12.97% 12.39% 8.64% 08/01/91
Century VP Advantage
American Century Variable Portfolios, Inc. - American 62.09% 12.58% 9.73% 11/20/87
Century VP Capital Appreciation
American Century Variable Portfolios, Inc. - American 16.19% N/A 22.69% 10/30/97
Century VP Income & Growth
Dreyfus Stock Index Fund, Inc. 18.74% 26.22% 15.96% 09/29/89
The Dreyfus Socially Responsible Growth Fund, Inc. 28.09% 26.80% 22.23% 10/06/93
Dreyfus Variable Investment Fund -Appreciation 9.71% 23.46% 18.10% 04/05/93
Portfolio (formerly, Dreyfus Variable Investment Fund
- Capital Appreciation Portfolio)
Dreyfus Variable Investment Fund - Quality Bond -1.43% 5.86% 6.46% 08/31/90
Portfolio
Dreyfus Variable Investment Fund - Small Cap Portfolio 21.25% 14.20% 33.85% 08/31/90
Fidelity VIP Equity-Income Portfolio 4.65% 16.87% 12.79% 10/09/86
Fidelity VIP High Income Portfolio 6.45% 9.18% 10.79% 09/19/85
Janus Aspen Series - International Growth Portfolio 79.61% 31.32% 26.28% 05/02/94
NSAT Government Bond Fund -3.92% 5.82% 6.05% 11/08/82
NSAT Money Market Fund 3.19% 3.58% 3.38% 11/10/81
NSAT Nationwide High Income Bond Fund 1.55% N/A 3.45% 10/31/97
NSAT Total Return Fund 5.25% 19.01% 13.09% 11/08/82
Neuberger Berman AMT Balanced Portfolio 31.53% 17.03% 10.97% 02/28/89
Strong Opportunity Fund II, Inc. 32.86% 21.54% 19.25% 05/08/92
Templeton Variable Products Series Securities Fund - 21.71% 15.45% 13.63% 05/01/92
Templeton International Fund: Class 1
-------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 49
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History.......................................1
Services..............................................................1
Purchase of Securities Being Offered..................................2
Underwriters..........................................................2
Calculation of Performance............................................2
Annuity Payments......................................................3
Financial Statements..................................................4
46
<PAGE> 50
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is an open-end, series, management investment
company. Shares of the Funds are currently offered to insurance company separate
accounts to fund benefits of variable annuity contracts and variable life
insurance policies. AIM Advisors, Inc. ("AIM"), the investment advisor for each
Fund, continuously reviews and, from time to time, changes the portfolio
holdings of each Fund in pursuit of each Fund's objective.
AIM V.I. CAPITAL APPRECIATION FUND
The Fund's investment objective is growth of capital through investment in
common stocks, with emphasis on medium and small sized growth opportunities.
AIM V.I. INTERNATIONAL EQUITY FUND
The Fund's investment objective is to provide long-term growth of capital by
investing in a diversified portfolio of international equity securities whose
issuers are considered to have strong earnings momentum.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end management investment
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 ADVANTAGE
Investment Objective: Current income and capital growth. The Fund will seek
to achieve its objective by investing in three types of securities. The
Fund's investment manager intends to invest approximately (i) 20% of the
Fund's assets in securities of the United States government and its agencies
and instrumentalities and repurchase agreements collateralized by such
securities with a weighted average maturity of six months or less, i.e., cash
or cash equivalents; (ii) 40% of the Fund's assets in fixed income securities
of the United States government and its agencies and instrumentalities with a
weighted average maturity of three to ten years; and (iii) 40% of the Fund's
assets in equity securities that are considered by management to have
better-than-average prospects for appreciation. Assets will be purchased or
sold, as the case may be, as is necessary in response to changes in market
value to maintain the asset mix of the Fund's portfolio at approximately 60%
cash, cash equivalents and fixed income securities and 40% equity securities.
There can be no assurance that the Fund will achieve its investment
objective.
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.
47
<PAGE> 51
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
primarily 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.
DREYFUS STOCK INDEX FUND
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.
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.
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.
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
48
<PAGE> 52
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. The Dreyfus Corporation ("Dreyfus") serves as the Fund's
manager. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation.
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.
QUALITY BOND PORTFOLIO
Investment Objective: To provide the maximum amount of current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity. The Portfolio invests in debt obligations of corporations, the
U.S. Government and its agencies and instrumentalities, and major U.S.
banking institutions. At least 80% of the value of the Portfolio's net assets
will consist of obligation of securities issued or guaranteed as to principal
and interest by the U.S. Government or its agencies or instrumentalities and
corporations which, at the time of purchase by the Portfolio's, are rated at
least A by Moody's or Standard & Poor's, or determined to be of comparable
quality by The Dreyfus Corporation. The Quality Bond Portfolio also may
invest in Municipal Obligations. In addition, at least 65% of the value of
the Series assets (except when maintaining a temporary defensive position)
will be invested in bond, debentures and other debt instruments.
SMALL CAP PORTFOLIO
Investment Objective: Seeks to maximize capital appreciation. The Portfolio
invests principally in common stocks. This Portfolio will be particularly
alert to companies which Dreyfus considers to be emerging smaller-sized
companies believed to be characterized by new or innovative products,
services or processes which should enhance prospects for growth in future
earnings.
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 Fund and
its 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 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
49
<PAGE> 53
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.
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.
INTERNATIONAL GROWTH PORTFOLIO
Investment Objective: Seeks long-term growth of capital. It pursues this
objective primarily through investments in common stocks of issuers located
outside the United States. The Portfolio has the flexibility to invest in a
worldwide basis in companies and other organizations of any size, regardless
of country of organization or place of principal business activity. The
Portfolio normally invests 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 at times invest in U.S.
issuers, and it may at times invest all of its assets in fewer than five
countries or even in a single country.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the funds listed below, each with its own investment objectives. Shares of
NSAT will be sold primarily to life insurance company separate accounts to fund
the benefits under variable life insurance policies and variable annuity
contracts issued by life insurance companies. The assets of NSAT are managed by
Villanova Mutual Fund Capital Trust ("VMF"), an indirect subsidiary of
Nationwide Financial Services, Inc.
GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of securities
issued or backed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET FUND
Investment Objective: As high a level of current income as is consistent with
the preservation of capital and maintenance of liquidity.
NATIONWIDE HIGH INCOME BOND FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks to provide high current income by investing
primarily in a professionally managed, diversified portfolio of fixed income
securities. To meet its objective, the Fund intends to invest at least 65% of
its assets in lower-rated fixed income securities such as preferred stocks,
bonds, debentures, notes, equipment lease certificates and equipment trust
certificates which are rated BBB or lower by S&P or Fitch Investors Service
or Baa or lower by Moody's (or if not rated, are determined by the Fund's
subadviser to be of a comparable quality). Such investments are commonly
referred to as "junk bonds." For a further discussion of lower-rated
securities, please see the "High Yield Securities" section of the Fund's
prospectus. Federated Investment Counseling serves as the Fund's subadviser.
50
<PAGE> 54
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable, long-term total return on
invested capital.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust ("NB AMT") is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the NB Trust 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 investment adviser is Neuberger Berman Management Incorporated ("NB
Management").
AMT BALANCED PORTFOLIO
Investment Objective: Long-term capital growth and reasonable current income
without undue risk to principal. The Portfolio will seek to achieve its
objective through investment of a portion of its assets in common stocks and
a portion of its assets in debt securities. NB Management anticipates that
the Portfolio's investments will normally be managed so that approximately
60% of the Portfolio's total assets will be invested in common stocks and the
remaining assets will be invested in debt securities. However, depending on
the NB Management's views regarding current market trends, the common stock
portion of the Portfolio's investments may be adjusted downward as low as 50%
or upward as high as 70%. At least 25% of the Portfolio's assets will be
invested in fixed income senior securities.
STRONG OPPORTUNITY FUND II, INC.
Strong Opportunity Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. The Strong Opportunity Fund II, Inc. was
incorporated in Wisconsin and may 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. serves as
investment advisor for the Fund.
Investment Objective: Capital appreciation through investments in a
diversified portfolio of equity securities.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund is an open-end, diversified management
investment company organized as a business trust under the laws of Massachusetts
on February 25, 1988. The Trust was organized primarily as an investment vehicle
for use in connection with variable annuity contracts and variable life
insurance policies offered by life insurance companies. The investment manager
is Templeton Investment Counsel, Inc.
TEMPLETON INTERNATIONAL SECURITIES FUND - CLASS 1
Investment Objective: To seek long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized will be
incidental.
51
<PAGE> 55
APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIM Variable Insurance 11.184821 15.964823 42.74% 172,141 1999
Funds, Inc. - AIM V.I. 9.498576 11.184821 17.75% 75,146 1998
Capital Appreciation 10.000000 9.498576 -5.01% 2,066 1997**
Fund - Q
AIM Variable Insurance 11.184821 15.964823 42.74% 5,381 1999
Funds, Inc. - AIM V.I. 9.498576 11.184821 17.75% 5,515 1998
Capital Appreciation 10.000000 9.498576 -5.01% 626 1997**
Fund - NQ
AIM Variable Insurance 11.300603 17.293870 53.03% 18,086 1999
Funds, Inc. - AIM V.I. 9.913890 11.300603 13.99% 11,832 1998
International Equity 10.000000 9.913890 -0.86% 591 1997**
Fund - Q
AIM Variable Insurance 11.300603 17.293870 53.03% 135 1999
Funds, Inc. - AIM V.I. 9.913890 11.300603 13.99% 456 1998
International Equity 10.000000 9.913890 -0.86% 0 1997
Fund - NQ
American Century 18.104123 20.506237 13.27% 335,376 1999
Variable Portfolios, 15.651770 18.104123 15.67% 398,891 1998
Inc. - American Century 14.055040 15.651770 11.36% 442,702 1997
VP Advantage - Q 13.035463 14.055040 7.82% 511,115 1996
11.312248 13.035463 15.23% 513,818 1995
11.343435 11.312248 -0.27% 518,729 1994
10.757355 11.343435 5.45% 467,066 1993
11.325089 10.757355 -5.01% 319,109 1992
10.000000 11.325089 13.25% 10,677 1991
----------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 56
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century 18.104123 20.506237 13.27% 121,987 1999
Variable Portfolios, 15.651770 18.104123 15.67% 156,744 1998
Inc. - American Century 14.055040 15.651770 11.36% 169,301 1997
VP Advantage - NQ 13.053463 14.055040 7.82% 199,799 1996
11.312248 13.035463 15.23% 209,516 1995
11.343435 11.312248 -0.27% 237,606 1994
10.757355 11.343435 5.45% 225,188 1993
11.325089 10.757355 -5.01% 163,922 1992
10.000000 11.325089 13.25% 3,898 1991
American Century 10.000000 10.579044 5.79% 1,669 1999
Variable Portfolios,
Inc. - American Century
VP Balanced -Q
American Century 10.000000 10.579044 5.79% 1,813 1999
Variable Portfolios,
Inc. - American Century
VP Balanced -NQ
American Century 14.321327 23.256156 62.39% 1,039,334 1999
Variable Portfolios, 14.829811 14.321327 -3.43% 1,194,132 1998
Inc. - American Century 15.531281 14.829811 -4.52% 1,536,676 1997
VP Capital Appreciation 16.447846 15.531281 -5.57% 1,991,010 1996
- Q 12.711014 16.447846 29.40% 1,986,887 1995
13.030369 12.711014 -2.45% 1,855,905 1994
11.967533 13.030369 8.88% 1,492,249 1993
12.290177 11.967533 -2.63% 846,374 1992
10.000000 12.290177 22.90% 18,446 1991
----------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 57
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century 14.321327 23.256156 62.39% 395,130 1999
Variable Portfolios, 14.829811 14.321327 -3.43% 509,808 1998
Inc. - American Century 15.531281 14.829811 -4.52% 643,503 1997
VP Capital Appreciation 16.447846 15.531281 -5.57% 896,863 1996
- NQ 12.711014 16.447846 29.40% 956,826 1995
13.030369 12.711014 -2.45% 1,058,520 1994
11.967533 13.030369 8.88% 984,830 1993
12.290177 11.967533 -2.63% 508,166 1992
10.000000 12.290177 22.90% 25,910 1991
American Century 13.027526 15.175314 16.49% 576,733 1999
Variable Portfolios, 10.403924 13.027526 25.22% 319,964 1998
Inc. - American Century 10.000000 10.403924 4.04% 18,598 1997**
VP Income & Growth - Q
American Century 13.027526 15.175314 16.49% 25,799 1999
Variable Portfolios, 10.403924 13.027526 25.22% 21,051 1998
Inc. - American Century 10.000000 10.403924 4.04% 2,246 1997**
VP Income & Growth - NQ
Dreyfus Stock Index 27.730490 33.009632 19.04% 3,233,328 1999
Fund, Inc. - Q 21.913276 27.730490 26.55% 2,822,344 1998
16.698256 21.913276 31.23% 2,033,357 1997
13.807559 16.698256 20.94% 995,299 1996
10.227308 13.807559 35.01% 489,045 1995
10.271065 10.227308 -0.43% 297,344 1994
10.000000 10.271065 2.71% 65,529 1993
Dreyfus Stock Index 27.730490 33.009632 19.04% 496,349 1999
Fund, Inc. - NQ 21.913276 27.730490 26.55% 515,394 1998
16.698256 21.913276 31.23% 456,512 1997
13.807559 16.698256 20.94% 321,661 1996
10.227308 13.807559 35.01% 210,808 1995
10.271065 10.227308 -0.43% 185,724 1994
10.000000 10.271065 2.71% 100,168 1993
----------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 58
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Dreyfus Socially 25.825425 33.157285 28.39% 1,718,536 1999
Responsible Growth 20.223412 25.825425 27.70% 1,409,837 1998
Fund, Inc. - Q 15.953248 20.223412 26.77% 967,915 1997
13.333625 15.953248 19.65% 399,889 1996
10.039093 13.333625 32.82% 94,479 1995
10.000000 10.039093 0.39% 16,111 1994
The Dreyfus Socially 25.825425 33.157285 28.39% 82,100 1999
Responsible Growth 20.223412 25.825425 27.70% 72,378 1998
Fund, Inc. - NQ 15.953248 20.223412 26.77% 59,654 1997
13.333625 15.953248 19.65% 30,211 1996
10.039093 13.333625 32.82% 7,847 1995
10.000000 10.039093 0.39% 1,221 1994
Dreyfus Variable 13.166473 14.484129 10.01% 814,540 1999
Investment Fund 10.244238 13.166473 28.53% 410,872 1998
-Appreciation Portfolio 10.000000 10.244238 2.44% 2,752 1997**
- Q(1)
Dreyfus Variable 13.166473 14.484129 10.01% 41,564 1999
Investment Fund 10.244238 13.166473 28.53% 31,894 1998
-Appreciation Portfolio 10.000000 10.244238 2.44% 487 1997**
- NQ(1)
Dreyfus Variable 12.008318 11.873090 -1.13% 501,629 1999
Investment Fund - 11.533218 12.008318 4.12% 529,886 1998
Quality Bond Portfolio 10.679640 11.533218 7.99% 377,157 1997
- Q 10.493309 10.679640 1.78% 202,913 1996
10.000000 10.493309 4.93% 9,201 1995
----------------------------------------------------------------------------------------------------------------------
(1) Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
</TABLE>
55
<PAGE> 59
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dreyfus Variable 12.008318 11.873090 -1.13% 30,684 1999
Investment Fund - 11.533218 12.008318 4.12% 35,289 1998
Quality Bond Portfolio 10.679640 11.533218 7.99% 30,748 1997
- NQ 10.493309 10.679640 1.78% 13,559 1996
10.000000 10.493309 4.93% 626 1995
Dreyfus Variable 16.742421 20.350320 21.55% 3,949,521 1999
Investment Fund - Small 17.567589 16.742421 -4.70% 4,221,501 1998
Cap Portfolio - Q 15.245571 17.567589 15.23% 3,392,728 1997
13.249127 15.245571 15.07% 1,991,389 1996
10.374796 13.249127 27.70% 709,274 1995
10.000000 10.374796 3.75% 137,041 1994
Dreyfus Variable 16.742421 20.350320 21.55% 118,642 1999
Investment Fund - Small 17.567589 16.742421 -4.70% 154,140 1998
Cap Portfolio - NQ 15.245571 17.567589 15.23% 173,470 1997
13.249127 15.245571 15.07% 132,109 1996
10.374796 13.249127 27.70% 57,885 1995
10.000000 10.374796 3.75% 21,950 1994
Fidelity VIP 22.645632 23.766053 4.95% 4,882,607 1999
Equity-Income Portfolio 20.553936 22.645632 10.18% 5,377,059 1998
- Q 16.255386 20.553936 26.44% 4,809,504 1997
14.412060 16.255386 12.79% 3,685,628 1996
10.808255 14.412060 33.34% 2,504,171 1995
10.227513 10.808255 5.68% 1,591,113 1994
10.000000 10.227513 2.28% 345,527 1993
Fidelity VIP 22.645632 23.766053 4.95% 899,955 1999
Equity-Income Portfolio 20.553936 22.645632 10.18% 1,151,378 1998
- NQ 16.255386 20.553936 26.44% 1,235,093 1997
14.412060 16.255386 12.79% 1,140,873 1996
10.808255 14.412060 33.34% 1,004,513 1995
10.227513 10.808255 5.68% 917,381 1994
10.000000 10.227513 2.28% 368,492 1993
----------------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 60
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP High 14.538235 15.519485 6.75% 1,552,373 1999
Income Portfolio - Q 15.396163 14.538235 -5.57% 1,649,380 1998
13.256841 15.396163 16.14% 1,184,586 1997
11.779381 13.256841 12.54% 621,493 1996
9.895223 11.779381 19.04% 210,727 1995
10.000000 9.895223 -1.05% 33,204 1994
Fidelity VIP High 14.538235 15.519485 6.75% 64,852 1999
Income Portfolio - NQ 15.396163 14.538235 -5.57% 84,449 1998
13.256841 15.396163 16.14% 70,227 1997
11.779381 13.256841 12.54% 33,405 1996
9.895223 11.779381 19.04% 11,249 1995
10.000000 9.895223 -1.05% 2,726 1994
Janus Aspen Series - 11.516019 20.718419 79.91% 684,662 1999
International Growth 9.952334 11.516019 15.71% 313,231 1998
Portfolio - Q 10.000000 9.952334 -0.48% 978 1997**
Janus Aspen Series - 11.516019 20.718419 79.91% 28,317 1999
International Growth 9.952334 11.516019 15.71% 12,850 1998
Portfolio - NQ 10.000000 9.952334 -0.48% 2,117 1997**
NSAT Government Bond 35.013105 33.746688 -3.62% 770,147 1999
Fund - Q 32.572519 35.013105 7.49% 895,885 1998
30.092479 32.572519 8.24% 864,418 1997
29.463573 30.092479 2.13% 2,948,795 1996
25.138302 29.463573 17.21% 3,276,421 1995
26.318797 25.138302 -4.49% 3,538,336 1994
24.348055 26.318797 8.09% 3,946,493 1993
22.869936 24.348055 6.46% 2,650,975 1992
19.854919 22.869936 15.19% 1,805,156 1991
18.372987 19.854919 8.07% 1,291,591 1990
----------------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 61
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT Government Bond 35.026017 33.759140 -3.62% 225,941 1999
Fund - NQ 32.584532 35.026017 7.49% 313,333 1998
30.103580 32.584532 8.24% 306,943 1997
29.474435 30.103580 2.13% 1,371,551 1996
25.147577 29.474435 17.21% 1,618,704 1995
26.328516 25.147577 -4.49% 1,893,807 1994
24.357055 26.328516 8.09% 2,350,137 1993
22.878402 24.357055 6.46% 1,501,470 1992
19.862268 22.878402 15.19% 976,874 1991
18.379796 19.862268 8.07% 750,363 1990
NSAT Money Market Fund 21.944976 22.709765 3.49% 450,327 1999
- Q* 21.120495 21.944976 3.90% 405,666 1998
20.329483 21.120495 3.89% 386,925 1997
19.595876 20.329483 3.74% 1,617,637 1996
18.790546 19.595876 4.29% 1,618,571 1995
18.325918 18.790546 2.54% 1,636,119 1994
18.069824 18.325918 1.42% 1,647,900 1993
17.705124 18.069824 2.06% 1,840,923 1992
16.950132 17.705124 4.45% 2,323,043 1991
15.891433 16.950132 6.66% 2,678,914 1990
NSAT Money Market Fund 23.843612 24.674569 3.49% 53,830 1999
- NQ* 22.947799 23.843612 3.90% 39,677 1998
22.088348 22.947799 3.89% 52,975 1997
21.291272 22.088348 3.74% 600,726 1996
20.416267 21.291272 4.29% 665,100 1995
19.911440 20.416267 2.54% 831,132 1994
19.633190 19.911440 1.42% 819,892 1993
19.236937 19.633190 2.06% 1,117,454 1992
18.416623 19.236937 4.45% 1,684,322 1991
17.266332 18.416623 6.66% 2,083,996 1990
NSAT Nationwide High 10.658111 10.855151 1.85% 31,261 1999
Income Bond Fund - Q 10.206766 10.658111 4.42% 26,163 1998
10.000000 10.206766 2.07% 279 1997**
----------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 62
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide High 10.658111 10.855151 1.85% 1,363 1999
Income Bond Fund - NQ 10.206766 10.658111 4.42% 1,104 1998
10.000000 10.206766 2.07% 0 1997**
NSAT Total Return Fund 92.558757 97.698445 5.55% 1,191,087 1999
- Q 79.422176 92.558757 16.54% 1,294,956 1998
62.170693 79.422176 27.75% 1,185,035 1997
51.701438 62.170693 20.25% 5,119,908 1996
40.575816 51.701438 27.42% 5,049,123 1995
40.671816 40.575816 -0.24% 5,094,417 1994
37.150744 40.671816 9.48% 4,467,810 1993
34.794462 37.150744 6.77% 3,578,781 1992
25.454897 34.794462 36.69% 2,974,227 1991
28.044760 25.454897 -9.23% 2,734,562 1990
NSAT Total Return Fund 89.896489 94.888344 5.55% 41,363 1999
- NQ 77.137765 89.896489 16.54% 298,279 1998
60.382482 77.137765 27.75% 318,518 1997
50.214359 60.382482 20.25% 2,180,633 1996
39.408735 50.214359 27.42% 2,273,685 1995
39.501981 39.408735 -0.24% 2,360,160 1994
36.082181 39.501981 9.48% 2,184,517 1993
33.793676 36.082181 6.77% 1,671,604 1992
24.722750 33.793676 36.69% 1,370,409 1991
27.238121 24.722750 -9.23% 1,268,584 1990
Neuberger Berman AMT 20.316082 26.782503 31.83% 1,420,544 1999
Balanced Portfolio - Q 18.349145 20.316082 10.72% 1,672,034 1998
15.563120 18.349145 17.90% 1,725,578 1997
14.753402 15.563120 5.49% 1,766,421 1996
12.077573 14.753402 22.16% 1,697,674 1995
12.661508 12.077573 -4.61% 1,651,413 1994
12.050347 12.661508 5.07% 1,478,589 1993
11.299008 12.050347 6.65% 743,247 1992
10.000000 11.29008 12.99% 13,232 1991
----------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE> 63
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENTAGE CHANGE NUMBER OF YEAR
VALUE AT VALUE AT END OF IN ACCUMULATION ACCUMULATION
BEGINNING OF PERIOD UNIT VALUE UNITS AT END
PERIOD OF PERIOD
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 20.316082 26.782503 31.83% 400,892 1999
Balanced Portfolio - NQ 18.349145 20.316082 10.72% 549,897 1998
15.563120 18.349145 17.90% 620,263 1997
14.753402 15.563120 5.49% 702,451 1996
12.077573 14.753402 22.16% 728,876 1995
12.661508 12.077573 -4.61% 844,181 1994
12.050347 12.661508 5.07% 927,960 1993
11.299008 12.050347 6.65% 370,418 1992
10.000000 11.299008 12.99% 14,765 1991
Strong Opportunity Fund 16.920120 22.530007 33.16% 1,462,965 1999
II - Q 15.098205 16.920120 12.07% 1,309,839 1998
12.193238 15.098205 23.82% 897,935 1997
10.456863 12.193238 16.61% 408,289 1996
10.000000 10.456863 4.57% 14,374 1995
Strong Opportunity Fund 16.920120 22.530007 33.16% 68,512 1999
II - NQ 15.098205 16.920120 12.07% 70,745 1998
12.193238 15.098205 23.82% 62,437 1997
10.456863 12.193238 16.61% 35,456 1996
10.000000 10.456863 4.57% 1,437 1995
Templeton Variable 16.833378 20.538218 22.01% 1,910,109 1999
Products Series Fund - 15.599596 16.833378 7.91% 2,030,341 1998
Templeton International 13.869569 15.599596 12.47% 1,817,862 1997
Securities Fund: Class 11.329203 13.869569 22.42% 1,044,821 1996
1 - Q 9.913613 11.329203 14.28% 503,599 1995
10.000000 9.913613 -0.86% 161,196 1994
Templeton Variable 16.833378 20.538218 22.01% 60,501 1999
Products Series Fund - 15.599596 16.833378 7.91% 80,680 1998
Templeton International 13.869569 15.599596 12.47% 96,814 1997
Securities Fund: Class 11.329203 13.869569 22.42% 66,863 1996
1 - NQ 9.913613 11.329203 14.28% 39,371 1995
10.000000 9.913613 -0.86% 24,273 1994
------------------------- ------------------- ------------------- ------------------- -------------------- -----------
</TABLE>
*The 7-day yield on the NSAT Money Market Fund as of December 31, 1999 was
4.08%.
**These underlying mutual funds were added to the variable account on November
3, 1997. Condensed Financial Information for these funds for 1997 reflects
values from November 3, 1997 to December 31, 1997.
60
<PAGE> 64
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 2000. The
prospectus may be obtained from Nationwide Life Insurance Company by writing
P.O. Box 182437, One Nationwide Plaza, Columbus, Ohio 43216, or calling
1-800-451-0070, TDD 1-800-238-3035.
TABLE OF CONTENTS
PAGE
General Information and History....................................1
Services...........................................................1
Purchase of Securities Being Offered...............................2
Underwriters.......................................................2
Calculation of Performance.........................................2
Annuity Payments...................................................3
Financial Statements...............................................4
GENERAL INFORMATION AND HISTORY
Nationwide Multi-Flex Variable Account is a separate investment account of
Nationwide Life Insurance Company ("Nationwide"). Nationwide is a member of the
Nationwide group of companies. 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.
The custodian of the assets of the variable account is Nationwide. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual fund options. Nationwide, or affiliates of Nationwide, may
have entered into agreements with either the investment adviser or distributor
for several of the underlying mutual funds. The agreements relate to
administrative services furnished by Nationwide or an affiliate of Nationwide
and provide for an annual fee based on the average aggregate net assets of the
variable account (and other separate accounts of Nationwide or life insurance
company subsidiaries of Nationwide) invested in particular underlying mutual
funds. These fees in no way affect the net asset value of the underlying mutual
funds or fees paid by the contract owner.
1
<PAGE> 65
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
UNDERWRITERS
Effective November 10, 2000, the contracts, which are offered continuously, are
distributed by Security Distributors, Inc. ("SDI"), 700 SW Harrison Street,
Topeka, Kansas 66636. Prior to November 14, 2000, the contracts were 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 either SDI or NISC.
CALCULATION 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 4.08%. 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 seven-day effective yield was
4.16%.
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.
2
<PAGE> 66
Standardized average annual total return reflects the deduction of a maximum $30
contract maintenance charge and a 1.30% actuarial risk fee (or, if applicable,
mortality and expense risk 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. 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 charge.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the underlying mutual fund has been available in the variable account if
the underlying mutual fund has not been available for one of the prescribed
periods. The nonstandardized annual total return will be based on rolling
calendar quarters and will cover periods of one, five and ten years, or a period
covering the time the underlying mutual fund has been in existence.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
<PAGE> 67
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide Multi-Flex Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Multi-Flex Variable Account (comprised of
the sub-accounts listed in note 1(b)) (collectively, "the Account") as of
December 31, 1999, and the related statements of operations and changes in
contract owners' equity for each of the years in the two year period then
ended. These financial statements are the responsibility of the 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 MULTI-FLEX VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS:
Investments at market value:
<S> <C>
AIM VI - Capital Appreciation Fund (AIMCapAp)
79,654 shares (cost $2,059,173) ................................................................ $ 2,834,091
AIM VI - International Equity Fund (AIMIntEq)
10,759 shares (cost $241,078) .................................................................. 315,119
American Century VP - American Century VP Advantage (ACVPAdv)
1,302,581 shares (cost $7,946,442) ............................................................. 9,378,583
American Century VP - American Century VP Balanced (ACVPBal)
4,742 shares (cost $34,508) .................................................................... 36,943
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
2,248,902 shares (cost $22,912,422) ............................................................ 33,373,698
American Century VP - American Century VP Income & Growth (ACVPIncGr)
1,142,984 shares (cost $7,600,648) ............................................................. 9,143,871
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
1,528,115 shares (cost $41,351,853) ............................................................ 59,703,455
Dreyfus Stock Index Fund (DryStkIx)
3,202,309 shares (cost $82,025,353) ............................................................ 123,128,790
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
311,008 shares (cost $11,211,504) .............................................................. 12,399,870
Dreyfus VIF - Quality Bond Portfolio (DryQualBd)
580,383 shares (cost $6,726,250) ............................................................... 6,320,366
Dreyfus VIF - Small Cap Portfolio (DrySmCap)
1,247,931 shares (cost $67,376,709) ............................................................ 82,787,741
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
5,345,503 shares (cost $108,739,033) ........................................................... 137,432,884
Fidelity VIP - High Income Portfolio (FidVIPHI)
2,219,122 shares (cost $26,942,979) ............................................................ 25,098,269
Janus AS - Janus Aspen International Growth Portfolio (JanASIntGr)
381,985 shares (cost $9,253,592) ............................................................... 14,771,357
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
1,957,893 shares (cost $37,775,858) ............................................................ 50,337,441
Nationwide SAT - Government Bond Fund (NSATGvtBd)
6,810,793 shares (cost $75,473,425) ............................................................ 73,488,452
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
37,199 shares (cost $370,653) .................................................................. 354,133
Nationwide SAT - Money Market Fund (NSATMyMkt)
35,526,533 shares (cost $35,526,533) ........................................................... 35,526,533
Nationwide SAT - Total Return Fund (NSATTotRe)
21,833,706 shares (cost $270,913,449) .......................................................... 410,692,009
Neuberger &Berman AMT - Balanced Portfolio (NBAMTBal)
2,335,297 shares (cost $36,028,279) ............................................................ 48,784,345
Strong Opportunity Fund II, Inc. (StOpp2)
1,327,573 shares (cost $27,287,423) ............................................................ 34,503,626
Templeton VPS - Templeton International Fund - Class I (TemIntFd)
1,818,977 shares (cost $34,058,942) ............................................................ 40,472,243
-------------
Total investments ........................................................................... 1,210,883,819
Accounts receivable .................................................................................. 26,493
-------------
Total assets ................................................................................ 1,210,910,312
ACCOUNTS PAYABLE ........................................................................................ 1,649
-------------
CONTRACT OWNERS' EQUITY (NOTE 4) ........................................................................ $ 1,210,908,663
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Total AIMCapAp
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 18,158,930 20,842,641 1,748 1,303
Mortality, expense and administration
charges (note 2)............................. (16,307,075) (16,314,807) (21,544) (6,208)
-------------- -------------- -------------- --------------
Net investment activity...................... 1,851,855 4,527,834 (19,796) (4,905)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.......... 293,370,782 270,437,065 179,274 43,627
Cost of mutual fund shares sold................ (191,191,387) (162,114,095) (149,815) (39,795)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments.......... 102,179,395 108,322,970 29,459 3,832
Change in unrealized gain (loss) on investment. (6,769,371) (2,435,061) 696,998 77,316
-------------- -------------- -------------- --------------
Net gain (loss) on investments............... 95,410,024 105,887,909 726,457 81,148
-------------- -------------- -------------- --------------
Reinvested capital gains....................... 34,832,101 45,381,013 54,532 23,090
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 132,093,980 155,796,756 761,193 99,333
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 120,515,358 171,010,136 511,618 454,482
Transfers between funds........................ - - 892,099 374,739
Redemptions.................................... (297,316,112) (285,564,514) (228,058) (51,115)
Annuity benefits............................... (120,625) (113,703) - -
Annual contract maintenance charge (note 2).... (1,877,502) (1,959,464) (3,883) (633)
Contingent deferred sales charges (note 2)..... (1,127,839) (944,022) (1,060) (200)
Adjustments to maintain reserves............... 23,947 5,561 22 3
-------------- -------------- -------------- --------------
Net equity transactions.................... (179,902,773) (117,566,006) 1,170,738 777,276
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ (47,808,793) 38,230,750 1,931,931 876,609
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 1,258,717,456 1,220,486,706 902,179 25,570
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $1,210,908,663 1,258,717,456 2,834,110 902,179
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AIMIntEq ACVPAdv
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 1,705 1,210 285,155 216,901
Mortality, expense and administration
charges (note 2)............................. (1,998) (891) (128,070) (124,133)
------------- -------------- -------------- --------------
Net investment activity...................... (293) 319 157,085 92,768
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.......... 120,932 25,294 3,410,634 1,825,984
Cost of mutual fund shares sold................ (117,864) (24,275) (2,779,524) (1,514,576)
------------- -------------- -------------- --------------
Realized gain (loss) on investments.......... 3,068 1,019 631,110 311,408
Change in unrealized gain (loss) on investment. 76,717 (2,795) (253,879) 252,847
------------- -------------- -------------- --------------
Net gain (loss) on investments............... 79,785 (1,776) 377,231 564,255
------------- -------------- -------------- --------------
Reinvested capital gains....................... 7,154 - 676,891 816,147
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 86,646 (1,457) 1,211,207 1,473,170
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 55,483 46,314 527,093 572,977
Transfers between funds........................ 62,728 93,540 (158,687) (351,854)
Redemptions.................................... (28,106) (5,180) (2,733,749) (1,112,420)
Annuity benefits............................... - - (33) (23)
Annual contract maintenance charge (note 2).... (389) (171) (13,901) (15,231)
Contingent deferred sales charges (note 2)..... (99) (39) (10,734) (13,255)
Adjustments to maintain reserves............... (1) (4) (514) 77
------------- -------------- -------------- --------------
Net equity transactions.................... 89,616 134,460 (2,390,525) (919,729)
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 176,262 133,003 (1,179,318) 553,441
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 138,862 5,859 10,557,958 10,004,517
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 315,124 138,862 9,378,640 10,557,958
============= ============== ============== ==============
</TABLE>
<PAGE> 5
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ACVPBal ACVPCapAp
------------------------------ ------------------------------
1999 1998 1999 1998
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ - - - -
Mortality, expense and administration
charges (note 2)............................. (136) - (324,124) (347,914)
-------------- -------------- -------------- --------------
Net investment activity...................... (136) - (324,124) (347,914)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.......... 5,894 - 5,727,111 7,431,160
Cost of mutual fund shares sold................ (5,837) - (5,336,111) (7,063,514)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments.......... 57 - 391,000 367,646
Change in unrealized gain (loss) on investments 2,435 - 13,035,532 (2,548,105)
-------------- -------------- -------------- --------------
Net gain (loss) on investments............... 2,492 - 13,426,532 (2,180,459)
-------------- -------------- -------------- --------------
Reinvested capital gains....................... - - - 1,515,406
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations.......... 2,356 - 13,102,408 (1,012,967)
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 2,678 - 1,595,991 2,220,641
Transfers between funds........................ 32,131 - (86,820) (5,465,509)
Redemptions.................................... (218) - (5,570,815) (3,562,186)
Annuity benefits............................... - - (1,178) (190)
Annual contract maintenance charge (note 2).... (4) - (42,619) (50,076)
Contingent deferred sales charges (note 2)..... - - (35,760) (49,503)
Adjustments to maintain reserves............... (105) - 1,122 513
-------------- -------------- -------------- --------------
Net equity transactions.................... 34,482 - (4,140,079) (6,906,310)
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 36,838 - 8,962,329 (7,919,277)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... - - 24,412,586 32,331,863
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 36,838 - 33,374,915 24,412,586
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
ACVPincGr DrySRGro
----------------------------- -------------------------------
1999 1998 1999 1998
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 1,352 22,466 7,382 59,690
Mortality, expense and administration
charges (note 2)............................. (98,210) (28,528) (631,876) (377,408)
------------- -------------- -------------- --------------
Net investment activity...................... (96,858) (6,062) (624,494) (317,718)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.......... 1,123,559 247,808 3,100,004 863,412
Cost of mutual fund shares sold................ (869,591) (230,017) (1,584,556) (500,142)
------------- -------------- -------------- --------------
Realized gain (loss) on investments.......... 253,968 17,791 1,515,448 363,270
Change in unrealized gain (loss) on investments 1,030,375 511,807 9,757,561 5,900,793
------------- -------------- -------------- --------------
Net gain (loss) on investments............... 1,284,343 529,598 11,273,009 6,264,063
------------- -------------- -------------- --------------
Reinvested capital gains....................... - 2,123 1,987,299 1,386,849
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations.......... 1,187,485 525,659 12,635,814 7,333,194
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 1,893,883 1,844,875 9,211,026 10,576,613
Transfers between funds........................ 3,055,413 2,112,196 7,352,558 1,465,431
Redemptions.................................... (1,417,049) (254,487) (7,614,810) (1,776,381)
Annuity benefits............................... (7) - - -
Annual contract maintenance charge (note 2).... (13,402) (2,425) (109,640) (83,289)
Contingent deferred sales charges (note 2)..... (5,041) (342) (50,310) (18,094)
Adjustments to maintain reserves............... (253) 259 716 428
------------- -------------- -------------- --------------
Net equity transactions.................... 3,513,544 3,700,076 8,789,540 10,164,708
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 4,701,029 4,225,735 21,425,354 17,497,902
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 4,442,594 216,859 38,278,833 20,780,931
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 9,143,623 4,442,594 59,704,187 38,278,833
============= ============== ============== ==============
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
DryStkIx DryCapAp
------------------------------ -----------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 1,195,594 990,158 68,824 29,273
Mortality, expense and administration
charges (note 2)............................. (1,430,698) (955,725) (140,066) (28,062)
-------------- -------------- -------------- --------------
Net investment activity...................... (235,104) 34,433 (71,242) 1,211
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.......... 8,345,485 1,666,853 3,218,125 232,731
Cost of mutual fund shares sold................ (3,069,769) (804,459) (2,795,528) (209,881)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments.......... 5,275,716 862,394 422,597 22,850
Change in unrealized gain (loss) on investments 13,147,714 16,211,739 682,319 506,293
-------------- -------------- -------------- --------------
Net gain (loss) on investments............... 18,423,430 17,074,133 1,104,916 529,143
-------------- -------------- -------------- --------------
Reinvested capital gains....................... 1,028,743 182,250 46,040 186
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations.......... 19,217,069 17,290,816 1,079,714 530,540
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 17,217,670 19,460,169 2,953,159 2,080,221
Transfers between funds........................ 10,982,972 7,196,900 4,252,360 3,450,453
Redemptions.................................... (16,562,657) (5,731,400) (1,682,937) (261,044)
Annuity benefits............................... (2,981) (2,559) - -
Annual contract maintenance charge (note 2).... (191,925) (145,678) (18,960) (2,389)
Contingent deferred sales charges (note 2)..... (100,434) (62,149) (13,131) (1,172)
Adjustments to maintain reserves............... 586 2,514 57 (137)
-------------- -------------- -------------- --------------
Net equity transactions.................... 11,343,231 20,717,797 5,490,548 5,265,932
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 30,560,300 38,008,613 6,570,262 5,796,472
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 92,569,778 54,561,165 5,829,653 33,181
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $123,130,078 92,569,778 12,399,915 5,829,653
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
DryQualBd DrySmCap
------------------------------- ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 365,296 336,884 53,163 252
Mortality, expense and administration
charges (note 2)............................. (85,777) (76,197) (969,857) (883,862)
------------- -------------- -------------- --------------
Net investment activity...................... 279,519 260,687 (916,694) (883,610)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.......... 1,328,426 794,218 10,343,781 2,151,154
Cost of mutual fund shares sold................ (1,361,891) (762,578) (7,873,839) (1,434,829)
------------- -------------- -------------- --------------
Realized gain (loss) on investments.......... (33,465) 31,640 2,469,942 716,325
Change in unrealized gain (loss) on investments (319,758) (184,062) 13,237,934 (4,434,714)
------------- -------------- -------------- --------------
Net gain (loss) on investments............... (353,223) (152,422) 15,707,876 (3,718,389)
------------- -------------- -------------- --------------
Reinvested capital gains....................... - 103,635 - 1,336,663
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations.......... (73,704) 211,900 14,791,182 (3,265,336)
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 1,343,499 2,019,788 15,052,033 23,152,760
Transfers between funds........................ (990,983) 517,074 (9,094,926) (3,926,582)
Redemptions.................................... (724,772) (643,999) (10,915,476) (5,065,492)
Annuity benefits............................... - - - -
Annual contract maintenance charge (note 2).... (14,217) (14,669) (207,487) (220,760)
Contingent deferred sales charges (note 2)..... (6,266) (7,839) (96,408) (64,756)
Adjustments to maintain reserves............... (181) 113 701 (511)
------------- -------------- -------------- --------------
Net equity transactions.................... (392,920) 1,870,468 (5,261,563) 13,874,659
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ (466,624) 2,082,368 9,529,619 10,609,323
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 6,786,814 4,704,446 73,258,807 62,649,484
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $6,320,190 6,786,814 82,788,426 73,258,807
============= ============== ============== ==============
</TABLE>
<PAGE> 7
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
FidVIPEI FidVIPHI
------------------------------- ------------------------------
1999 1998 1999 1998
--------------- -------------- ------------- --------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ............................. $ 2,194,168 1,767,643 2,309,949 1,423,227
Mortality, expense and administration
charges (note 2)................................ (1,930,270) (1,811,344) (334,326) (303,847)
-------------- -------------- -------------- --------------
Net investment activity......................... 263,898 (43,701) 1,975,623 1,119,380
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............. 22,292,242 6,079,485 4,354,783 487,817
Cost of mutual fund shares sold................... (13,073,844) (3,887,729) (4,531,558) (433,912)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments............. 9,218,398 2,191,756 (176,775) 53,905
Change in unrealized gain (loss) on investments... (7,069,937) 4,573,114 (220,283) (3,585,376)
-------------- -------------- -------------- --------------
Net gain (loss) on investments.................. 2,148,461 6,764,870 (397,058) (3,531,471)
-------------- -------------- -------------- --------------
Reinvested capital gains.......................... 4,850,267 6,290,729 86,353 904,342
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations............ 7,262,626 13,011,898 1,664,918 (1,507,749)
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................. 16,218,966 23,845,625 5,214,131 8,511,396
Transfers between funds........................... (9,309,653) 279,782 (2,997,810) 506,824
Redemptions....................................... (24,177,752) (13,156,692) (3,898,211) (1,543,731)
Annuity benefits.................................. (1,945) (1,823) - -
Annual contract maintenance charge (note 2)....... (226,584) (238,894) (60,728) (62,035)
Contingent deferred sales charges (note 2)........ (180,119) (141,165) (30,842) (17,150)
Adjustments to maintain reserves.................. 798 409 223 (47)
-------------- -------------- -------------- --------------
Net equity transactions....................... (17,676,289) 10,587,242 (1,773,237) 7,395,257
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............... (10,413,663) 23,599,140 (108,319) 5,887,508
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 147,846,675 124,247,535 25,206,813 19,319,305
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............... $ 137,433,012 147,846,675 25,098,494 25,206,813
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
JanASIntGr NSATCapAp
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ............................. 15,443 22,540 362,218 520,711
Mortality, expense and administration
charges (note 2)................................ $ (86,183) (22,121) (783,096) (871,653)
------------- -------------- -------------- --------------
Net investment activity......................... (70,740) 419 (420,878) (350,942)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............. 573,381 260,312 20,466,124 27,191,128
Cost of mutual fund shares sold................... (471,570) (262,817) (8,263,983) (12,328,964)
------------- -------------- -------------- --------------
Realized gain (loss) on investments............. 101,811 (2,505) 12,202,141 14,862,164
Change in unrealized gain (loss) on investments... 5,520,283 (2,299) (13,202,257) (11,772)
------------- -------------- -------------- --------------
Net gain (loss) on investments.................. 5,622,094 (4,804) (1,000,116) 14,850,392
------------- -------------- -------------- --------------
Reinvested capital gains.......................... - 3,054 3,336,082 1,743,763
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations............ 5,551,354 (1,331) 1,915,088 16,243,213
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................. 2,062,705 1,682,674 3,283,685 4,344,587
Transfers between funds........................... 4,482,193 2,201,050 4,181,155 1,551,729
Redemptions....................................... (1,059,008) (155,078) (21,374,802) (27,248,088)
Annuity benefits.................................. - - (6,442) (5,545)
Annual contract maintenance charge (note 2)....... (12,999) (2,187) (58,224) (69,163)
Contingent deferred sales charges (note 2)........ (8,045) (787) (27,899) (37,866)
Adjustments to maintain reserves.................. 448 12 366 829
------------- -------------- -------------- --------------
Net equity transactions....................... 5,465,294 3,725,684 (14,002,161) (21,463,517)
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............... 11,016,648 3,724,353 (12,087,073) (5,220,304)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 3,755,155 30,802 62,424,782 67,645,086
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD............... $ 14,771,803 3,755,155 50,337,709 62,424,782
============= ============== ============== ==============
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NSATGvtBd NSATHIncBd
------------------------------- ------------------------------
1999 1998 1999 1998
--------------- -------------- -------------- --------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ............................ $ 4,728,402 5,973,305 28,889 12,442
Mortality, expense and administration
charges (note 2)............................... (1,197,314) (1,492,699) (4,505) (2,277)
-------------- -------------- -------------- --------------
Net investment activity........................ 3,531,088 4,480,606 24,384 10,165
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............ 32,891,196 30,298,498 354,458 232,973
Cost of mutual fund shares sold.................. (33,623,472) (29,393,218) (354,414) (238,033)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments............ (732,276) 905,280 44 (5,060)
Change in unrealized gain (loss) on investments (6,432,465) 2,221,884 (20,305) 3,767
-------------- -------------- -------------- --------------
Net gain (loss) on investments................. (7,164,741) 3,127,164 (20,261) (1,293)
-------------- -------------- -------------- --------------
Reinvested capital gains......................... 143,792 515,384 176 -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations............ (3,489,861) 8,123,154 4,299 8,872
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................ 4,249,902 6,311,434 113,296 231,833
Transfers between funds.......................... (5,526,811) 2,143,077 9,538 61,586
Redemptions...................................... (28,900,434) (31,796,007) (62,026) (14,158)
Annuity benefits................................. (13,882) (18,715) - -
Annual contract maintenance charge (note 2)...... (117,010) (143,045) (912) (230)
Contingent deferred sales charges (note 2)....... (79,560) (91,476) (672) (128)
Adjustments to maintain reserves................. 3,519 (2,276) (2) (8)
-------------- -------------- -------------- --------------
Net equity transactions...................... (30,384,276) (23,597,008) 59,222 278,895
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.............. (33,874,137) (15,473,854) 63,521 287,767
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 107,365,814 122,839,668 290,615 2,848
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD.............. $ 73,491,677 107,365,814 354,136 290,615
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NSATMyMkt NSATTotRe
------------------------------ ------------------------------
1999 1998 1999 1998
------------ -------------- -------------- --------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ............................ $ 1,784,450 2,073,211 3,065,692 5,590,811
Mortality, expense and administration
charges (note 2)............................... (493,484) (527,889) (6,248,692) (7,193,698)
------------- -------------- -------------- --------------
Net investment activity........................ 1,290,966 1,545,322 (3,183,000) (1,602,887)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............ 24,626,159 27,802,187 135,044,092 155,161,671
Cost of mutual fund shares sold.................. (24,626,159) (27,802,187) (67,006,380) (68,662,100)
------------- -------------- -------------- --------------
Realized gain (loss) on investments............ - - 68,037,712 86,499,571
Change in unrealized gain (loss) on investments - - (53,970,645) (18,444,180)
------------- -------------- -------------- --------------
Net gain (loss) on investments................. - - 14,067,067 68,055,391
------------- -------------- -------------- --------------
Reinvested capital gains......................... - - 15,439,049 19,993,831
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations............ 1,290,966 1,545,322 26,323,116 86,446,335
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................ 2,629,089 9,331,757 21,912,256 32,910,520
Transfers between funds.......................... 8,370,815 (720,419) (10,866,530) (7,086,137)
Redemptions...................................... (15,360,742) (13,718,112) (137,661,912) (170,647,039)
Annuity benefits................................. (3,092) (4,505) (90,848) (80,283)
Annual contract maintenance charge (note 2)...... (46,595) (53,369) (541,134) (657,048)
Contingent deferred sales charges (note 2)....... (42,148) (61,733) (305,720) (272,491)
Adjustments to maintain reserves................. (340) 3,489 15,225 37
------------- -------------- -------------- --------------
Net equity transactions...................... (4,453,013) (5,222,892) (127,538,663) (145,832,441)
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.............. (3,162,047) (3,677,570) (101,215,547) (59,386,106)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 38,688,503 42,366,073 511,922,904 571,309,010
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD.............. $ 35,526,456 38,688,503 410,707,357 511,922,904
============= ============== ============== ==============
</TABLE>
<PAGE> 9
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NBAMTBal StOpp2
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 728,530 1,016,529 - 52,459
Mortality, expense and administration
charges (note 2)................................. (556,057) (569,585) (363,188) (248,876)
-------------- -------------- -------------- --------------
Net investment activity.......................... 172,473 446,944 (363,188) (196,417)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.............. 9,446,870 4,701,654 1,787,702 569,604
Cost of mutual fund shares sold.................... (8,628,993) (4,516,095) (1,380,657) (457,623)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments.............. 817,877 185,559 407,045 111,981
Change in unrealized gain (loss) on investments.... 9,965,004 (3,399,106) 5,338,403 46,665
-------------- -------------- -------------- --------------
Net gain (loss) on investments................... 10,782,881 (3,213,547) 5,745,448 158,646
-------------- -------------- -------------- --------------
Reinvested capital gains........................... 1,079,303 7,139,906 2,758,314 2,115,597
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations.............. 12,034,657 4,373,303 8,140,574 2,077,826
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.................................. 2,666,834 4,215,700 5,512,092 7,498,780
Transfers between funds............................ (2,097,348) (1,509,657) 1,479,431 495,807
Redemptions........................................ (8,836,839) (4,853,908) (3,895,650) (1,150,570)
Annuity benefits................................... (217) (60) - -
Annual contract maintenance charge (note 2)........ (61,972) (65,141) (64,423) (51,449)
Contingent deferred sales charges (note 2)......... (63,429) (61,893) (28,046) (10,724)
Adjustments to maintain reserves................... 409 72 577 83
-------------- -------------- -------------- --------------
Net equity transactions........................ (8,392,562) (2,274,887) 3,003,981 6,781,927
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 3,642,095 2,098,416 11,144,555 8,859,753
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 45,142,869 43,044,453 23,359,647 14,499,894
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD................ $ 48,784,964 45,142,869 34,504,202 23,359,647
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
TemIntFd
------------------------------
1999 1998
------------- ---------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 960,970 731,626
Mortality, expense and administration
charges (note 2)................................. (477,604) (441,890)
------------- --------------
Net investment activity.......................... 483,366 289,736
------------- --------------
Proceeds from mutual fund shares sold.............. 4,630,550 2,369,495
Cost of mutual fund shares sold.................... (3,286,032) (1,547,351)
------------- --------------
Realized gain (loss) on investments.............. 1,344,518 822,144
Change in unrealized gain (loss) on investments.... 2,228,883 (128,877)
------------- --------------
Net gain (loss) on investments................... 3,573,401 693,267
------------- --------------
Reinvested capital gains........................... 3,338,106 1,308,058
------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations.............. 7,394,873 2,291,061
------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.................................. 6,288,269 9,696,990
Transfers between funds............................ (4,023,825) (3,390,030)
Redemptions........................................ (4,610,089) (2,817,427)
Annuity benefits................................... - -
Annual contract maintenance charge (note 2)........ (70,494) (81,582)
Contingent deferred sales charges (note 2)......... (42,116) (31,260)
Adjustments to maintain reserves................... 574 (294)
------------- --------------
Net equity transactions........................ (2,457,681) 3,376,397
------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 4,937,192 5,667,458
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 35,535,615 29,868,157
------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD................ $ 40,472,807 35,535,615
============= ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Multi-Flex Variable Account (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 through the Account. The primary
distributions for the contracts is through Company Agents and an
affiliated sales organization; however, other distributors may be
utilized.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase.
See note 2 for a discussion of contract expenses. With certain
exceptions, contract owners in either the accumulation or payout phase
may invest in any of the following:
Funds of the AIM Variable Insurance Funds, Inc. (AIM VI);
AIM VI - Capital Appreciation Fund (AIMCapAp)*
AIM VI - International Equity Fund (AIMIntEq)*
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP); American Century VP - American Century VP
Advantage (ACVPAdv)* 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)*
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 - Quality Bond Portfolio (DryQualBd)*
Dreyfus VIF - Small Cap Portfolio (DrySmCap)*
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)*
Fidelity VIP - High Income Portfolio (FidVIPHI)*
Portfolio of the Janus Aspen Series (Janus AS);
Janus AS - Janus Aspen International Growth Portfolio
(JanASIntGr)*
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp) (not
available to contracts established under NEA Valuebuilder)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund (NSATHIncBd)*
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolio of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)*
<PAGE> 11
Strong Opportunity Fund II, Inc. (StOpp2)*
Portfolio of the Templeton Variable Products Series Fund
(Templeton VPS);
Templeton VPS - Templeton International Fund - Class I
(TemIntFd)*
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.
(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 a 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.
(Continued)
<PAGE> 12
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(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 February 1, 1989, 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
February 1, 1989, the Company will deduct a contingent deferred sales
charge not to exceed 7% of the lesser of purchase payments or the amount
surrendered, such charge declining 1% per year, to 0%, after the purchase
payment has been held in the contract for 84 months. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The following contract charges are deducted by the Company: (a) an annual
contract maintenance charge of up to $30, dependent upon contract type and
issue date, which is satisfied by surrendering units; and (b) for contracts
issued prior to February 1, 1989, a charge for mortality and expense risk
assessed through the daily unit value calculation equal to an annual rate
of 0.80% and 0.50%, respectively; for contracts issued on or after February
1, 1989, 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 NEA
Valuebuilder Annuity contracts issued before November 3, 1997, or in states
which have not approved the applicable contract modifications, a mortality
and expense risk charge and an administrative charge assessed through the
daily unit value calculation equal to a annual rate of 1.25% and .05%,
respectively; for NEA Valuebuilder Annuity contracts issued on or after the
later of November 3, 1997, or the date on which state insurance authorities
approve corresponding contract modifications, an actuarial risk charge
assessed through the daily unit value calculation equal to an annual rate
of 1.30%.
(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.
*This fund is only available for contracts issued to Plans established under the
NEA Valuebuilder Annuity.
<PAGE> 13
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1999,
in both the accumulation and payout phases.
Contract owners' equity represented by:
<TABLE>
<CAPTION>
ANNUAL
Contracts in accumulation phase: UNITS UNIT VALUE RETURN(b)
-------- --------- ---------
<S> <C> <C> <C> <C>
AIM VI - Capital Appreciation Fund:
Tax qualified 172,142 $ 15.964823 $ 2,748,217 43%
Non-tax qualified 5,380 15.964823 85,891 43%
AIM VI - International Equity Fund:
Tax qualified 18,086 17.293870 312,777 53%
Non-tax qualified 135 17.293870 2,335 53%
American Century VP - American Century
VP Advantage:
Tax qualified 335,356 20.506237 6,876,890 13%
Non-tax qualified 121,988 20.506237 2,501,515 13%
American Century VP - American Century
VP Balanced:
Tax qualified 1,669 10.579044 17,656 6%(a)
Non-tax qualified 1,813 10.579044 19,180 6%(a)
American Century VP - American Century
VP Capital Appreciation:
Tax qualified 1,039,334 23.256156 24,170,914 62%
Non-tax qualified 395,130 23.256156 9,189,205 62%
American Century VP - American Century
VP Income & Growth:
Tax qualified 576,734 15.175314 8,752,120 16%
Non-tax qualified 25,799 15.175314 391,508 16%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified 1,718,535 33.157285 56,981,955 28%
Non-tax qualified 82,100 33.157285 2,722,213 28%
Dreyfus Stock Index Fund:
Tax qualified 3,233,417 33.009632 106,733,905 19%
Non-tax qualified 496,349 33.009632 16,384,298 19%
Dreyfus VIF - Capital Appreciation Portfolio:
Tax qualified 814,540 14.484129 11,797,902 10%
Non-tax qualified 41,563 14.484129 602,004 10%
Dreyfus VIF - Quality Bond Portfolio:
Tax qualified 501,628 11.873090 5,955,874 (1)%
Non-tax qualified 30,684 11.873090 364,314 (1)%
Dreyfus VIF - Small Cap Portfolio:
Tax qualified 3,949,521 20.350320 80,374,016 22%
Non-tax qualified 118,642 20.350320 2,414,403 22%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified 4,882,606 23.766053 116,040,273 5%
Non-tax qualified 899,955 23.766053 21,388,378 5%
Fidelity VIP - High Income Portfolio:
Tax qualified 1,552,373 15.519485 24,092,029 7%
Non-tax qualified 64,851 15.519485 1,006,454 7%
</TABLE>
(Continued)
<PAGE> 14
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(b)
-------- --------- ---------
<S> <C> <C> <C> <C>
Janus AS - Janus Aspen
International Growth Portfolio:
Tax qualified 684,662 20.718419 14,185,114 80%
Non-tax qualified 28,317 20.718419 586,683 80%
Nationwide SAT - Capital Appreciation Fund:
Tax qualified 1,154,090 31.511115 36,366,663 3%
Non-tax qualified 441,558 31.511115 13,913,985 3%
Nationwide SAT - Government Bond Fund:
Tax qualified 1,576,867 33.746688 53,214,039 (4)%
Non-tax qualified 597,758 33.759140 20,179,796 (4)%
Nationwide SAT - High Income Bond Fund:
Tax qualified 31,261 10.855151 339,343 2%
Non-tax qualified 1,363 10.855151 14,796 2%
Nationwide SAT - Money Market Fund:
Tax qualified 1,219,198 22.709765 27,687,700 3%
Non-tax qualified 316,915 24.674569 7,819,741 3%
Nationwide SAT - Total Return Fund:
Tax qualified 3,167,075 97.698445 309,418,303 6%
Non-tax qualified 1,062,496 94.888344 100,818,486 6%
Neuberger &Berman AMT -
Balanced Portfolio:
Tax qualified 1,420,544 26.782503 38,045,724 32%
Non-tax qualified 400,892 26.782503 10,736,891 32%
Strong Opportunity Fund II, Inc.:
Tax qualified 1,462,966 22.530007 32,960,634 33%
Non-tax qualified 68,512 22.530007 1,543,576 33%
Templeton VPS - Templeton International Fund:
Tax qualified 1,910,109 20.538218 39,230,235 22%
Non-tax qualified 60,501 20.538218 1,242,583 22%
========= =========
Reserves for annuity contracts in payout phase:
Tax qualified 418,884
Non-tax qualified 259,261
---------------
$ 1,210,908,663
===============
</TABLE>
(a) Non-annualized. The return was computed for the period 5/03/99 (effective
date) through 12/31/99 for American Century VP - Balanced.
(b) The annual return does not include contract charges satisfied by
surrendering units.
--------------------------------------------------------------------------------
<PAGE> 68
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1999 and
1998, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Columbus, Ohio
January 28, 2000
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------------
Assets 1999 1998
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $15,294.0 $14,245.1
Equity securities 92.9 127.2
Mortgage loans on real estate, net 5,786.3 5,328.4
Real estate, net 254.8 243.6
Policy loans 519.6 464.3
Other long-term investments 73.8 44.0
Short-term investments 416.0 289.1
--------- ---------
22,437.4 20,741.7
--------- ---------
Cash 4.8 3.4
Accrued investment income 238.6 218.7
Deferred policy acquisition costs 2,554.1 2,022.2
Other assets 305.9 420.3
Assets held in separate accounts 67,135.1 50,935.8
--------- ---------
$92,675.9 $74,342.1
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $21,861.6 $19,767.1
Other liabilities 914.2 866.1
Liabilities related to separate accounts 67,135.1 50,935.8
--------- ---------
89,910.9 71,569.0
--------- ---------
Commitments and contingencies (notes 8 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 766.1 914.7
Retained earnings 2,011.0 1,579.0
Accumulated other comprehensive income (15.9) 275.6
--------- ---------
2,765.0 2,773.1
--------- ---------
$92,675.9 $74,342.1
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Policy charges $ 895.5 $ 698.9 $ 545.2
Life insurance premiums 220.8 200.0 205.4
Net investment income 1,520.8 1,481.6 1,409.2
Realized (losses) gains on investments (11.6) 28.4 11.1
Other 66.1 66.8 46.5
-------- -------- --------
2,691.6 2,475.7 2,217.4
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Other benefits and claims 210.4 175.8 178.2
Policyholder dividends on participating policies 42.4 39.6 40.6
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Other operating expenses 463.4 419.7 384.9
-------- -------- --------
2,085.1 1,918.6 1,787.5
-------- -------- --------
Income before federal income tax expense 606.5 557.1 429.9
Federal income tax expense 201.4 190.4 150.2
-------- -------- --------
Net income $ 405.1 $ 366.7 $ 279.7
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1996 $ 3.8 $ 527.9 $1,432.6 $173.6 $2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
--------
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ -------- -------- ------ --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ -------- -------- ------ --------
December 31, 1998 3.8 914.7 1,579.0 275.6 2,773.1
Comprehensive income:
Net income -- -- 405.1 -- 405.1
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (315.0) (315.0)
--------
Total comprehensive income 90.1
--------
Capital contribution -- 26.4 87.9 23.5 137.8
--------
Dividends to shareholder -- (175.0) (61.0) -- (236.0)
------ -------- -------- ------ --------
December 31, 1999 $ 3.8 $ 766.1 $2,011.0 $(15.9) $2,765.0
====== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 405.1 $ 366.7 $ 279.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Capitalization of deferred policy acquisition costs (637.0) (584.2) (487.9)
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Amortization and depreciation 2.4 (8.5) (2.0)
Realized (gains) losses on invested assets, net 11.6 (28.4) (11.1)
Increase in accrued investment income (7.9) (8.2) (0.3)
Decrease (increase) in other assets 122.9 16.4 (12.7)
Decrease in policy liabilities (20.9) (8.3) (23.1)
Increase (decrease) in other liabilities 149.7 (34.8) 230.6
Other, net (8.6) (11.3) (10.9)
--------- --------- ---------
Net cash provided by operating activities 1,386.2 982.9 1,146.1
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,307.9 1,557.0 993.4
Proceeds from sale of securities available-for-sale 513.1 610.5 574.5
Proceeds from repayments of mortgage loans on real estate 696.7 678.2 437.3
Proceeds from sale of real estate 5.7 103.8 34.8
Proceeds from repayments of policy loans and sale of other invested assets 40.9 23.6 22.7
Cost of securities available-for-sale acquired (3,724.9) (3,182.8) (2,828.1)
Cost of mortgage loans on real estate acquired (971.4) (829.1) (752.2)
Cost of real estate acquired (14.2) (0.8) (24.9)
Short-term investments, net (27.5) 69.3 (354.8)
Other, net (110.9) (88.4) (62.5)
--------- --------- ---------
Net cash used in investing activities (1,284.6) (1,058.7) (1,959.8)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- -- 836.8
Cash dividends paid (188.5) (100.0) --
Increase in investment product and universal life insurance
product account balances 3,799.4 2,682.1 2,488.5
Decrease in investment product and universal life insurance
product account balances (3,711.1) (2,678.5) (2,379.8)
--------- --------- ---------
Net cash used in financing activities (100.2) (96.4) 945.5
--------- --------- ---------
Net increase (decrease) in cash 1.4 (172.2) 131.8
Cash, beginning of year 3.4 175.6 43.8
--------- --------- ---------
Cash, end of year $ 4.8 $ 3.4 $ 175.6
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) Organization and Description of Business
Nationwide Life Insurance Company (NLIC) is a leading provider of
long-term savings and retirement products in the United States and is a
wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
The Company develops and sells a diverse range of products including
variable annuities, fixed annuities and life insurance as well as
investment management and administrative services. NLIC markets its
products through a broad network of distribution channels, including
independent broker/dealers, national and regional brokerage firms,
financial institutions, pension plan administrators, life insurance
specialists, Nationwide Retirement Solutions sales representatives, and
Nationwide agents.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
Nationwide Investment Services Corporation. NLIC and its subsidiaries
are collectively referred to as "the Company."
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(b) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of accumulated other comprehensive income in
shareholder's equity. The adjustment to deferred policy
acquisition costs represents the change in amortization of
deferred policy acquisition costs that would have been required as
a charge or credit to operations had such unrealized amounts been
realized. The Company has no fixed maturity securities classified
as held-to-maturity or trading as of December 31, 1999 or 1998.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(d) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $915.4 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 5.6%, 6.0% and 6.1% for the years ended
December 31, 1999, 1998 and 1997, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
Participating business represents approximately 29% in 1999 (40%
in 1998 and 50% in 1997) of the Company's life insurance in force,
69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
in 1997) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Reinsurance Ceded
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(j) Recently Issued Accounting Pronouncements
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $8.3 million.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(k) Reclassification
Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 428.4 $ 23.4 $ (2.4) $ 449.4
Obligations of states and political subdivisions 0.8 -- -- 0.8
Debt securities issued by foreign governments 110.6 0.6 (0.8) 110.4
Corporate securities 11,414.7 118.9 (218.6) 11,315.0
Mortgage-backed securities 3,422.8 25.8 (30.2) 3,418.4
--------- ------ ------- ---------
Total fixed maturity securities 15,377.3 168.7 (252.0) 15,294.0
Equity securities 84.9 12.4 (4.4) 92.9
--------- ------ ------- ---------
$15,462.2 $181.1 $(256.4) $15,386.9
========= ====== ======= =========
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------- ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------- ---------
$13,831.7 $563.2 $ (22.6) $14,372.3
========= ====== ======= =========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions) cost fair value
--------- ---------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 847.0 $ 847.0
Due after one year through five years 5,240.5 5,205.7
Due after five years through ten years 5,046.9 5,005.2
Due after ten years 4,242.9 4,236.1
--------- ---------
$15,377.3 $15,294.0
========= =========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized (losses) gains on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
------ -------
<S> <C> <C>
Gross unrealized (losses) gains $(75.3) $ 540.6
Adjustment to deferred policy acquisition costs 50.9 (116.6)
Deferred federal income tax 8.5 (148.4)
------ -------
$(15.9) $ 275.6
====== =======
</TABLE>
An analysis of the change in gross unrealized (losses) gains on
securities available-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(607.1) $52.6 $137.5
Equity securities (8.8) 4.2 (2.7)
------- ----- ------
$(615.9) $56.8 $134.8
======= ===== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
respectively. During 1999, gross gains of $10.4 million ($9.0 million
and $9.9 million in 1998 and 1997, respectively) and gross losses of
$28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The Company had $15.6 million of real estate investments at December
31, 1999 that were non-income producing the preceding twelve months.
During 1998 the Company had investments of $42.4 million that were
non-income producing, which consisted of $32.7 million of securities
available-for-sale and $9.7 million of real estate.
Real estate is presented at cost less accumulated depreciation of $24.8
million as of December 31, 1999 ($21.5 million as of December 31, 1998)
and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
million as of December 31, 1998).
The recorded investment of mortgage loans on real estate considered to
be impaired was $3.7 million as of both December 31, 1999 and 1998. No
valuation allowance has been recorded for these loans as of December
31, 1999 or 1998. During 1999, the average recorded investment in
impaired mortgage loans on real estate was approximately $3.7 million
($9.1 million in 1998) and there was no interest income recognized on
those loans. Interest income recognized on impaired loans was $0.3
million in 1998 which is equal to interest income recognized using a
cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Allowance, beginning of year $42.4 $42.5 $51.0
Additions (reductions) charged to operations 0.7 (0.1) (1.2)
Direct write-downs charged against the allowance -- -- (7.3)
Allowance on acquired mortgage loans 1.3 -- --
----- ----- -----
Allowance, end of year $44.4 $42.4 $42.5
===== ===== =====
</TABLE>
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $1,031.3 $ 982.5 $ 911.6
Equity securities 2.5 0.8 0.8
Mortgage loans on real estate 460.4 458.9 457.7
Real estate 28.8 40.4 42.9
Short-term investments 18.6 17.8 22.7
Other 26.5 30.7 21.0
-------- -------- --------
Total investment income 1,568.1 1,531.1 1,456.7
Less investment expenses 47.3 49.5 47.5
-------- -------- --------
Net investment income $1,520.8 $1,481.6 $1,409.2
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(25.0) $(0.7) $ 3.6
Equity securities 7.4 2.1 2.7
Mortgage loans on real estate (0.6) 3.9 1.6
Real estate and other 6.6 23.1 3.2
------ ----- -----
$(11.6) $28.4 $11.1
====== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $9.1 million as of
December 31, 1999 and $6.5 million as of December 31, 1998 were on
deposit with various regulatory agencies as required by law.
(4) Derivative Financial Instruments
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest rate swaps are primarily used to convert specific investment
securities and interest bearing policy liabilities from a fixed-rate to
a floating-rate basis. Amounts receivable or payable under these
agreements are recognized as an adjustment to net investment income or
interest credited to policyholder account balances consistent with the
nature of the hedged item. The changes in fair value of the interest
rate swap agreements are not recognized on the balance sheet, except
for interest rate swaps designated as hedges of fixed maturity
securities available-for-sale, for which changes in fair values are
reported in accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
policy liabilities and investments denominated in foreign currencies
into U.S. dollars at specified exchange rates. Gains and losses on
foreign currency swaps are recorded in earnings based on the related
spot foreign exchange rate at the end of the reporting period. Gains
and losses on these contracts offset those recorded as a result of
translating the hedged foreign currency denominated liabilities and
investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $362.7
Pay variable/receive fixed rate swaps hedging investments $ 28.5
Other contracts hedging investments $ 19.1
Pay variable/receive fixed rate swaps hedging liabilities $577.2
Foreign currency swaps
Hedging foreign currency denominated investments $ 14.8
Hedging foreign currency denominated liabilities $577.2
Interest rate futures contracts $781.6
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(5) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Fixed maturity securities $ 5.3 $ --
Future policy benefits 149.5 207.7
Liabilities in separate accounts 373.6 319.9
Mortgage loans on real estate and real estate 18.5 17.5
Other assets and other liabilities 51.1 58.9
----- ------
Total gross deferred tax assets 598.0 604.0
Less valuation allowance (7.0) (7.0)
----- ------
Net deferred tax assets 591.0 597.0
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 724.4 568.7
Fixed maturity securities -- 212.2
Deferred tax on realized investment gains 34.7 34.8
Equity securities and other long-term investments 10.8 9.6
Other 26.5 21.6
------ ------
Total gross deferred tax liabilities 796.4 846.9
------ ------
Net deferred tax liability $205.4 $249.9
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1999, 1998 and 1997.
The Company's current federal income tax liability was $104.7 million
and $72.8 million as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 1999 1998 1997
------ ------ ------
Currently payable $ 53.6 $186.1 $121.7
Deferred tax expense 147.8 4.3 28.5
------ ------ ------
$201.4 $190.4 $150.2
====== ====== ======
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $212.3 35.0 $195.0 35.0 $150.5 35.0
Tax exempt interest and dividends
received deduction (7.3) (1.2) (4.9) (0.9) -- --
Income tax credits (4.3) (0.7) -- -- -- --
Other, net 0.7 0.1 0.3 0.1 (0.3) (0.1)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $201.4 33.2 $190.4 34.2 $150.2 34.9
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $29.8 million, $173.4 million and
$91.8 million during the years ended December 31, 1999, 1998 and 1997,
respectively.
(6) Comprehensive Income
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
equity that bypass net income. Currently, the Company's only component
of Other Comprehensive Income is unrealized gains (losses) on
securities available-for-sale. The related before and after federal tax
amounts are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $(665.3) $ 58.2 $141.1
Adjustment to deferred policy acquisition costs 167.5 (12.9) (21.8)
Related federal income tax (expense) benefit 171.4 (15.9) (41.7)
------- ------ ------
Net (326.4) 29.4 77.6
------- ------ ------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross 17.6 (1.4) (6.3)
Related federal income tax expense (benefit) (6.2) 0.5 2.2
------- ------ ------
Net 11.4 (0.9) (4.1)
------- ------ ------
Total Other Comprehensive Income $(315.0) $ 28.5 $ 73.5
======= ====== ======
</TABLE>
(7) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 8.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Interest rate and foreign currency swaps: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------------------ -------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $15,294.0 $15,294.0 $14,245.1 $14,245.1
Equity securities 92.9 92.9 128.5 128.5
Mortgage loans on real estate, net 5,786.3 5,745.5 5,328.4 5,527.6
Policy loans 519.6 519.6 464.3 464.3
Short-term investments 416.0 416.0 289.1 289.1
Cash 4.8 4.8 3.4 3.4
Assets held in separate accounts 67,135.1 67,135.1 50,935.8 50,935.8
Liabilities:
Investment contracts (16,977.7) (16,428.6) (15,468.7) (15,158.6)
Policy reserves on life insurance contracts (4,883.9) (4,607.9) (3,914.0) (3,768.9)
Liabilities related to separate accounts (67,135.1) (66,318.7) (50,935.8) (49,926.5)
Derivative financial instruments:
Interest rate swaps hedging assets 4.3 4.3 - -
Interest rate swaps hedging liabilities - (24.2) - -
Foreign currency swaps (11.8) (11.8) - -
Futures contracts 1.3 1.3 (1.3) (1.3)
</TABLE>
(8) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans and derivative financial instruments. These
instruments involve, to varying degrees, elements of credit risk in
excess of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $216.2 million
extending into 2000 were outstanding as of December 31, 1999. The
Company also had $28.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1999.
Notional amounts of derivative financial instruments, primarily
interest rate swaps, interest rate futures contracts and foreign
currency swaps, significantly exceed the credit risk associated with
these instruments and represent contractual balances on which
calculations of amounts to be exchanged are based. Credit exposure is
limited to the sum of the aggregate fair value of positions that have
become favorable to NLIC, including accrued interest receivable due
from counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of high quality institutions,
collateral agreements and other contract provisions. At December 31,
1999, NLIC's credit risk from these derivative financial instruments
was $6.1 million.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 23% (22% in 1998) in any geographic area and no more than 2% (2%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999, 39% (42% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $143.6 million and $187.9 million as of December 31,
1999 and 1998, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(9) Pension Plan and Postretirement Benefits Other Than Pensions
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
million and $7.5 million, respectively. The Company has recorded a
prepaid pension asset of $13.3 million and $5.0 million as of December
31, 1999 and 1998, respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1999 and 1998 was $49.6 million and $40.1 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
1997 was $4.9 million, $4.1 million and $3.0 million, respectively.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------ -----------------------
(in millions) 1999 1998 1999 1998
--------------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185.0 $2,033.8 $ 270.1 $ 237.9
Service cost 80.0 87.6 14.2 9.8
Interest cost 109.9 123.4 17.6 15.4
Actuarial (gain) loss (95.0) 123.2 (64.4) 15.6
Plan settlement in 1999/curtailment in 1998 (396.1) (107.2) -- --
Benefits paid (72.4) (75.8) (11.0) (8.6)
Acquired companies -- -- 13.3 --
-------- -------- ------- -------
Benefit obligation at end of year 1,811.4 2,185.0 239.8 270.1
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541.9 2,212.9 77.9 69.2
Actual return on plan assets 161.8 300.7 3.5 5.0
Employer contribution 12.4 104.1 20.9 12.1
Plan settlement (396.1) -- -- --
Benefits paid (72.4) (75.8) (11.0) (8.4)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,247.6 2,541.9 91.3 77.9
-------- -------- ------- -------
Funded status 436.2 356.9 (148.5) (192.2)
Unrecognized prior service cost 28.2 31.5 -- --
Unrecognized net (gains) losses (402.0) (345.7) (46.7) 16.0
Unrecognized net (asset) obligation at transition (7.7) (11.0) 1.1 1.3
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 54.7 $ 31.7 $(194.1) $(174.9)
======== ======== ======= =======
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
1999 1998 1999 1998
---- ---- ------- ------
<S> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 8.00%
Uniform declining period -- -- 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80.0 $ 87.6 $ 77.3
Interest cost on projected benefit obligation 109.9 123.4 118.6
Expected return on plan assets (160.3) (159.0) (139.0)
Recognized gains (9.1) (3.8) --
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.4) 4.2 4.2
------- ------- --------
$ 22.3 $ 55.6 $ 64.3
======= ======= ========
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide Insurance and employees of WSC ended
participation in the plan. A curtailment gain of $67.1 million resulted
(consisting of a $107.2 million reduction in the projected benefit
obligation, net of the write-off of the $40.1 million remaining
unamortized transition obligation related to WSC). During 1999, the
plan transferred assets to settle its obligation related to WSC
employees . A settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $14.2 $ 9.8 $ 7.0
Interest cost on accumulated postretirement benefit obligation 17.6 15.4 14.0
Actual return on plan assets (3.5) (5.0) (3.6)
Amortization of unrecognized transition obligation of affiliates 0.6 0.2 0.2
Net amortization and deferral (1.8) 1.2 (0.5)
----- ----- -----
$27.1 $21.6 $17.1
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1999, 1998
and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
$111.7 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1999
$40.2 million of dividends could be paid by NLIC without prior
approval.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) Transactions With Affiliates
During second quarter 1999 the Company entered into a modified
coinsurance arrangement to reinsure the 1999 operating results of an
affiliated company, Employers Life Insurance Company of Wausau (ELOW)
retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
for $120.8 million and immediately merged ELOW into NLIC terminating
the modified coinsurance arrangement. Because ELOW was an affiliate,
the Company accounted for the merger similar to poolings-of-interests;
however, prior period financial statements were not restated due to
immateriality. The reinsurance and merger combined contributed $1.46
million to year to date net income.
The Company has a reinsurance agreement with NMIC whereby all of the
Company's accident and health business is ceded to NMIC on a modified
coinsurance basis. The agreement covers individual accident and health
business for all periods presented and group and franchise accident and
health business since July 1, 1999. Either party may terminate the
agreement on January 1 of any year with prior notice. Prior to July 1,
1999 group and franchise accident and health business and a block of
group life insurance policies were ceded to ELOW under a modified
coinsurance agreement. Under a modified coinsurance agreement, invested
assets are retained by the ceding company and investment earnings are
paid to the reinsurer. Under the terms of the Company's agreements, the
investment risk associated with changes in interest rates is borne by
the reinsurer. Risk of asset default is retained by the Company,
although a fee is paid to the Company for the retention of such risk.
The ceding of risk does not discharge the original insurer from its
primary obligation to the policyholder. The Company believes that the
terms of the modified coinsurance agreements are consistent in all
material respects with what the Company could have obtained with
unaffiliated parties. Revenues ceded to NMIC and ELOW for the years
ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
million, and $315.3 million, respectively, while benefits, claims and
expenses ceded were $216.9 million, $259.3 million, and $326.6 million,
respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by such agreement are subject to
allocation among NMIC and such subsidiaries. Measures used to allocate
expenses among companies include individual employee estimates of time
spent, special cost studies, salary expense, commission expense and
other methods agreed to by the participating companies that are within
industry guidelines and practices. In addition, beginning in 1999
Nationwide Services Company, a subsidiary of NMIC, provides computer,
telephone, mail, employee benefits administration, and other services
to NMIC and certain of its direct and indirect subsidiaries, including
the Company, based on specified rates for units of service consumed.
For the years ended December 31, 1999, 1998 and 1997, the Company made
payments to NMIC and Nationwide Services Company totaling $124.1
million, $95.0 million, and $85.8 million, respectively. In addition,
the Company does not believe that expenses recognized under these
agreements are materially different than expenses that would have been
recognized had the Company operated on a stand-alone basis.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $9.9
million, $8.0 million and $8.4 million, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1999 and
1998 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $411.7 million and $248.4 million as
of December 31, 1999 and 1998, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
As part of certain restructuring activities that occurred prior to the
March 1997 IPO, the Company paid a dividend valued at $485.7 million to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of ELOW, National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
the Company paid a dividend to NFS, and NFS paid an equivalent dividend
to Nationwide Corp., consisting of securities having an aggregate fair
value of $850.0 million. The Company recognized a gain of $14.4 million
on the transfer of securities.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1999 were $56.0
million, $60.0 million and $66.1 million, respectively.
(12) Bank Lines of Credit
NFS, NLIC and NMIC are parties to a $600.0 million revolving credit
facility which provides for a $600.0 million loan over a five year term
on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by any party. NFS, NLIC and
NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. As of December 31, 1999 the
Company had no amounts outstanding under the agreement.
(13) Contingencies
On October 29, 1998, the Company was named in a lawsuit filed in Ohio
state court related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company affiliates which were
used to fund certain tax-deferred retirement plans. The amended
complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, the Company and the other named
defendants filed a motion to dismiss the amended complaint. On March 8,
2000, the court denied the motion to dismiss the amended complaint
filed by the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(14) Segment Information
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Variable Annuities segment consists of annuity contracts that
provide the customer with access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate fixed for a
prescribed period, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. Such contracts consist of single premium deferred
annuities, flexible premium deferred annuities and single premium
immediate annuities. The Fixed Annuities segment includes the fixed
option under variable annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary, revenues
and expenses related to group annuity contracts sold to Nationwide
Insurance employee and agent benefit plans and all realized gains and
losses on investments in a Corporate and Other segment.
During 1999 the Company revised the allocation of net investment income
among its Life Insurance and Corporate and Other segments. Also,
certain amounts previously reported as other income were reclassified
to operating expense. Amounts reported for prior periods have been
restated to reflect these changes.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (41.5) $ 1,134.5 $ 253.1 $ 174.7 $ 1,520.8
Other operating revenue 668.2 43.4 393.0 77.8 1,182.4
--------- --------- -------- -------- ---------
Total operating revenue (2) 626.7 1,177.9 646.1 252.5 2,703.2
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 837.5 130.5 128.3 1,096.3
Amortization of deferred policy
acquisition costs 162.8 49.7 60.1 -- 272.6
Other benefits and expenses 173.6 113.5 334.7 94.4 716.2
--------- --------- -------- -------- ---------
Total expenses 336.4 1,000.7 525.3 222.7 2,085.1
--------- --------- -------- -------- ---------
Operating income before
federal income tax 290.3 177.2 120.8 29.8 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 290.3 $ 177.2 $ 120.8 $ 18.2 $ 606.5
========= ========= ======== ======== =========
Assets as of year end $62,599.7 $17,134.8 $6,616.7 $6,324.7 $92,675.9
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 225.6 $ 170.7 $ 1,481.6
Other operating revenue 532.9 35.7 318.5 78.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 501.6 1,152.3 544.1 249.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 159.3 104.2 293.5 78.1 635.1
--------- --------- -------- -------- ---------
Total expenses 283.2 977.0 455.3 203.1 1,918.6
--------- --------- -------- -------- ---------
Operating income before federal
income tax 218.4 175.3 88.8 46.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 88.8 $ 74.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.8) $ 1,098.2 $ 184.9 $ 152.9 $ 1,409.2
Other operating revenue 413.9 43.2 283.4 56.6 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 387.1 1,141.4 468.3 209.5 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Benefits and expenses 148.4 108.7 283.5 63.1 603.7
--------- --------- -------- -------- ---------
Total expenses 236.2 971.9 401.6 177.8 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 66.7 31.7 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 66.7 $ 42.8 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
----------
(1) The Company's method of allocating net investment income results in
a charge (negative net investment income) to the Variable Annuities
segment which is recognized in the Corporate and Other segment. The
charge relates to non-invested assets which support this segment on
a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 69
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial statements included in Prospectus.
(Part A):
Condensed Financial Information.
in Part B:
Those financial statements required by Item 23 to
be included in Part B have been incorporated
therein by reference to the Prospectus (Part A).
Nationwide Multi-Flex Variable Account:
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
Owners' Equity for the years ended
December 31, 1999 and 1998.
Notes to Financial Statements.
Nationwide Life Insurance Company:
Independent Auditors' Report.
Consolidated Balance Sheets as of December
31, 1999 and 1998.
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Shareholder's Equity
for the years ended December 31, 1999, 1998 and
1997.
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
<PAGE> 70
<TABLE>
<S> <C> <C>
(b) Exhibits
(1) Resolution of the Depositor's Board of *
Directors authorizing the establishment of
the Registrant.
(2) Not Applicable *
(3) Underwriting or Distribution of contracts *
between the Registrant and NISC as Principal
Underwriter.
Underwriting or Distribution of contracts Attached hereto.
between the Registrant and SDI as Principal
Underwriter.
(4) The form of the variable annuity contract *
(5) Variable Annuity Application- Attached
hereto.
(6) Articles of Incorporation of Depositor - *
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel *
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation *
Schedule.
</TABLE>
*Filed previously in connection with this registration statement (SEC
File No. 2-75174) and hereby incorporated by reference.
<PAGE> 71
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C> <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
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
</TABLE>
<PAGE> 72
<TABLE>
<S> <C> <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
David A. Diamond Senior Vice President -
One Nationwide Plaza Corporate Controller
Columbus, OH 43215
Philip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary - Nationwide Financial
Columbus, OH 43215
Patricia R. Hatler Senior Vice President,
One Nationwide Plaza General Counsel and Secretary
Columbus, OH 43215
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C> <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> 74
<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> 75
<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 Agency Alabama Insurance agency marketing life
of Alabama, Inc. insurance and annuity products through
financial institutions
Financial Horizons Distributors Agency Ohio Insurance marketing life insurance and
of Ohio, Inc. annuity products through financial
institutions
Financial Horizons Distributors Agency Oklahoma Insurance marketing life insurance and
of Oklahoma, Inc. annuity products through financial
institutions
Financial Horizons Distributors Agency Texas Insurance marketing life insurance and
of Texas, Inc. annuity products through financial
institutions
*Financial Horizons Investment Trust Massachusetts Diversified, open-end investment
company
Financial Horizons Securities Oklahoma Limited broker-dealer doing business
Corporation solely in the financial institution
market
GatesMcDonald Health Plus Inc. Ohio Managed Care Organization
Gates, McDonald & Company Ohio Services employers for managing
workers' and unemployment compensation
matters
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
Gates, McDonald & Company of New York, New York Workers' compensation/self-insured
Inc. claims administration services to
employers with exposure in New York
Insurance Intermediaries, Inc. Ohio Insurance agency providing commercial
property & casualty brokerage services
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Landmark Financial Services of New New York Insurance agency marketing life
York, Inc. insurance and annuity products through
financial institutions
Leben Direkt Insurance Company Germany Life insurance through direct mail
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY 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
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 77
<TABLE>
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide Assurance Company Wisconsin Underwrites non-standard automobile
and motorcycle insurance
Nationwide Cash Management Company Ohio Investment Securities Agent
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 78
<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> 79
<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> 80
<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
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
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> 82
<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
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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> 84
<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 Group Germany Recruits and supervises external sales
partners who obtain new business for
the Neckura Group as well as to offer
financial services
Union Bond & Trust Company Oregon Oregon state bank with trust powers
Villanova Capital, Inc. Delaware Holding Company
Villanova Mutual Fund Capital Trust Delaware Trust designed to act as a registered
investment advisor
Villanova SA Capital Trust Delaware Trust designed to act as a registered
investment advisor
Western Heritage Insurance Company Arizona Underwrites excess and surplus lines
of property and casualty insurance
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 85
<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 Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide VA Separate Account-D Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity 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
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 86
<TABLE>
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C><
* 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> 87
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Account Policies
Nationwide VL Separate Account-B Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Account Policies
* Nationwide VL Separate Account-C Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Account Policies
* Nationwide VL Separate Ohio Nationwide Life and Issuer of Life Insurance
Account -D Annuity 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> 88
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
--------------------------- --------------------------- ----------------------------
| CARIBBEAN ALLIANCE | | ALLIED | | |
| INSURANCE COMPANY | | GROUP, INC. | | |
| | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 1,900,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|99.99% $19,000,000 | | |100% $1,243,344,521| | | |
--------------------------- | --------------------------- | ----------------------------
| |
--------------------------- | --------------------------- | ----------------------------
| NATIONWIDE INSURANCE | | | AMCO | | | DEPOSITORS |
| COMPANY OF AMERICA | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
| | | | (AMCO) | | | (DEPOSITORS) |
|Common Stock: 12,000 | | |Common Stock: 300,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | |---|---| |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
| | | | | | | |
|AGI-100% $215,273,000 | | |AGI-100% $147,425,540| | |AGI-100% $22,251,842 |
--------------------------- | --------------------------- | ----------------------------
| | |
--------------------------- | --------------------------- | ----------------------------
| AID FINANCE | | | ALLIED | | | ALLIED PROPERTY |
| SERVICES, INC. | | | GENERAL AGENCY | | | AND CASUALTY |
| (AID FINANCE) | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 10,000 | | |Common Stock: 5,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AGI-100% $19,545,634| |AMCO-100% $135,342 | | |AGI-100% $47,018,643 |
--------------------------- --------------------------- | ----------------------------
| |
--------------------------- --------------------------- | ----------------------------
| ALLIED | | ALLIED | | | NATIONWIDE |
| GROUP INSURANCE | | DOCUMENT SOLUTIONS, | | | HOME MORTGAGE |
| MARKETING COMPANY | | INC. | | | COMPANY (NHMC) |
| | |Common Stock: 10,000 | | | |
|Common Stock: 20,000 | |------------ Shares | | |Common Stock: 54,348 |
|------------ Shares | | |---|---|------------ Shares |
| | | | | | |
| | | | | | |
| | | | | | |
| Cost | | Cost | | | |
| ---- | | ---- | | | |
| Aid | |AGI-100% $610,000 | | |AGI-88.9% |
| 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 |
--------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| ADVANCED BUSINESS | | | WESTERN |
| SERVICES, INC. | | | HERITAGE INSURANCE |
| | | | COMPANY |
|Common Stock: 1,000 | | | |
|------------ Shares | | |Common Stock: 4,776,076 |--------------------------------
| |---| |------------- Shares |
| Cost | | |
| ---- | | Cost |
|AGI-100% $1,500,000 | | ---- |
| | |SIC-100% $57,000,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
NATIONWIDE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |==============================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
--| || |--------------------------------------------------------------------| |-----------------------
|| |
|| |--------------------------------------------------------------|-------------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | INSURANCE COMPANY | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| |Guaranty Fund | | | | | |
=====||==|------------ |---| | |Common Stock: 20,000 | |Common Stock: 10,000 |
|Certificate | | |---|------------ Shares | |--|------------ Shares |
|----------- | | | | | | | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|Casualty $500,000 | | | |Casualty-100% $5,944,422 | | |Casualty-100% $142,943,140 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | NATIONWIDE PROPERTY | | | NECKURA |
| | | | | AND CASUALTY | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | INSURANCE COMPANY | | | |
|------------ | | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
| |---| |---|------------ Shares | | |------------ Shares |
| Cost | | | | | | | |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $6,000,000 | | |Neckura-100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | NATIONWIDE ASSURANCE | | | NECKURA LIFE |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| | | |------------ Shares | | |------------ Shares |
| Cost | | | | |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $3,506,173 | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681|
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| SCOTTSDALE | | | NATIONWIDE AGRIBUSINESS | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | BROKERAGE AND SERVICE |
| (SIC) | | | | | | GMBH |
|Common Stock: 30,136 | | |Common Stock: 1,000,000 | | |Common Stock: 1 Share |
|---|------------ Shares |--------|---|------------ Shares | |--|------------ |
| | | | | | | | |
| | | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-99.9% $26,714,335 | | |Neckura-100% DM 51,639 |
| |Casualty-100% $150,000,500 | | |Other Capital | | | |
| | | | |------------- | | | |
| | | | |Casualty-Ptd. $713,576 | | | |
| -------------------------------- | ------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | --------------------------------
| | SCOTTSDALE | | | NATIONAL CASUALTY | | | LEBEN DIREKT |
| | SURPLUS LINES | | | COMPANY | | | INSURANCE COMPANY |
| | INSURANCE COMPANY | | | (NC) | | | |
| |Common Stock: 10,000 | | | Common Stock: 100 Shares | | |Common Stock: 4,000 Shares |
|---|------------ Shares | |---| ------------- | |--|------------ |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |SIC-100% $6,000,000 | | |Casualty-100% $67,442,439 | | |Neckura-100% DM 4,000,000 |
| | | | | | | | |
| -------------------------------- | -------------------------------- | --------------------------------
| | | |
| -------------------------------- | -------------------------------- | --------------------------------
| | NATIONAL PREMIUM & | | | NCC OF AMERICAN, LTD. | | | AUTO DIREKT |
| | BENEFIT ADMINISTRATION | | | (INACTIVE) | | | INSURANCE COMPANY |
| | COMPANY | | | | | | |
| |Common Stock: 10,000 | | | | | |Common Stock: 1500 Shares |
---|---|------------ Shares | | | | |--|------------ |
| | | | | | | |
| Cost | | | | | | Cost |
| ---- | | | | | | ---- |
|SIC-100% $10,000 | | |NC-100% | | |Neckura-100% DM 1,643,149 |
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| RP&C | | | SUN DIRECT | | | SVM SALES |
| INTERNATIONAL | | | VERSICHERUNGS - | | | GMBH |
| | | | AKTIENGESCLISCHAFT | | | |
|Common Stock: 1,000 | | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|------------ Shares |--------- |------------ |------------|------------ |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|Casualty-20.3% $2,400,740 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
---------------------------------------------------------------------------------------------------------------------|
|
--------------------------------------------------------------------------------------------------------------- |
| | | | |
| | | | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | SCOTTSDALE | | | NATIONWIDE CASH | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | | CORPORATION |
| | | | | | | | |
| | | | | | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 100 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |13,642,432 100% |
| | | | | Cost | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $11,226 | | |Casualty 12,992,922 $1,182,959,447 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 111,835,185 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | ARENA LLC | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |....| | |-----| ---- |
| |------------ Shares | | | | | |Casualty-16% $91,600 |
| | | | | | | |Fire-16% $91,742 |
| | Cost | | | | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-90% | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE | | | NATIONWIDE INTERNATIONAL |
| | GENERAL AGENCY, INC. | | | EXCLUSIVE DISTRIBUTION | | | UNDERWRITERS |
| | | | | COMPANY, LLC (NEDCO) | | | |
------|Common Stock: 1,000 | |....| | |-----|Common Stock: 1,000 |
| |------------ Shares | | | Single Member Limited | | |------------- Shares |
| | | | | Liability Company | | | |
| | Cost | | | | | | Cost |
| | ---- | | |Casualty-100% | | | ---- |
| |Casualty-100% $5,000,000 | | | | | |Casualty-100% $10,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| || | | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | COLONIAL COUNTY | | | INSURANCE | | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | INTERMEDIARIES, INC. | | | COMPANY |
| | COMPANY | | | | | | |
| | | | |Common Stock: 1,615 Shares | | |Common Stock: 52,000 |
| | | | |------------- | |-----|-------------- Shares |
| | | | | Cost | | |
| |Surplus Debentures: | | | ---- | | Cost |
| |------------------- | | |NEDCO-100% $1,615,000 | | ---- |
| | Cost | | -------------------------------- |Casualty-100% $106,164,995 |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- -------------------------------------
| |Lone Star 150,000 | | | eNATIONWIDE, LLC | |
| -------------------------------- | | (eNat) | -------------------------------------
| | | | | CALFARM INSURANCE |
| -------------------------------- | | | | AGENCY |
| | NATIONWIDE SERVICES | |....| Single Member Limited | | |
| | COMPANY, LLC | | Liability Company | | |
| | | | | | |
| |Single Member Limited | |----| | |Common Stock: 1,000 shares |
|.....|Liability Company | | | | |------------- |
| | | | | | | |
| | | | |Casualty-100% | | |
| |Casualty-100% | | | | | |
| | | | -------------------------------- |CalFarm Insurance |
| -------------------------------- | |Company - 100% |
| | -------------------------------- -------------------------------------
| | | DISCOVER INSURANCE | |
| -------------------------------- | | COMPANY, LLC | -------------------------------------
| | AMERICAN MARINE | | | | | CAL-AG INSURANCE |
| | UNDERWRITERS, INC. | | | | | SERVICES |
| | | | | Single Member Limited | | |
| |Common Stock: 20 Shares | |....| Liability Company | |Common Stock: 100 Shares |
|-----|------------ | | | | |------------ |
| | Cost | | | | | |
| | ---- | | |eNat-100% | |CalFarm Insurance |
| |Casualty-100% $5,020 | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| --------------------------------- | | DISCOVER INSURANCE AGENCY |
| | NATIONWIDE INSURANCE | | | OF TEXAS, LLC |
| | COMPANY OF FLORIDA | | | |
| | | | | Single Member Limited |
| | Liability Company | |....| Liability Company |
| |Common Stock: 10,000 Shares | | |
|-----|------------- | | |
| Cost | |eNat-100% |
| ---- | | |
|Casualty-100% $300,000,000 | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
September 30, 2000
</TABLE>
Page 1
<PAGE> 91
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-----------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE TRUST |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | COMPANY, FSB |
| | | CAPITAL TRUST | | Common Stock: 2,800,000 |
| Common Stock: 3,814,779 | | Preferred Stock: | | ------------ Shares |
| ------------ Shares | | --------------- | | Cost |
| | | | | ---- |
| NFS--100% | | NFS--100% | | NFS--100% $3,000,000 |
----------------|------------ ----------------------------- -----------------------------
|
| |--------------------------
----------------------------- | ----------------------------- -----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC | | INSTITUTION DISTRIBUTORS |
| | | | (NW ADV. SERV.) | | AGENCY, INC. (NFIDAI) |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | |
| ------------ Shares |--|--| ------------ Shares |==== | |
| | | | | || | |
| Cost | | | Cost | || | Common Stock: 1,000 Shares|
| ---- | | | ---- | || | ------------ |
| NW Life-100% $58,070,003 | | | NW Life-100% $5,996,261 | || | NFSDI-100% |
----------------------------- | ----------------------------- || --------------|--||----------
| || | ||
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE INVESTMENT | | | NATIONWIDE MUTUAL | || | FINANCIAL HORIZONS | | || | |
| SERVICES CORPORATION | | | FUNDS | || | DISTRIBUTORS AGENCY | | || | |
| | | | | || | OF ALABAMA, INC. | | || | |
| Common Stock: 5,000 | | | OHIO BUSINESS TRUST | || | | | || | FLORIDA |
| ------------ Shares | | | | || | Common Stock: 10,000 | | || | RECORDS |===
| |--| | |==|| | ------------ Shares |-- || | ADMINISTRATOR, |
| | | | | || | | | || | INC |
| Cost | | | | || | Cost | | || | |
| ---- | | | | || | ---- | | || | |
| NW Life-100% $529,728 | | | | || | NFIDAI-100% $100 | | || | |
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | | NATIONWIDE | || | LANDMARK FINANCIAL | | || | |
| ASSIGNMENT | | | SEPARATE ACCOUNT | || | SERVICES OF | | || | |
| COMPANY | | | TRUST | || | NEW YORK, INC. | | || | |
| | | | | || | | | || | |
| | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| |--| | MASSACHUSETTS |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | BUSINESS TRUST | || | | | || | OF OHIO, INC |
| | | | | || | Cost | | || | |
| | | | | || | ---- | | || | |
| NW Life-100% | | | | || | NFIDAI-100% $10,100 | | || | |
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | FINANCIAL HORIZONS | | || | |
| INVESTORS, LTD. | | | ASSET ALLOCATION TRUST | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |..| | OHIO BUSINESS TRUST |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | | || | OF OKLAHOMA, INC |
| | | | | | Cost | | || | |
| NW Life-70% | | | | | ---- | | || | |
| NW Mutual-30% | | | | | NFIDAI-100% $153,000 | | || | |
----------------------------- | ----------------------------- ----------------------------- | || -----------------------
| | ||
----------------------------- | ----------------------------- | || -----------------------
| NATIONWIDE | | | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | | | || | |
| | | | | | || | |
| Units: |..| | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | OF TEXAS, INC |
| | | Cost | | || | |
| NW Life-97.6% | | ---- | | || | |
| NW Mutual-2.4% | | NFIDAI-100% $100 | | || | |
----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | AFFILIATE |
| INSTITUTION DISTRIBUTORS | | || | AGENCY OF |
| INSURANCE AGENCY, | | || | OHIO, INC |
| INC. OF MASS. | | || | |
| |-- ====|Common Stock: 750 |
|Common Stock: 100 Shares | | |------------ Shares |
|------------ | | | |
| | | | |
|NFIDAI-100% | | |NFIDAI-100% |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INSURANCE AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
(Center)
NATIONWIDE(R)
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
-------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| COMMON STOCK: CONTROL: |
| ------------ ------- |
| 13,642,432 100% |
| SHARES COST |
| ------ ---- |
|CASUALTY 12,992,922 $1,182,959,447 |
|FIRE 649,510 111,385,185 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public-100% |
|CLASS B NW CORP-100% |
---------------|-------------
|
-----------|-------------------------|-------------------------|--------------------------|-------------------------|
| | | | |
-----------|------------ ------------|------------ ------------|------------ -------------|------------ ------------|-------------
|NFS DISTRIBUTORS, INC.| | NATIONWIDE FINANCIAL | | NATIONWIDE FINANCIAL | |PENSION ASSOCIATES, INC.| |VILLANOVA CAPITAL, INC. |
| (NFSDI) | | SERVICES CAPITAL | |SERVICES (BERMUDA) INC.| |Common Stock: 1,000 | |Common Stock: 958,750 |
| | | TRUST II | |Common Stock: 250,000 | |------------ Shares | |------------- Shares |
| | | | |------------- Shares | | | |NFS-96% |
| | | | | Cost | | Cost | |Preferred Stock: 500,000|
|NFS-100% | | | | ---- | | ---- | |--------------- Shares |
| | | NFS-100% | |NFS-100% $3,500,000 | | NFS-100% $2,839,392| |NFS-100% |
-----------|------------ ------------------------- ------------------------- -------------------------- ------------|-------------
| |
-----------|---------|----------------|--------------------------| |-------------------------|---------------
-----------|-------- | ---------------|------------ -------------|------------ -----------|------------- -----------|-------------
|NATIONAL DEFERRED | | |THE 401(k) COMPANIES, INC.| | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL |
|COMPENSATION, INC.| | | (401(k)) | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)|
| | | | | |Common Stock: 236,494 | | | |Common Stock: 82,343 |
| | | |Common Stock: Control | |------------- Shares | | | |------------ Shares |
| | | |------------- ------- | | | | | | |
|NFSDI-100% | | |Class A Other-100% | | | | | |VILLANOVA CAPITAL, INC.|
| | | |Class B NFSDI-90% | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% |
---||--------------- | -----------|---------------- -------------|------------ -----------------|------- -----------|-------------
|| | | | | |
|| | | | | |------------|
|| | | | | |
|| --------------|------------|---------------------------- | -------------------------- | ---------------------------- |
|| | IRVIN L. SCHWARTZ ||| NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | |
|| | AND ASSOCIATES, INC. |||SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | | INVESTORS SERVICES, INC. | |
|| | ||| | | | NEW MEXICO | | | | |
|| |Common Stock: Control: |||Common Stock: 10,000 | | | Common Stock: 1,000 | | |Common Stock: 5 | |
===== |------------- -------- |||------------- Shares |--|--| ------------- Shares | |--|------------- Shares | |
|Class A Other-100%||| Cost | | | Cost | | | Cost | |
|Class B NFSDI-100%||| ---- | | | ---- | | | ---- | |
| |||NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | |
---------------------------|---------------------------- | -------------------------- | ---------------------------- |
| | | |
---------------------------|---------------------------- | -------------------------- | ---------------------------- |
| 401(k) INVESTMENT ||| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | NATIONWIDE GLOBAL FUNDS | |
| SERVICES, INC. |||SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | | |
| ||| | | | SO. DAKOTA | | | | |
|Common Stock: 1,000,000 |||Common Stock: 1,000 | | |Common Stock: 1,000 | | | | |
|------------ Shares |-|------------- Shares |--|--|------------- Shares | |==| LUXEMBOURG SICAV | |--
| ||| Cost | | | Cost | | | | |
| Cost ||| ---- | | | ---- | | | | |
| ---- |||NRS-100% $1,000 | | |NRS-100% $1,000 | | | | |
|401(k)-100% $7,800 ||---------------------------- | -------------------------- | ---------------------------- |
---------------------------| | | |
|---------------------------- | -------------------------- | ---------------------------- |
---------------------------|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | VILLANOVA DISTRIBUTION | |
| 401(k) INVESTMENT ||| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | | SERVICES, INC. | |
| ADVISORS, INC. ||| ARKANSAS | | | OF WYOMING | | | | |
| |||Common Stock: 50,000 |-----|Common Stock: 500 Shares| |--|Common Stock: 10,000 | |--
|Common Stock: 1,000 |||------------- Shares | | |------------- | | |------------- Shares | |
|------------ Shares |-| Cost | | | Cost | | | Cost | |
| ||| ---- | | | ---- | | | ---- | |
| Cost |||NRS-100% $500 | | |NRS-100% $500 | | |VSA-100% $146,653 | |
| ---- ||---------------------------- | -------------------------- | ---------------------------- |
|401(k)-100% $1,000 || | | |
---------------------------|---------------------------- | -------------------------- | ---------------------------- |
|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | VILLANOVA FINANCIAL | |
---------------------------|| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | | GROUP, INC. | |
| THE 401(k) COMPANY ||| AGENCY, INC. | | | OF OHIO | | |Common Stock: 450,000| |
| |||Common Stock: 1,000 | | | | | |------------ Shares | |
|Common Stock: 855,000 |||------------- Shares |--|==| | |--|Series A Preferred:100,000| |--
|------------ Shares ||| | | | | |------------------ Shares | |
| ||| Cost | | | | | Cost | |
| Cost ||| ---- | | | | | ---- | |
| ---- |-|NRS-100% $1,000 | | | | |VSA-100% $10,000,000| |
|401(k)-100% $1,000 ||---------------------------- | -------------------------- ---------------------------- |
---------------------------| | |
|---------------------------- | -------------------------- ---------------------------- |
---------------------------|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
| |||SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| ||| | | | OKLAHOMA | | | |
| RIVERVIEW AGENCY, INC. |||Common Stock: 500 | | | | |Common Stock: 1,000 | |
| |||------------- Shares |--|==| | |------------- Shares |--|--
| ||| Cost | | | | | Cost | |
| |=| ---- | | | | | ---- | |
| | |NRS-100% $500 | | | | |Morley-100% $25,000 | |
--------------------------- ---------------------------- | -------------------------- ---------------------------- |
| |
---------------------------- | -------------------------- ---------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT| | MORLEY & | |
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. | | ASSOCIATES, INC. | |
| | | | OF TEXAS | | | |
|Common Stock: 1,000 |-- ==| | |Common Stock: 3,500 |--|--
|------------- Shares | | | |------------- Shares |
| Cost | | | | Cost |
| ---- | | | | ---- |
|NRS-100% $1,000 | | | |Morley-100% $1,000 |
---------------------------- -------------------------- ----------------------------
</TABLE>
<PAGE> 93
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
---------------|-------------- ------------------------------- | ----------------------------
| NATIONWIDE GLOBAL | | GATES MCDONALD | | | NATIONWIDE |
| HOLDINGS, INC. (NGH) | | & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) |
| | | | | | |
|Common Stock: 1 Share | --|Common Stock: 254 Shares | | |---|Common Stock: 100 Shares |
|------------ | | |------------ | | | |------------ |
| Cost | | | Cost | | | | Cost |
| ---- | | | ---- | | | | ---- |
|NW Corp.-100% $506,434,210 | | |NW Corp.-100% $25,683,532 | | | | |
| | | |------------------------------ | | |NW Corp.-100% $14,603,732|
|(See Page 3) | | | | ----------------------------
------------------------------ | |------------------------------ | | ----------------------------
| | MEDPROSOLUTIONS, INC. | | | | NATIONWIDE MANAGEMENT |
------------------------------ --| | | | | SYSTEMS, INC. |
| VILLANOVA MUTUAL FUND | | | Cost | | | | |
| CAPITAL TRUST (VMF) | | | ---- | | |---|Common Stock: 100 Shares |
----|----| | | |Gates-100% $6,700,000 | | | |------------- |
| | | | | | | | | Cost |
| | | | | | | | | ---- |
| | | | ------------------------------- | | |NHP Inc.-100% $25,149 |
| | | | | | ----------------------------
| | | | |------------------------------ | | ----------------------------
| | DELAWARE BUSINESS TRUST | | | GATES MCDONALD & | | | | NATIONWIDE |
| ------------------------------ | | COMPANY OF NEW YORK, INC. | | | | AGENCY, INC. |
| --| | | | | |
| ------------------------------ | |Common Stock: 3 Shares | | |---|Common Stock: 100 Shares |
| | NORTHPOINTE | | |------------ | | |------------ |
| | CAPITAL LLC | | | Cost | | | Cost |
| | | | | ---- | | | ---- |
|----| | | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 |
| | | ------------------------------- | ----------------------------
| | | |
| | | ------------------------------- | ----------------------------
|VILLANOVA CAPITAL, INC.-65% | | | GATES MCDONALD & | | | MRM INVESTMENTS, INC. |
------------------------------ | | COMPANY OF NEVADA | | | |
--| | -------|Common Stock: 1 Shares |
------------------------------ | |Common Stock: 40 Shares | |------------ |
| EXCALIBER FUNDING | | |------------ | | Cost |
| CORPORATION | | | Cost | | ---- |
---------|Common Stock: 1,000 Shares | | | ---- | |NW Corp.-100% $7,000,000 |
|------------- | | |Gates-100% $93,750 | ----------------------------
| Cost | | -------------------------------
| ---- | |
|Morley-100% $1,000 | | -------------------------------
------------------------------ | | GATES MCDONALD |
| | HEALTH PLUS, INC. |
------------------------------ --| |
| CALIBER FUNDING | | |Common Stock: 200 Shares |
| CORPORATION | | |------------ |
| | | | Cost |
---------| | | | ---- |
| | | |Gates-100% $2,000,000 |
| Morley-100% | | -------------------------------
| | |
------------------------------ | -------------------------------
| |NEVADA INDEPENDENT COMPANIES-|
| |MANUFACTURING TRANSPORTATION |
| | AND DISTRIBUTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| |Gates-100% |
| -------------------------------
|
------------------------------ | -------------------------------
| MORLEY RESEARCH | | | NEVADA INDEPENDENT |
| ASSOCIATES, LTD. | | | COMPANIES-HEALTH AND |
---------| | --| NONPROFIT |
|Common Stock: 1,000 Shares | | |Common Stock: 1,000 Shares |
|------------- | | |------------ |
| Cost | | | |
| ---- | | |Gates-100% |
|Morley-100% $1,000 | | -------------------------------
------------------------------ |
| -------------------------------
------------------------------ | | NEVADA INDEPENDENT |
| MORLEY CAPITAL | | | COMPANIES-CONSTRUCTION |
| MANAGEMENT | --| |
| | | |Common Stock: 1,000 Shares |
---------|Common Stock: 500 Shares | | |------------ |
|------------- | | | |
| Cost | | |Gates-100% |
| ---- | | -------------------------------
|Morley-100% $5,000 | |
------------------------------ | -------------------------------
| | NEVADA INDEPENDENT |
------------------------------ | | COMPANIES-HOSPITALITY AND | Subsidiary Companies - Solid Line
| UNION BOND & TRUST | --| ENTERTAINMENT | Contractual Association - Double Line
| COMPANY | | | Limited Liability Company - Dotted Line
| | |Common Stock: 1,000 Shares |
---------|Common Stock: 2,000 Shares | |------------ |
|------------ | | |
| Cost | |Gates-100% | September 30, 2000
| ---- | -------------------------------
|Morley-100% $50,000 |
------------------------------
Page 2
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Left side)
|--------------------------------------------|------------------------------------------|---------------------
| | |
----------------|--------------- -----------------|----------------- ------------------|----------------
| VILLANOVA GLOBAL ASSET | | NATIONWIDE GLOBAL HOLDINGS | | NGH |
| MANAGEMENT TRUST | | - HONG KONG, LIMITED | | NETHERLANDS B.V. |
| (VGAMT) | | Common Stock: 20,343,752 Shares | | Common Stock: 40 Shares |
| | | ------------- Shares | | ------------- |
| | | ------ | | Cost |
| | | NGH 20,343,751 | | ----- |
| NGH - 100% | | LUX SA 1 | | NGH - 100% NLG 52,500 |
----------------|--------------- ----------------------------------- -----------------------------------
|
| |--------------------------|--------------------|-------------------------------------------
| | | |
----------------|--------------- | -----------------|----------------- | -----------------------------------
| NATIONWIDE ASSET | | | GARTMORE INVESTMENT | | | GARTMORE FUND |
| MANAGEMENT HOLDINGS, LTD. | | | SERVICES LTD. | | | MANAGERS LTD. |
| (NAMHL) | | |----| (GISL) | |---| (GFM) |
| | | | | | | | |
| | | | | GIM - 80% | | | GIM - 99.99% |
| VGAMT - 100% | | | | GNL - 20% | | | GSL - .01% |
----------------|--------------- | | ----------------------------------- | ------------------|----------------
| | | | |
| | | | |
| | | | |
----------------|--------------- | | ----------------------------------- | ------------------|----------------
| NATIONWIDE UK ASSET | | | | GARTMORE INVESTMENT | | | |
| MANAGEMENT HOLDINGS, LTD. | | | | SERVICES GMBH | | | FENPLACE LIMITED |
| (NUKAMHL) | | |----| | |---| |
| | | | | | | | |
| NAMHL - 100% | | | | GISL - 100% | | | GFM - 100% |
----------------|--------------- | | ----------------------------------- | ------------------|----------------
| | | | |
| | | | |
| | | | |
----------------|--------------- | | ----------------------------------- | ------------------|----------------
| NATIONWIDE UK HOLDING | | | | MARENWOOD, LTD. (FKA) | | | FENPLACE TWO LTD. (FKA) |
| COMPANY, LTD. | | | | GARTMORE FUND MANAGERS | | | NATWEST INVESTMENT |
| (NUKHCL) | | |----| (FAR EAST) LTD. | | | MANAGEMENT LIMITED (FTL) |
| | | | | | | | |
| | | | | GISL - 50% | | | |
| NUKAMHL - 100% | | | | GNL - 50% | | | GIM - 100% |
----------------|--------------- | | ----------------------------------- | -----------------------------------
| | | |
| | | |
| | | |
----------------|--------------- | | ----------------------------------- | -----------------------------------
| ASSET MANAGEMENT | | | | GARTMORE FUND MANAGERS | | | GARTMORE INVESTMENT MGMT. |
| HOLDINGS PLC | | | | INTERNATIONAL LIMITED | | | (CHANNEL ISLAND) LTD. (GIMCIL) |
| (AMH) | | | | (GFMI) | | | (FKA) NATWEST INVESTMENT MGMT. |
| | | |----| | |---| CHANNEL ISLANDS LIMITED |
| | | | GISL - 99.99% | | | FTL - 99.99% |
| NUKHCL - 100% | | | GSL - .01% | | | Corp Share Ltd. - .01% |
----------------|--------------- | -----------------|----------------- | -----------------------------------
| | | |
| | | |
| | | |
----------------|--------------- | -----------------|----------------- | -----------------------------------
| GARTMORE INVESTMENT | | | GARTMORE NOMINEES | | | GARTMORE SECURITIES LTD. |
| MANAGEMENT PLC | | | (JERSEY) LTD. | | | (GSL) |
| (GIM) | | | | | | |
| |--| | GFMI - 94% | |---| |
| AMH - 99.99% | | GSL - 3% | | GIM - 99.99% |
| GNL - .01% | | GIM - 3% | | GNL - .01% |
-------------------------------- ----------------------------------- -----------------------------------
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Center)
NATIONWIDE(R)
--------------------------------- ----------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |=============| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
--------------------------------- | ----------------------------------
|
|
--------------------|--------------------
| NATIONWIDE CORPORATION (NW CORP) |
| COMMON STOCK: CONTROL: |
| ------------- -------- |
| 13,642,432 100% |
| SHARES COST |
| ------ ---- |
| Casualty 12,992,922 $1,182,959,447 |
| Fire 649,510 111,835,185 |
--------------------|--------------------
|
---------------|----------------
| NATIONWIDE GLOBAL |
| HOLDINGS, INC. (NGH) |
| Common Stock: 1 Share |
| ------------- |
| |
| Cost |
| ---- |
| NW Corp.-100% $506,434,210 |
---------------|----------------
|
---------------------------------------|-----------------------|------------------------|-------------------------------------------
| |
---------------|---------------- ----------------|---------------
| NATIONWIDE | | NATIONWIDE GLOBAL |
| SERVICES SP. Z.O.O. | | JAPAN, INC. |
| Common Stock: 80 Shares | | Common Stock: 100 Shares |
| ------------ | | ------------- |
| Cost | | Cost |
| ---- | | ---- |
| NGH - 100% 4,000 PLN | | NGH - 100% $100 |
-------------------------------- --------------------------------
----------------|-----------------------------------------------|-------------------------------------------------------------------
| |
| -------------------------------- | --------------------------------
| | GARTMORE INVESTMENT LTD. | | | GARTMORE SCOTLAND LTD. |
| | (GIL) | | | (GSCL) |
|-------| | |-------| |
| | GIM - 50% | | | GIM - 99.99% |
| | GNL - 50% | | | GNL - .01% |
| ---------------|---------------- | --------------------------------
| | |
| | |
| ---------------|---------------- | --------------------------------
| | GARTMORE JAPAN | | | DAMIAN SECURITIES LTD. |
| | LIMITED | | | |
| | | |-------| |
| | GIL - 98.46% | | | GIM - 50% |
| | GIM - 1.54% | | | GSCL - 50% |
| -------------------------------- | --------------------------------
| |
| |
| -------------------------------- | --------------------------------
| | GARTMORE 1990 LTD. | | | GARTMORE NOMINEES LTD. |
| | (GENERAL PARTNER) | | | (GNL) |
|-------| | |-------| |
| | GIM - 50% | | | GIM - 99.99% |
| | GSL - 50% | | | GSCL - .01% |
| -------------------------------- | --------------------------------
| |
| |
| -------------------------------- | --------------------------------
| | GARTMORE INDOSUEZ UK | | | GARTMORE PENSION FUND |
| | RECOVERY FUND (G.P.) LTD. | | | TRUSTEES, LTD. |
|-------| | |-------| |
| | GIM - 50% | | | GIM - 99% |
| | GNL - 50% | | | GSCL - 1% |
| -------------------------------- | --------------------------------
| |
| |
| -------------------------------- | --------------------------------
| | GARTMORE 1990 TRUSTEE LTD. | | | GIL NOMINEES LTD. |
| | (GENERAL PARTNER) | | | |
|-------| | |-------| |
| GIM - 50% | | GIM - 50% |
| GSL - 50% | | GSCL - 50% |
-------------------------------- --------------------------------
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Right side)
----------------------|---------------------|----------------------|------------------------------------------|
: | : |
---------------|---------------- | ----------------|------------------ -----------------|-----------------
| NATIONWIDE GLOBAL | | | NATIONWIDE TOWARZYSTWO | | NATIONWIDE GLOBAL HOLDINGS, |
| FINANCE, LLC | | | UBEZPIECZEN NA ZYCIE SA | | INC. - LUXEMBOURG BRANCH |
| | | | | | (BRANCH) |
| Single Member Limited | | | Common Stock: 1,952,000 Shares | | |
| Liability Company | | | ------------ | | |
| | | | | | |
| NGH - 100% | | | NGH - 100% | | Endowment Capital - $1,000,000 |
-------------------------------- | ----------------|------------------ -----------------|-----------------
| | |
---| | | |
| | | |
| -------------------------------- | ----------------|------------------ -----------------------------------
| | VICPIC LTD. | | | PIONEER NATIONWIDE | | NGH LUXEMBOURG S.A. |
| | | | | SP. Z.O.O. | | (LUX SA) |
| | | | | | | |
|---| | | | | |---| Common Stock: 5,894 Shares |
| | | | | Common Stock: 40,950 Shares | | | ------------ |
| | | | | ------------ | | | Cost |
| | GIM - 99.99% | | | | | | ----- |
| | GSCL - .01% | | | NGH - 70% | | | BRANCH - 99.98% $115,470,723 |
| -------------------------------- | ----------------------------------- | -----------------------------------
| | |
| | |
| -------------------------------- | ----------------------------------- | -----------------------------------
| | GARTMORE EUROPE LTD. | | | SIAM AR-NA-KHET | | | NGH UK, LTD. |
| | | | | COMPANY LTD. (SIAM) | | | |
|---| | |......| | |---| |
| | GIM - 50% | | | | | |
| | GSL - 50% | | NGH - 48.99% | | | LUX SA - 100% |
| -------------------------------- ----------------|------------------ | -----------------------------------
| : |
| : |
| -------------------------------- ----------------|------------------ | -----------------------------------
| | GARTMORE CAPITAL | | THAI PRASIT | | | NATIONWIDE GLOBAL HOLDINGS |
| | MANAGEMENT LTD. | | NATIONWIDE COMPANY LTD. | | | - NGH BRASIL PARTICIPACOES |
| | (GCM) | | | | | LTDA (NGH BRASIL) |
|---| | | | |---| |
| | | | | | Shares Cost |
| | | | | | ------ ----- |
| GIM - 99.99% | | NGH - 24.3% | | | LUX SA 6,164,899 R6,164,889 |
| GSL - .01% | | SIAM - 37.7% | | | NGH 1 R1 |
---------------|---------------- ----------------------------------- | -----------------|-----------------
| | |
| | |
---------------|---------------- ----------------------------------- | -----------------|-----------------
| GARTMORE U.S. LTD. | | PANEUROLIFE (PEL) | | | NATIONWIDE SEGURADORA S.A. |
| (GUS) | | | | | |
| | | Common Stock: 1,300,000 Shares | | | Shares Cost |
| | | ------------- Cost |---| | ------ ----- |
| | | ---- | | NGH |
| | | LUX SA - 100% 3,817,832,685 | | BRASIL 9,999,999 R9,999,999 |
| GCM - 100% | | LUF | | LUX SA 1 R1 |
---------------|---------------- -----------------|----------------- -----------------------------------
| |
| |
---------------|---------------- -----------------|-----------------
| GARTMORE GLOBAL | | VERTBOIS, SA |
| PARTNERS | | | Subsidiary Companies-- Solid Line
| | | | Contractual Association-- Double Line
| | | | Limited Liability Company-- Dotted Line
| | | PEL - 99.99% |
| GUS - 50% | | LUX SA - .01% | September 30, 2000 Page 3
-------------------------------- -----------------------------------
</TABLE>
<PAGE> 97
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract owners of Qualified and Non-Qualified
Contracts as of January 31, 2000 was 44,894 and 1,212 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) Security Distributors, Inc. ("SDI"), a subsidiary of Security
Benefit Life Insurance Company, serves as distributor for
contracts issued by the Registrant through its Nationwide
Multi-Flex Variable Account and Nationwide Variable Account - 9
and made available to educators and their families who are
members of the National Education Association ("NEA"). SDI
receives no compensation for its distribution function in
excess of the commissions it pays to selling broker/dealers.
SDI performs similar functions for the following separate
accounts of Security Benefit Life Insurance Company: SBL
Variable Annuity Accounts I, III, IV, X and XI, SBL Variable
Life Insurance Account Varilife, Security Varilife Separate
Account, SBL Variable Annuity Account VIII (Variflex Extra
Credit), SBL Variable Annuity Account VIII (Variflex LS), SBL
Variable Annuity Account VIII (Variflex Signature), and
Parkstone Variable Annuity Separate Account. SDI also acts as
principal underwriter for the following management investment
companies for which Security Management Company, LLC, a
subsidiary of Security Benefit Life, acts as investment
adviser: Security Equity Fund, Security Income Fund, Security
Growth and Income Fund, Security Municipal Bond Fund, Security
Ultra Fund, and SBL Fund.
<PAGE> 98
(b) SDI DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------------------------
<S> <C>
Gregory J. Garvin President
700 SW Harrison
Topeka, Kansas 66636-0001
John D. Cleland Vice President and Director
700 SW Harrison
Topeka, Kansas 66636-0001
Richard K. Ryan Director
700 SW Harrison
Topeka, Kansas 66636-0001
James R. Schmank Director
700 SW Harrison
Topeka, Kansas 66636-0001
Mark E. Young Director
700 SW Harrison
Topeka, Kansas 66636-0001
Amy J. Lee Secretary
700 SW Harrison
Topeka, Kansas 66636-0001
Brenda M. Harwood Treasurer and Director
700 SW Harrison
Topeka, Kansas 66636-0001
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(c)
------------------------------------------------------------------------------------------------------------------
NAME OF PRINCIPAL UNDERWRITER NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION
DISCOUNTS AND REDEMPTION OR COMMISSIONS
COMMISSIONS ANNUITIZATION
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Security Distributors, Inc. N/A N/A N/A N/A
------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
<PAGE> 99
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under this
form promptly upon written or oral request.
The Registrant represents that any of the 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 the risks
assumed by Nationwide.
<PAGE> 100
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Multi-Flex Variable Account:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG LLP
Columbus, Ohio
April 5, 2000
<PAGE> 101
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of 1940
the Registrant, NATIONWIDE MULTIFLEX VARIABLE ACCOUNT certifies that the
requirements of the Securities Act Rule 485(b) for effectiveness of the
Post-Effective Amendment No. 30 and has caused this Post-Effective Amendment to
be signed on its behalf in the City of Columbus, and State of Ohio, on this 16th
day of November, 2000.
NATIONWIDE MULTI-FLEX VARIABLE ACCOUNT
-------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-------------------------------------------------
(Depositor)
By /s/ STEVEN SAVINI, ESQ.
-------------------------------------------------
Steven Savini, Esq.
As required by the Securities Act of 1933, this Post-Effective Amendment No. 30
has been signed by the following persons in the capacities indicated on the 16th
day of November, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
----------------------------------------
Lewis J. Alphin
A. I. BELL Director
----------------------------------------
A. I. Bell
NANCY C. BREIT Director
----------------------------------------
Nancy C. Breit
KENNETH D. DAVIS Director
----------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
----------------------------------------
Keith W. Eckel
Willard J. Engel Director
----------------------------------------
Willard J. Engel
Fred C. Finney Director
----------------------------------------
Fred C. Finney
Joseph J. Gasper President and Chief Operating
----------------------------------------
Joseph J. Gasper Officer and Director
W.G. JURGENSEN Chief Executive Officer
----------------------------------------
W.G. Jurgensen and Director
Dimon R. MCFerson Chairman and
----------------------------------------
Dimon R. McFerson Director
David O. Miller Chairman of the Board and
----------------------------------------
David O. Miller Director
Yvonne M. Curl Director
----------------------------------------
Yvonne M. Curl
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
---------------------------------------- --------------------------------------
Arden L. Shisler Steven Savini
Robert L. Stewart Director Attorney-in-Fact
----------------------------------------
Robert L. Stewart
</TABLE>
