<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-86408
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
POST EFFECTIVE AMENDMENT NO. 7
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 7
NATIONWIDE VA SEPARATE ACCOUNT- B
(Exact Name of Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective amendment amends the Registration Statement in respect of
the Prospectus, Statement of Additional Information, and the Financial
Statements.
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
===============================================================================
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NATIONWIDE VA SEPARATE ACCOUNT-B
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<S> <C> <C>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page...................................................................................3
Item 2. Definitions..................................................................................5
Item 3. Synopsis or Highlights......................................................................14
Item 4. Condensed Financial Information.............................................................15
Item 5. General Description of Registrant, Depositor, and Portfolio Companies.......................20
Item 6. Deductions and Expenses.....................................................................21
Item 7. General Description of Variable Annuity Contracts...........................................22
Item 8. Annuity Period..............................................................................28
Item 9. Death Benefit and Distributions.............................................................31
Item 10. Purchases and Contract Value................................................................22
Item 11. Redemptions.................................................................................25
Item 12. Taxes.......................................................................................34
Item 13. Legal Proceedings...........................................................................46
Item 14. Table of Contents of the Statement of Additional Information................................46
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page..................................................................................55
Item 16. Table of Contents...........................................................................55
Item 17. General Information and History.............................................................55
Item 18. Services....................................................................................55
Item 19. Purchase of Securities Being Offered........................................................55
Item 20. Underwriters................................................................................56
Item 21. Calculation of Performance Information......................................................56
Item 22. Annuity Payments............................................................................56
Item 23. Financial Statements........................................................................57
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits...........................................................97
Item 25. Directors and Officers of the Depositor.....................................................99
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant.............101
Item 27. Number of Contract Owners..................................................................111
Item 28. Indemnification............................................................................111
Item 29. Principal Underwriter......................................................................111
Item 30. Location of Accounts and Records...........................................................113
Item 31. Management Services........................................................................113
Item 32. Undertakings...............................................................................113
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Home Office
P.O. Box 16609
Columbus, Ohio 43216-6609, 1-800-848-6331
TDD 1-800-238-3035
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT-B
The Contracts described in this prospectus are Modified Single Purchase Payment
Contracts (collectively referred to as the "Contracts"). Reference throughout
the prospectus to such Contracts will mean individual contracts as well as
Certificates issued under Group Modified Single Premium Retirement Contracts.
For such Group Contracts, references to "Contract Owner" will mean the
"Participant" unless the plan otherwise permits or requires the Contract Owner
to exercise contractual rights under the authority of the plan terms. The
Contracts are sold for use in retirement plans which may qualify for special
federal tax treatment under the Internal Revenue Code (the "Code"). The
Contracts are sold as either: Non-Qualified Contracts; IRAs; Roth IRAs; SEP
IRAs; Tax Sheltered Annuities; or Qualified Contracts. Annuity payments are
deferred until a selected later date.
Purchase Payments are allocated to the Nationwide VA Separate Account-B
("Variable Account"), a separate account of Nationwide Life and Annuity
Insurance Company (the "Company"). The Underlying Mutual Funds are available as
investment options in variable life insurance policies or variable annuity
contracts issued by life insurance companies or, in some cases, through
participation in certain qualified pension or retirement plans. The Variable
Account uses its assets to purchase shares at Net Asset Value in one or more of
the following series of the Underlying Mutual Fund options:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN
CENTURY(SM) FAMILY OF INVESTMENTS
<TABLE>
<S> <C>
American Century VP Balanced American Century VP Capital Appreciation
American Century VP Income & Growth American Century VP International
American Century VP Value
DREYFUS
Dreyfus Stock Index Fund, Inc. Dreyfus Variable Investment Fund-Capital Appreciation Portfolio
Dreyfus Variable Investment Fund-Growth & Income Portfolio*
The Dreyfus Socially Responsible Growth Fund, Inc.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Equity-Income Portfolio VIP Growth Portfolio
VIP High Income Portfolio* VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager Portfolio VIP II Contrafund Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
VIP III Growth Opportunities Portfolio
MORGAN STANLEY
Morgan Stanley Universal Funds, Inc. - Emerging Markets Debt Portfolio
Van Kampen American Capital Life Investment Trust - Morgan Stanley Real Estate Securities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund Government Bond Fund Money Market Fund
Nationwide Small Cap Value Fund Nationwide Small Company Fund
Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
AMT Growth Portfolio AMT Guardian Portfolio AMT Limited Maturity Bond Portfolio
AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Growth Fund Oppenheimer Multiple Strategies Fund
</TABLE>
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STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUNDS II. INC.")
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. International Stock Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
International Equity Portfolio Post-Venture Capital Portfolio
Small Company Growth Portfolio
* These Funds may invest in lower quality debt securities commonly referred to
as junk bonds.
This prospectus provides you with basic information you should know about
the Contracts issued by the Variable Account before investing. You should read
it and keep it for future reference. A Statement of Additional Information dated
May 1, 1998, containing further information about the Contracts and the Variable
Account has been filed with the Securities and Exchange Commission ("SEC"). You
can obtain a copy without charge from the Company by calling 1-800-848-6331, TDD
1-800-238-3035 or writing P.O. Box 16609, Columbus, Ohio 43216-6609.
THE BENEFITS DESCRIBED IN THIS PROSPECTUS MAY NOT BE AVAILABLE IN EVERY
JURISDICTION. PLEASE REFER TO YOUR CONTRACT FOR SPECIFIC BENEFIT INFORMATION.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, ANY ADVISER OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED
ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT
INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SEC MAINTAINS A WEB SITE, www.sec.gov, THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION AS WELL AS ANY MATERIAL INCORPORATED BY REFERENCE
RELATING TO THIS PROSPECTUS.
INFORMATION ABOUT THIS PRODUCT AND OTHER BEST OF AMERICA PRODUCTS CAN BE
OBTAINED ON THE WORLD-WIDE WEB AT www.bestofamerica.com.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1998, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 44 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person designated to receive annuity payments during
Annuitization and upon whose continuation of life any annuity payment involving
life contingencies depends. This person must be age 85 or younger at the time of
Contract issuance, unless the Company has approved a request for an Annuitant of
greater age. The Annuitant may be changed prior to the Annuitization Date with
the consent of the Company.
ANNUITIZATION- The period during which annuity payments are received.
ANNUITIZATION DATE- The date on which annuity payments commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract. The Annuity Commencement Date may be changed by the Contract Owner
with the consent of the Company.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The person designated to receive certain benefits under the
Contract when the Annuitant dies prior to the Annuitization Date. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life and Annuity Insurance Company.
CONTINGENT ANNUITANT- The person who may be the recipient of certain rights or
benefits under the Contract when the Annuitant dies before the Annuitization
Date. If a Contingent Annuitant is designated and the Annuitant dies before the
Annuitization Date, the Contingent Annuitant becomes the Annuitant. A Contingent
Annuitant may not be named for Contracts issued as Qualified Contracts, IRAs,
Roth IRAs, SEP IRAs or Tax Sheltered Annuities.
CONTINGENT BENEFICIARY- The person designated to be the Beneficiary if the named
Beneficiary is not living at the time of the death of the Annuitant.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. A Contingent Owner
may not be named for Contracts issued as Qualified Contracts, IRAs, Roth IRAs,
SEP IRAs or Tax Sheltered Annuities.
CONTRACT- The Deferred Variable Annuity Contract described in this prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER- The person who possesses all rights under the Contract,
including the right to designate and change any designations of the Contract
Owner, Contingent Owner, Annuitant, Contingent Annuitant, Beneficiary,
Contingent Beneficiary, Annuity Payment Option, and the Annuity Commencement
Date. The Contract Owner is the person named as Contract Owner on the
application, unless changed.
CONTRACT VALUE- The sum of the value of all Accumulation Units attributable to
the Contract.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit which is payable upon the death of the Annuitant or
the Contingent Annuitant, if applicable. This benefit does not apply upon the
death of the Contract Owner when the Contract Owner and Annuitant are not the
same person. If the Annuitant dies after the Annuitization Date, any benefit
that may be payable will be as specified in the Annuity Payment Option elected.
DISTRIBUTION- Any payment of part or all of the Contract Value
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
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FIXED PAYMENT ANNUITY- An annuity providing for payments which are guaranteed by
the Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408 of the Code, but does not include Roth Individual
Retirement Accounts, which qualify for favorable tax treatment under Section
408A of the Code.
INDIVIDUAL RETIREMENT ANNUITY ("IRA")- An annuity contract which qualifies for
favorable tax treatment under Section 408 of the Code, but does not include Roth
IRAs, which qualify for favorable tax treatment under Section 408A of the Code.
JOINT OWNER- The Joint Owner possesses an undivided interest in the entire
Contract in conjunction with the Contract Owner. If a Joint Owner is named,
references to "Contract Owner" or "Joint Owner" will apply to both the Contract
Owner and Joint Owner or either of them. Joint Owners must be spouses at the
time Joint Ownership is requested unless otherwise required by state law. Joint
Ownership may be selected only for Non-Qualified Contracts.
NET ASSET VALUE- The value of one share of an Underlying Mutual Fund at the end
of a market day or at the close of the New York Stock Exchange. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment under Sections 401 and 403(a) (Qualified Plans), 408 (IRAs) 408A (Roth
IRAs) or 403(b) (Tax Sheltered Annuities) of the Code.
PLAN PARTICIPANT-The person for whom contributions are being made to a Qualified
Contract or Tax Sheltered Annuity either through employer contributions or
employee salary reduction contributions.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers among the Sub-Accounts.
QUALIFIED CONTRACTS- A contract issued to fund a Qualified Plan.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Sections 401 or 403(a) of the Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Code.
SEP IRA- A retirement plan which receives favorable tax treatment under Section
408(k) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
UNDERLYING MUTUAL FUND- A registered open-end management investment company in
which the assets of the Sub-Accounts will be invested.
VALUATION DATE- Each day the New York Stock Exchange and the Home Office are
open for business or any other day during which there is a sufficient degree of
trading of the Underlying Mutual Fund shares that the current Variable Account
Contract Value might be materially affected.
VALUATION PERIOD- The period of time commencing at the close of a Valuation Date
and ending at the close of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT- The Nationwide VA Separate Account-B, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in the shares of a separate Underlying Mutual Fund.
VARIABLE PAYMENT ANNUITY- An annuity providing for payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS...........................................................................................3
SUMMARY OF CONTRACT EXPENSES........................................................................................7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..............................................................................7
EXAMPLE.............................................................................................................9
SYNOPSIS...........................................................................................................12
CONDENSED FINANCIAL INFORMATION....................................................................................13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY......................................................................18
NATIONWIDE ADVISORY SERVICES, INC..................................................................................18
THE VARIABLE ACCOUNT...............................................................................................18
Underlying Mutual Fund Options..........................................................................18
Voting Rights...........................................................................................19
Substitution of Securities..............................................................................19
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS......................................................................19
Expenses of Variable Account............................................................................19
Mortality Risk Charge...................................................................................19
Expense Risk Charge.....................................................................................19
Administration Charge...................................................................................20
Premium Taxes...........................................................................................20
OPERATION OF THE CONTRACT..........................................................................................20
Investments of the Variable Account.....................................................................20
Allocation of Purchase Payments and Contract Value......................................................20
Value of an Accumulation Unit...........................................................................20
Net Investment Factor...................................................................................21
Determining the Contract Value..........................................................................21
Right to Revoke.........................................................................................21
Transfers...............................................................................................21
Contract Ownership......................................................................................22
Joint Ownership.........................................................................................22
Contingent Ownership....................................................................................22
Beneficiary.............................................................................................23
Surrender (Redemption)..................................................................................23
Surrenders Under a Qualified Contract or Tax-Sheltered Annuity Contract.................................23
Loan Privilege..........................................................................................24
Assignment..............................................................................................25
CONTRACT OWNER SERVICES............................................................................................26
Asset Rebalancing.......................................................................................26
Dollar Cost Averaging...................................................................................26
Systematic Withdrawals..................................................................................26
ANNUITY PAYMENT PERIOD, DEATH BENEFIT, AND OTHER DISTRIBUTIONS.....................................................26
Annuity Commencement Date...............................................................................26
Annuitization...........................................................................................26
Fixed Payment Annuity - First and Subsequent Payments...................................................27
Variable Payment Annuity - First and Subsequent Payments................................................27
Variable Payment Annuity - Assumed Investment Rate......................................................27
Variable Payment Annuity - Value of an Annuity Unit.....................................................27
Variable Payment Annuity - Exchanges Among Underlying Mutual Fund Options...............................27
Frequency and Amount of Annuity Payments................................................................27
Annuity Payment Options.................................................................................27
Death of Contract Owner -Non-Qualified Contracts........................................................28
Death of Annuitant - Non-Qualified Contracts............................................................28
Death of Contract Owner/Annuitant.......................................................................28
Death Benefit Payment...................................................................................29
Required Distributions for Non-Qualified Contracts.....................................................29
Required Distributions for Qualified Plans or Tax Sheltered Annuities...................................30
Required Distributions for IRAs or SEP IRAs.............................................................31
</TABLE>
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<TABLE>
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Required Distributions for Roth IRAs....................................................................32
FEDERAL TAX CONSIDERATIONS.........................................................................................32
Federal Income Taxes....................................................................................32
Puerto Rico.............................................................................................33
Non-Qualified Contracts-Natural Persons as Contract Owners..............................................33
Non-Qualified Contracts-Non-Natural Persons as Contract Owners..........................................34
Qualified Plans, IRAs, SEP IRAs and Tax Sheltered Annuities.............................................34
Roth IRAs...............................................................................................35
Withholding.............................................................................................35
Non-Resident Aliens.....................................................................................36
Federal Estate, Gift, and Generation Skipping Transfer Taxes............................................36
Charge for Tax..........................................................................................36
Diversification.........................................................................................36
Tax Changes.............................................................................................37
GENERAL INFORMATION................................................................................................38
Contract Owner Inquiries................................................................................38
Statements and Reports..................................................................................38
Advertising.............................................................................................38
YEAR 2000 COMPLIANCE ISSUES........................................................................................44
LEGAL PROCEEDINGS..................................................................................................44
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS..............................................................44
APPENDIX...........................................................................................................45
</TABLE>
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SUMMARY OF CONTRACT EXPENSES
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges.......................... 1.25%
Administration Charge....................................... 0.20%
Total Variable Account Annual Expenses.................... 1.45%
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc.-American Century VP Balanced
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc.-American Century VP Capital Appreciation
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 0.70% 0.00% 0.70%
Inc.-American Century VP Income & Growth
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.50% 0.00% 1.50%
Inc.-American Century VP International
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc.-American Century VP Value
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.03% 0.28%
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- Capital 0.75% 0.05% 0.80%
Appreciation Portfolio
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- Growth & 0.75% 0.05% 0.80%
Income Portfolio
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth 0.75% 0.01% 0.76%
Fund, Inc.
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio* 0.50% 0.07% 0.57%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio* 0.60% 0.07% 0.67%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 0.59% 0.12% 0.71%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio* 0.75% 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio* 0.55% 0.09% 0.64%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio* 0.60% 0.08% 0.68%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities 0.60% 0.13% 0.73%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, 0.04% 1.26% 1.30%
Inc.-Emerging Markets Debt Portfolio*
- -------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.60% 0.09% 0.69%
- -------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.08% 0.58%
- -------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.40% 0.08% 0.48%
- -------------------------------------------------------------------------------------------------------------
NSAT-Nationwide Small Cap Value Fund* 0.90% 0.15% 1.05%
- -------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Company Fund 1.00% 0.11% 1.11%
- -------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.60% 0.07% 0.67%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Growth Portfolio 0.83% 0.07% 0.90%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Guardian Portfolio 0.60% 0.40% 1.00%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Limited Maturity 0.65% 0.12% 0.77%
Bond Portfolio
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Partners Portfolio 0.80% 0.06% 0.86%
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 0.73% 0.05% 0.78%
Oppenheimer Bond Fund
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 0.70% 0.06% 0.76%
Oppenheimer Global Securities Fund
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 0.73% 0.02% 0.75%
Funds- Oppenheimer Growth Fund
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oppenheimer Variable Account Funds- 0.72% 0.03% 0.75%
Oppenheimer Multiple Strategies Fund
- -------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00% 0.15% 1.15%
- -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 1.00% 0.18% 1.18%
Inc.- Discovery Fund II, Inc.
- -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 1.00% 0.51% 1.51%
Inc.- International Stock Fund II
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide 1.00% 0.12% 1.12%
Bond Fund
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide 0.80% 0.00% 0.80%
Emerging Markets Fund*
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide 1.00% 0.17% 1.17%
Hard Assets Fund*
- -------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 0.07% 1.07%
Trust- Morgan Stanley Real Estate Securities
Portfolio
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- International Equity 1.00% 0.35% 1.35%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Post- Venture Capital 1.07% 0.33% 1.40%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Small Company Growth 0.90% 0.24% 1.14%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The Mutual Fund expenses shown above are assessed at the Underlying
Mutual Fund level and are not direct charges against Variable Account
assets or reductions from Contract Values. These Underlying Mutual Fund
expenses are taken into consideration in computing each Underlying Mutual
Fund's Net Asset Value, which is the share price used to calculate the
unit values of the Variable Account. The management fees and other
expenses are more fully described in the prospectus for each individual
Underlying Mutual Fund. The information relating to the Underlying Mutual
Fund expenses was provided by the Underlying Mutual Fund and was not
independently verified by the Company. Except as otherwise noted, the
Management Fees and Other Expenses are not currently subject to fee
waivers or expense reimbursements.
* The investment advisers for the indicated Underlying Mutual Funds have
voluntarily agreed to reimburse a portion of the management fees and/or
other expenses resulting in a reduction of total expenses. Absent any
partial reimbursement "Management Fees" and "Other Expenses" would have
been 0.50% and 0.08% for Fidelity VIP Equity-Income Portfolio, 0.60% and
0.09% for Fidelity VIP Growth Portfolio, 0.75% and 0.17% for Fidelity VIP
Overseas Portfolio, 0.55% and 0.10% for Fidelity VIP II Asset Manager
Portfolio, 0.60% and 0.11% for Fidelity VIP II Contrafund Portfolio,
0.60% and 0.14% for Fidelity VIP III Growth Opportunities Portfolio,
0.80% and 1.26% for Morgan Stanley Universal Funds, Inc. - Emerging
Markets Debt Portfolio, 0.90% and 5.41% for NSAT-Nationwide Small Cap
Value Fund, 1.00% and 0.18% for Van Eck Worldwide Insurance Trust -
Worldwide Hard Assets Fund, 1.00% and 0.34% for Van Eck Worldwide
Insurance Trust - Worldwide Emerging Markets Fund, 1.00% and 0.36% for
Warburg Pincus Trust - International Equity Portfolio, 1.25% and 0.33%
for Warburg Pincus Trust - Post-Venture Capital Portfolio, and 0.90% and
0.25% for Warburg Pincus Trust - Small Company Growth Portfolio.
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EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender your If you annuitize your Contract
Contract Contract at the end of the at the end of the applicable
at the end of the applicable applicable time period time period
time period
- ----------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Variable 26 79 135 287 26 79 135 287 * 79 135 287
Portfolios, Inc.- American
Century VP Balanced
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 26 79 135 287 26 79 135 287 * 79 135 287
Portfolios, Inc.- American
Century VP Capital
Appreciation
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 23 70 119 256 23 70 119 256 * 70 119 256
Portfolios, Inc.- American
Century VP Income &Growth
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 31 95 161 338 31 95 161 338 * 95 161 338
Portfolios, Inc.- American
Century VP International
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 26 79 135 287 26 79 135 287 * 79 135 287
Portfolios, Inc.- American
Century VP Value
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, 18 56 97 210 18 56 97 210 * 56 97 210
Inc.
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus Variable 24 73 125 266 24 73 125 266 * 73 125 266
Investment Fund- Capital
Appreciation Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus Variable 24 73 125 266 24 73 125 266 * 73 125 266
Investment Fund- Growth &
Income Portfolio
- ----------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 23 71 122 262 23 71 122 262 * 71 122 262
Responsible Growth Fund,
Inc.
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 21 65 112 242 21 65 112 242 * 65 112 242
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 22 69 118 253 22 69 118 253 * 69 118 253
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 23 70 120 257 23 70 120 257 * 70 120 257
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 25 76 130 277 25 76 130 277 * 76 130 277
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset 22 68 116 249 22 68 116 249 * 68 116 249
Manager Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 22 69 118 254 22 69 118 254 * 69 118 254
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 23 71 121 259 23 71 121 259 * 71 121 259
Opportunities Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal 29 88 151 318 29 88 151 318 * 88 151 318
Funds, Inc.- Emerging
Markets Debt Portfolio
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation 22 69 119 255 22 69 119 255 * 69 119 255
Fund
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 22 66 113 243 21 66 113 243 * 66 113 243
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 20 63 108 232 20 63 108 232 * 63 108 232
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
9
11 of 120
<PAGE> 12
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
- ----------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NSAT- Nationwide Small 26 81 138 292 26 81 138 292 * 81 138 292
Cap Value Fund
- ----------------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 27 83 141 299 27 83 141 299 * 83 141 299
Company Fund
- ----------------------------------------------------------------------------------------------------------------------------
NSAT- Total Return Fund 22 69 118 253 22 69 118 253 * 69 118 253
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 25 76 130 277 25 76 130 277 * 76 130 277
AMT- Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 26 79 135 287 26 79 135 287 * 79 135 287
Guardian Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 23 72 123 263 23 72 123 263 * 72 123 263
AMT- Limited Maturity
Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 24 75 128 273 24 75 128 273 * 75 128 273
AMT Partners
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 23 72 123 264 23 72 123 264 * 72 123 264
Account
Funds- Oppenheimer Bond
Fund
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 23 71 122 262 23 71 122 262 * 71 122 262
Account Funds-
Oppenheimer Global
Securities Fund
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 23 71 122 261 23 71 122 261 * 71 122 261
Account Funds-
Oppenheimer Growth Fund
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 23 71 122 261 23 71 122 261 * 71 122 261
Account
Funds- Oppenheimer
Multiple Strategies Fund
- ----------------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund 27 84 143 303 27 84 143 303 * 84 143 303
II, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
Strong Variable 28 85 144 306 28 85 144 306 * 85 144 306
Insurance Funds, Inc.-
Discovery Fund II, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
Strong Variable 31 95 161 339 31 95 161 339 * 95 161 339
Insurance Funds, Inc.-
International Stock
Fund II
- ----------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 27 83 141 300 27 83 141 300 * 83 141 300
Insurance
Trust- Worldwide Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 24 73 125 266 24 73 125 266 * 73 125 266
Insurance
Trust- Worldwide Emerging
Markets Fund
- ----------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 28 84 144 305 28 84 144 305 * 84 144 305
Insurance
Trust- Worldwide Hard
Assets Fund
- ----------------------------------------------------------------------------------------------------------------------------
Van Kampen American 26 81 139 294 26 81 139 294 * 81 139 294
Capital Life Investment
Trust- Morgan Stanley
Real Estate Securities
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
12 of 120
<PAGE> 13
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
- ----------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Warburg Pincus 29 90 153 323 29 90 153 323 * 90 153 323
Trust- International
Equity Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 30 92 156 328 30 92 156 328 * 92 156 328
Trust-Post- Venture
Capital Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 27 83 142 302 27 83 142 302 * 83 142 302
Trust- Small Company
Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The Contracts sold under this prospectus do not permit Annuitizations during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that will be
borne directly or indirectly when investing in the Contract. The expenses of the
Variable Account as well as those of the Underlying Mutual Fund options are
reflected in the Example. For more complete descriptions of the expenses of the
Variable Account, see "Variable Account Charges and Other Deductions." For more
complete information regarding expenses paid out of the assets of the Underlying
Mutual Fund options, see the prospectus for each Underlying Mutual Fund.
Deductions for premium taxes may also apply but are not reflected in the Example
shown above (see "Premium Taxes").
11
13 of 120
<PAGE> 14
SYNOPSIS
The Contracts can be categorized as follows: (1) Non-Qualified; (2) IRAs; (3)
Roth IRAs; (4) SEP IRAs; (5) Tax Sheltered Annuities; and (6) Qualified.
The initial first year Purchase Payment must be at least $15,000 and subsequent
Purchase Payments, if any, at least $1,000. The cumulative total of all purchase
payments under contracts issued by the Company on the life of any one Annuitant
may not exceed $1,000,000 without the prior consent of the Company (see
"Allocation of Purchase Payments and Contract Value").
The Company does not deduct a sales charge from Purchase Payments made for these
Contracts, nor is any sales charge deducted upon the surrender of the Contract.
The Company deducts a Mortality Risk Charge equal to an annual rate of 0.80% of
the daily net assets of the Variable Account for mortality risks assumed by the
Company (see "Mortality Risk Charge"). The Company deducts an Expense Risk
Charge equal to an annual rate of 0.45% of the daily net assets of the Variable
Account for the Company's risk by undertaking not to increase administrative
charges on the Contracts regardless of the actual administrative costs (see
"Expense Risk Charge").
The Company also assesses an Administration Charge equal to an annual rate of
0.20% of the daily net assets of the Variable Account. This charge is to
reimburse the Company for administrative expenses related to the issuance and
maintenance of the Contracts (see "Administration Charge").
Upon Annuitization, the selected Annuity Payment Option will begin (see "Annuity
Payment Option"). However, if the net amount to be applied to any Annuity
Payment Option on the Annuitization Date is less than $5,000, the Contract Value
may be distributed in lump sum in lieu of annuity payments. If any annuity
payment would be less than $50, the Company will have the right to change the
frequency of payments to such intervals as will result in payments of at least
$50. In no event, however, will annuity payments be made less frequently than
annually (see "Frequency and Amount of Annuity Payments").
Taxation of the Contracts will depend on the type of Contract issued (see
"FEDERAL TAX CONSIDERATIONS"). In addition, the Company will charge against the
Purchase Payments or the Contract Value the amount of any premium taxes levied
by a state or any other governmental entity (see "Premium Taxes").
The Contract Owner has a ten day free look to examine the Contract. Within ten
days of the date the Contract is received, it may be returned for any reason to
the Home Office at the address shown on page 1 of this prospectus. If the
Contract is returned to the Company in a timely manner, the Company will void
the Contract and refund the Contract Value in full unless otherwise required by
law. State and/or federal law may provide additional free look privileges. All
IRA, Roth IRA and SEP IRA refunds will be return of Purchase Payments (see
"Right to Revoke").
12
14 of 120
<PAGE> 15
CONDENSED FINANCIAL INFORMATION
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF UNITS
BEGINNING UNIT ENDING UNIT PERCENT CHANGE AT THE END OF
FUND VALUE VALUE IN UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century 10.871600 12.407611 14.13% 43,518 1997
Variable Portfolios, 10.000000 10.871600 8.72% 13,228 1996
Inc.- American Century
VP Balanced-Q
- -------------------------------------------------------------------------------------------------------------
American Century 10.871600 12.407611 14.13% 82,722 1997
Variable Portfolios, 10.000000 10.871600 8.72% 35,163 1996
Inc.- American
Century
VP Balanced-NQ
- -------------------------------------------------------------------------------------------------------------
American Century 9.371161 8.934300 -4.66% 51,907 1997
Variable Portfolios, 10.000000 9.371161 -6.29% 46,612 1996
Inc.- American Century
VP Capital
Appreciation-Q
- -------------------------------------------------------------------------------------------------------------
American Century 9.371161 8.934300 -4.66% 97,412 1997
Variable Portfolios, 10.000000 9.371161 -6.29% 83,063 1996
Inc.- American Century
VP Capital
Appreciation- NQ
- -------------------------------------------------------------------------------------------------------------
American Century 11.142834 13.027680 16.92% 111,405 1997
Variable Portfolios, 10.000000 11.142834 11.43% 27,097 1996
Inc.- American
Century
VP International-Q
- -------------------------------------------------------------------------------------------------------------
American Century 11.142834 13.027680 16.92% 266,987 1997
Variable Portfolios, 10.000000 11.142834 11.43% 77,343 1996
Inc.- American
Century
VP International-NQ
- -------------------------------------------------------------------------------------------------------------
American Century 10.142228 12.602262 24.26% 19,668 1997
Variable Portfolio, 10.000000 10.142228 1.42% 0 1996*
Inc.
Inc.- American Century
VP Value-Q
- -------------------------------------------------------------------------------------------------------------
American Century 10.142228 12.602262 24.26% 114,608 1997
Variable Portfolio, 10.000000 10.142228 1.42% 0 1996*
Inc.
Inc.- American
Century
VP Value-NQ
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 11.644617 15.258148 31.03% 355,678 1997
Fund, Inc.-Q 10.000000 11.644617 16.45% 64,418 1996
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 11.644617 15.258148 31.03% 704,237 1997
Fund, Inc.-NQ 10.000000 11.644617 16.45% 189,227 1996
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 10.000000 10.184856 1.85% 1,527 1997*
Investment Fund-
Capital Appreciation
Portfolio-Q
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 10.000000 10.184856 1.85% 35,595 1997*
Investment Fund-
Capital Appreciation
Portfolio-NQ
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 9.986593 11.437343 14.53% 43,110 1997
Investment Fund- 10.000000 9.986593 -0.13% 0 1996*
Growth & Income
Portfolio-Q
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 9.986593 11.437343 14.53% 64,938 1997
Investment Fund- 10.000000 9.986593 -0.13% 0 1996*
Growth & Income
Portfolio-NQ
- -------------------------------------------------------------------------------------------------------------
</TABLE>
13
15 of 120
<PAGE> 16
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF
PERCENT UNITS AT THE
BEGINNING UNIT ENDING UNIT CHANGE IN END OF THE
FUND VALUE VALUE UNIT VALUE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Dreyfus Socially 11.402663 14.432845 26.57% 105,131 1997
Responsible Growth 10.000000 11.402663 14.03% 10,096 1996
Fund, Inc.-Q
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 11.402663 14.432845 26.57% 127,251 1997
Responsible Growth 10.000000 11.402663 14.03% 29,501 1996
Fund, Inc.-NQ
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 10.958584 13.835418 26.25% 629,906 1997
Portfolio-Q 10.000000 10.958584 9.59% 320,026 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 10.958584 13.835418 26.25% 1,499,279 1997
Portfolio-NQ 10.000000 10.958584 9.59% 682,976 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio-Q 11.057399 13.455923 21.69% 594,211 1997
10.000000 11.057399 10.57% 230,586 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio-NQ 11.057399 13.455923 21.69% 1,228,768 1997
10.000000 11.057399 10.57% 910,947 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP High 10.970108 12.721046 15.96% 538,510 1997
Income Portfolio-Q 10.000000 10.970108 9.70% 291,879 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP High 10.970108 12.721046 15.96% 1,050,615 1997
Income Portfolio-NQ 10.000000 10.970108 9.70% 245,978 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP 10.915770 12.000570 9.94% 125,092 1997
Overseas Portfolio-Q 10.000000 10.915770 9.16% 36,697 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP 10.915770 12.000570 9.94% 176,490 1997
Overseas Portfolio-NQ 10.000000 10.915770 9.16% 95,229 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II 11.029343 13.114181 18.90% 95,815 1997
Asset Manager 10.000000 11.029343 10.29% 38,401 1996
Portfolio-Q
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II 11.029343 13.114181 18.90% 273,771 1997
Asset Manager 10.000000 11.029343 10.29% 63,564 1996
Portfolio-NQ
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II 11.815914 14.455907 22.34% 625,349 1997
Contrafund Portfolio-Q 10.000000 11.815914 18.16% 255,409 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II 11.815914 14.455907 22.34% 862,290 1997
Contrafund Portfolio-NQ 10.000000 11.815914 18.16% 400,821 1996
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 10.000000 10.924397 9.24% 57,285 1997*
Opportunities Portfolio-Q
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 10.000000 10.924397 9.24% 213,473 1997*
Opportunities Portfolio-NQ
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, 10.000000 9.803540 -1.96% 1,079 1997*
Inc.- Emerging Markets Debt
Portfolio-Q
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, 10.000000 9.803540 -1.96% 9,814 1997*
Inc.- Emerging Markets Debt
Portfolio-NQ
- -------------------------------------------------------------------------------------------------------------
</TABLE>
14
16 OF 120
<PAGE> 17
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF
PERCENT UNITS AT THE
BEGINNING UNIT ENDING UNIT CHANGE IN END OF THE
FUND VALUE VALUE UNIT VALUE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT- Capital Appreciation 11.889746 15.772381 32.66% 122,279 1997
Fund-Q 10.000000 11.889746 19.00% 89,481 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation 11.889746 15.772381 32.66% 168,800 1997
Fund-NQ 10.000000 11.889746 19.00% 71,846 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Government 10.149155 10.968893 8.08% 112,607 1997
Bond Fund-Q 10.000000 10.149155 1.49% 30,956 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Government 10.149155 10.968893 8.08% 244,780 1997
Bond Fund-NQ 10.000000 10.149155 1.49% 97,767 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Money Market 10.326243 10.711730 3.73% 638,508 1997
Fund-Q** 10.000000 10.326243 3.26% 283,411 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Money Market 10.326243 10.711730 3.73% 2,073,349 1997
Fund-NQ** 10.000000 10.326243 3.26% 628,692 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 12.152247 14.053920 15.65% 140,739 1997
Company Fund-Q 10.000000 12.152247 21.52% 49,485 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 12.152247 14.053920 15.65% 283,747 1997
Company Fund-NQ 10.000000 12.152247 21.52% 69,854 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Total 11.639579 14.846819 27.55% 157,002 1997
Return Fund-Q 10.000000 11.639579 16.40% 32,415 1996
- --------------------------------------------------------------------------------------------------------------
NSAT- Total 11.639579 14.846819 27.55% 229,416 1997
Return Fund-NQ 10.000000 11.639579 16.40% 57,403 1996
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 10.469935 13.311087 27.14% 39,613 1997
AMT- Growth Portfolio-Q 10.000000 10.469935 4.70% 7,597 1996
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 10.469935 13.311087 27.14% 67,289 1997
AMT- Growth Portfolio-NQ 10.000000 10.469935 4.70% 50,629 1996
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 10.209208 10.739513 5.19% 232,553 1997
AMT- Limited Maturity 10.000000 10.209208 2.09% 123,635 1996
Bond Portfolio-Q
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 10.209208 10.739513 5.19% 369,140 1997
AMT- Limited Maturity 10.000000 10.209208 2.09% 274,872 1996
Bond Portfolio-NQ
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 12.248582 15.843430 29.35% 551,365 1997
AMT- Partners Portfolio-Q 10.000000 12.248582 22.49% 177,265 1996
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 12.248582 15.843430 29.35% 607,558 1997
AMT- Partners Portfolio-NQ 10.000000 12.248582 22.49% 214,292 1996
- --------------------------------------------------------------------------------------------------------------
</TABLE>
15
18 OF 120
<PAGE> 18
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF UNITS
BEGINNING UNIT ENDING UNIT PERCENT CHANGE AT THE END OF
FUND VALUE VALUE IN UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oppenheimer VAF- 10.288722 11.077843 7.67% 102,577 1997
Oppenheimer Bond 10.000000 10.288722 2.89% 55,343 1996
Fund-Q
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- 10.288722 11.077843 7.67% 281,567 1997
Oppenheimer Bond 10.000000 10.288722 2.89% 152,075 1996
Fund-NQ
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- 11.201956 13.545830 20.92% 96,027 1997
Oppenheimer Global 10.000000 11.201956 12.02% 40,161 1996
Securities Fund-Q
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- 11.201956 13.545830 20.92% 226,937 1997
Oppenheimer Global 10.000000 11.201956 12.02% 75,124 1996
Securities Fund-NQ
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- 10.000000 10.420499 4.20% 7,039 1997*
Oppenheimer Growth
Fund-Q
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- 10.000000 10.420499 4.20% 6,625 1997*
Oppenheimer Growth
Fund-NQ
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- 11.129020 12.856596 15.52% 56,867 1997
Oppenheimer 10.000000 11.129020 11.29% 6,127 1996
Multiple Strategies
Fund-Q
- -------------------------------------------------------------------------------------------------------------
Oppenheimer VAF- 11.129020 12.856596 15.52% 193,943 1997
Oppenheimer 10.000000 11.129020 11.29% 34,052 1996
Multiple Strategies
Fund-NQ
- -------------------------------------------------------------------------------------------------------------
Strong Variable 9.903046 10.870948 9.77% 27,509 1997
Insurance Funds, 10.000000 9.903046 -0.97% 27,130 1996
Inc.- Discovery
Fund II, Inc.-Q
- -------------------------------------------------------------------------------------------------------------
Strong Variable 9.903046 10.870948 9.77% 73,785 1997
Insurance Funds, 10.000000 9.903046 -0.97% 55,312 1996
Inc.- Discovery
Fund II, Inc.-NQ
- -------------------------------------------------------------------------------------------------------------
Strong Variable 10.462103 8.916485 -14.77% 88,170 1997
Insurance Funds, 10.000000 10.462103 4.62% 61,841 1996
Inc.- International
Stock Fund II-Q
- -------------------------------------------------------------------------------------------------------------
Strong Variable 10.462103 8.916485 -14.77% 236,119 1997
Insurance Funds, 10.000000 10.462103 4.62% 154,841 1996
Inc.- International
Stock Fund II-NQ
- -------------------------------------------------------------------------------------------------------------
Strong Opportunity 11.319705 13.995266 23.64% 436,276 1997
Fund II, Inc.-Q 10.000000 11.319705 13.20% 312,712 1996
- -------------------------------------------------------------------------------------------------------------
Strong Opportunity 11.319705 13.995266 23.64% 513,631 1997
Fund, II Inc.-NQ 10.000000 11.319705 13.20% 302,280 1996
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 10.189870 10.281856 0.90% 52,244 1997
Insurance Trust - 10.000000 10.189870 1.90% 39,599 1996
Worldwide Bond
Fund-Q
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 10.189870 10.281856 0.90% 135,652 1997
Insurance Trust- 10.000000 10.189870 1.90% 36,398 1996
Worldwide Bond
Fund-NQ
- -------------------------------------------------------------------------------------------------------------
</TABLE>
16
18 of 120
<PAGE> 19
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF UNITS
BEGINNING UNIT ENDING UNIT PERCENT CHANGE AT THE END OF
FUND VALUE VALUE IN UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 10.077496 8.778805 -12.89% 65,901 1997
Insurance Trust- 10.000000 10.077496 0.77% 0 1996*
Worldwide Emerging
Markets Fund-Q
- ----------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 10.077496 8.778805 -12.89% 109,850 1997
Insurance Trust- 10.000000 10.077496 0.77% 750 1996*
Worldwide Emerging
Markets Fund-NQ
- ----------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 10.132333 9.817789 -3.10% 36,777 1997
Insurance Trust- Worldwide 10.000000 10.132333 1.32% 22,227 1996
Hard Assets Fund-Q
- ----------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 10.132333 9.817789 -3.10% 110,634 1997
Insurance Trust- Worldwide 10.000000 10.132333 1.32% 48,531 1996
Hard Assets-NQ
- ----------------------------------------------------------------------------------------------------------------
Van Kampen American 13.626341 16.312466 19.71% 143,467 1997
Capital Life Investment 10.000000 13.626341 36.26% 63,345 1996
Trust- Morgan Stanley
Real Estate Securities
Portfolio-Q
- ----------------------------------------------------------------------------------------------------------------
Van Kampen American 13.626341 16.312466 19.71% 312,287 1997
Capital Life Investment 10.000000 13.626341 36.26% 65,843 1996
Trust- Morgan Stanley
Real Estate Securities
Portfolio-NQ
- ----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.450529 10.066530 -3.67% 224,358 1997
International Equity 10.000000 10.450529 4.51% 113,387 1996
Portfolio-Q
- ----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.450529 10.066530 -3.67% 501,764 1997
International Equity 10.000000 10.450529 4.51% 278,224 1996
Portfolio-NQ
- ----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.163437 11.351955 11.69% 7,811 1997
Post-Venture Capital 10.000000 10.163437 1.63% 0 1996*
Portfolio-Q
- ----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.163437 11.351955 11.69% 37,566 1997
Post-Venture Capital 10.000000 10.163437 1.63% 726 1996*
Portfolio-NQ
- ----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 11.231071 12.800371 13.97% 182,340 1997
Small Company Growth 10.000000 11.231071 12.31% 104,843 1996
Portfolio-Q
- ----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 11.231071 12.800371 13.97% 496,268 1997
Small Company Growth 10.000000 11.231071 12.31% 314,236 1996
Portfolio-NQ
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*The Dreyfus Variable Investment Fund-Capital Appreciation Portfolio,
Fidelity VIP III Growth Opportunities Portfolio, Morgan Stanley Universal
Funds, Inc.-Emerging Markets Debt Portfolio, and Oppenheimer VAF-
Oppenheimer Growth Fund were added July 14, 1997. Consequently, the
Condensed Financial Information reflects Accumulation Unit values for the
Accumulation Units outstanding for the period from July 14, 1997 to
December 31. 1997. The American Century Variable Portfolio, Inc. -
American Century VP Value, Dreyfus Variable Investment Fund - Growth &
Income Portfolio, Van Eck Worldwide Insurance Trust - Worldwide Emerging
Markets Fund, and Warburg Pincus Trust - Post-Venture Capital Portfolio
were added December 23, 1996. Consequently, the Condensed Financial
Information reflects Accumulation Unit values for the Accumulation Units
outstanding for the period from December 23, 1996 to December 31, 1996.
**The 7-day yield on the Money Market Fund as of December 31, 1997 was
3.89%.
The American Century Variable Portfolios, Inc.- American Century VP Income &
Growth, NSAT- Nationwide Small Cap Value Fund and Neuberger Berman AMT -
Guardian Portfolio were added to the Variable Account on May 1, 1998.
Consequently, no Condensed Financial Information is available.
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in February 1981. The Company is a member of the "Nationwide
Insurance Enterprise" with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215. The Company is a provider of life insurance and annuities.
NATIONWIDE ADVISORY SERVICES, INC.
The Contracts are distributed by the General Distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
THE VARIABLE ACCOUNT
The Variable Account was established as Financial Horizons VA Separate Account-2
by the Company on March 6, 1991, pursuant to Ohio law. The name of the Variable
Account was subsequently changed to Nationwide VA Separate Account-B pursuant to
a resolution by the Board of Directors. The Company has caused the Variable
Account to be registered with the SEC as a unit investment trust pursuant to the
provisions of the Investment Company Act of 1940 ("1940 Act"). Such registration
does not involve supervision of the management of the Variable Account or of the
Company by the SEC.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with liabilities arising out of any other business the
Company may conduct. The Company does not guarantee the investment performance
of the Variable Account. Obligations under the Contracts, however, are
obligations of the Company. Income, gains and losses of the Variable Account,
whether or not realized, are credited to or charged against the Variable Account
without regard to other income, gains, or losses of the Company. Purchase
Payments are allocated among one or more Sub-Accounts corresponding to one or
more of the Underlying Mutual Funds designated by the Contract Owner. There are
two Sub-Accounts within the Variable Account for each of the Underlying Mutual
Fund options which may be designated by the Contract Owner. One such Sub-Account
contains the Underlying Mutual Fund shares attributable to Accumulation Units
under Qualified Contracts, IRAs, Roth IRAs, SEP IRAs and Tax Sheltered Annuities
and one such Sub-Account contains the Underlying Mutual Fund shares attributable
to Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
A Contract Owner may choose from among a number of different Underlying Mutual
Fund options. See the Appendix which contains a summary of investment objectives
for each Underlying Mutual Fund. More detailed information may be found in the
current prospectus for each Underlying Mutual Fund. Prospectuses for the
Underlying Mutual Funds should be read in conjunction with this prospectus. A
copy of each prospectus may be obtained without charge from the Company by
calling 1-800-848-6331, TDD 1-800-238-3035, or writing P.O. Box 16609, Columbus,
Ohio 43216-6609.
The Underlying Mutual Fund options are NOT available to the general public
directly.The Underlying Mutual Funds are available as investment options in
variable life insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in certain
qualified pension or retirement plans.
Some of the Underlying Mutual Funds have been established by investment advisers
which manage publicly traded mutual funds having similar names and investment
objectives. While some of the Underlying Mutual Funds may be similar to, and may
in fact be modeled after, publicly traded mutual funds, Contract purchasers
should understand that the Underlying Mutual Funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any corresponding Underlying
Mutual Funds may differ substantially.
The Underlying Mutual Funds may also be available to registered separate
accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts in which the Underlying Mutual Funds participate. A conflict
may occur due to a number of reasons including, a change in law affecting the
operations of variable life insurance policies and variable annuity contracts or
differences in the voting instructions of the Contract Owners and those of other
companies. In the event of conflict, the Company will take any steps necessary
to protect the Contract Owners
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and variable annuity payees, including withdrawal of the Variable Account from
participation in the Underlying Mutual Fund(s) involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to amounts allocated
to the Sub-Accounts. In accordance with its view of applicable law, the Company
will vote the shares of the Underlying Mutual Funds at regular and special
meetings of the shareholders. These shares will be voted in accordance with
instructions received from Contract Owners. If the 1940 Act or any regulation
thereunder should be amended or if the present interpretation changes permitting
the Company to vote the shares of the Underlying Mutual Funds in its own right,
it may elect to do so.
The Contract Owner is the person who has the voting interest under the Contract.
The number of Underlying Mutual Fund shares attributable to each Contract Owner
is determined by dividing the Contract Owner's interest in each respective
Sub-Account by the Net Asset Value of the Underlying Mutual Fund corresponding
to the Sub-Account. The number of shares which may be voted will be determined
as of the date chosen by the Company not more than 90 days prior to the meeting
of the Underlying Mutual Fund. Each person having a voting interest will receive
periodic reports relating to the Underlying Mutual Fund, proxy material and a
form with which to give such voting instructions.
Voting instructions will be solicited by written communication at least 21 days
prior to such meeting. Underlying Mutual Fund shares to which no timely
instructions are received will be voted by the Company in the same proportion as
the voting instructions which are received with respect to all contracts
participating in the Variable Account.
SUBSTITUTION OF SECURITIES
If shares of the Underlying Mutual Fund options are no longer available for
investment by the Variable Account or if, in the judgment of the Company's
management, further investment in such Underlying Mutual Fund shares is
inappropriate, the Company may eliminate Sub-Accounts, combine two or more
Sub-Accounts, or substitute shares of another underlying mutual fund for
underlying mutual fund shares already purchased or to be purchased in the future
with Purchase Payments under the Contract. No substitution of securities in the
Variable Account may take place without prior approval of the SEC.
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of expenses: (1)
administrative expenses relating to the issuance and maintenance of the
Contracts; (2) mortality risk charge associated with guaranteeing the annuity
purchase rates at issue for the life of the Contracts; and (3) expense risk
charge associated with guaranteeing that the Mortality Risk, Expense Risk and
Administration Charges described in this prospectus will not change regardless
of actual expenses. If these charges are insufficient to cover these expenses,
the loss will be borne by the Company.
MORTALITY RISK CHARGE
The Company deducts a Mortality Risk Charge from the Variable Account. This
amount is computed on a daily basis, and is equal to an annual rate of 0.80% of
the daily net assets of the Variable Account. By guaranteeing the Contract's
annuity rate, the Company assumes the Mortality Risk. These guarantees cannot
change regardless of the death rates of persons receiving annuity payments or of
the general population.
EXPENSE RISK CHARGE
The Company deducts an Expense Risk Charge from the Variable Account. This
amount is computed on a daily basis, and is equal to an annual rate of 0.45% of
the daily net assets of the Variable Account. The Company will not increase
charges for administration of the Contracts regardless of its actual expenses.
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ADMINISTRATION CHARGE
The Company assesses an Administration Charge equal on an annual basis to 0.20%
of the daily net assets of the Variable Account. The Administrative Charge is
designed only to reimburse the Company for administrative expenses.
PREMIUM TAXES
The Company will charge against the Contract Value any premium taxes levied by a
state or any other government entity upon Purchase Payments received by the
Company. Premium tax rates currently range from 0% to 3.5%. This range is
subject to change. The method used to recoup premium tax will be determined by
the Company at its sole discretion in compliance with state law. The Company
currently deducts such charges from the Contract Value either at: (1) the time
the Contract is surrendered; (2) Annuitization; or (3) such earlier date as the
Company may become subject to such taxes.
OPERATION OF THE CONTRACT
INVESTMENTS OF THE VARIABLE ACCOUNT
The Contract Owner may have Purchase Payments allocated among one or more of the
Sub-Accounts. Shares of the respective Underlying Mutual Fund options specified
by the Contract Owner are purchased at Net Asset Value for the respective
Sub-Account(s) and converted into Accumulation Units. The Contract Owner may
change the election as to allocation of Purchase Payments or may elect to
exchange amounts among the Sub-Accounts. Such transactions may be subject to
conditions imposed by the Underlying Mutual Funds, as well as those set forth in
the Contracts.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts in accordance with
the designation of the Underlying Mutual Funds by the Contract Owner and
converted into Accumulation Units.
The initial first year Purchase Payment must be at least $15,000 and additional
payments, if any, must be at least $1,000. The Contract Owner may increase or
decrease Purchase Payments or change the frequency of payment. The Contract
Owner is not obligated to continue Purchase Payments in the amount or at the
frequency elected. There are no penalties for failure to continue Purchase
Payments. The cumulative total of all purchase payments under contracts issued
by the Company on the life of any one Annuitant may not exceed $1,000,000
without prior consent of the Company.
The initial Purchase Payment allocated to designated Sub-Accounts will be priced
no later than 2 business days after receipt of an order to purchase, if the
application and all information necessary for processing the purchase order are
complete. The Company may, however, retain the Purchase Payment for up to 5
business days while attempting to complete an incomplete application. If the
application cannot be made complete within 5 business days, the prospective
purchaser will be informed of the reasons for the delay and the Purchase Payment
will be returned immediately unless the prospective purchaser specifically
consents to the Company retaining the Purchase Payment until the application is
complete. Thereafter, subsequent Purchase Payments will be priced on the basis
of the Accumulation Unit value next computed for the appropriate Sub-Account
after the additional Purchase Payment is received.
Purchase Payments will not be priced on the following nationally recognized
holidays: New Year's Day; Martin Luther King, Jr. Day; Presidents Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving; and Christmas.
VALUE OF AN ACCUMULATION UNIT
The Accumulation Unit value for any Valuation Period is determined by
multiplying the Accumulation Unit value for each Sub-Account for the immediately
preceding Valuation Period by the net investment factor for the Sub-Account
during the subsequent Valuation Period. Though the number of Accumulation Units
will not change as a result of investment experience, the value of an
Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period.
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NET INVESTMENT FACTOR
The net investment factor for any Valuation Period is determined by dividing (a)
by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the current
Valuation Period; and
(2) the per share amount of any dividend or capital gain
Distributions made by the Underlying Mutual Fund held in the
Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period.
(b) is the Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately preceding
Valuation Period.
(c) is a factor representing the daily Mortality Risk Charge, Expense
Risk Charge and Administration Charge. Such factor is equal to an
annual rate of 1.45% of the daily net assets of the Variable Account.
The net investment factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the net investment factor may not be directly proportional to changes
in the Net Asset Value of Underlying Mutual Fund shares, because of the
deduction for the Mortality Risk Charge, Expense Risk Charge, and Administration
Charge.
DETERMINING THE CONTRACT VALUE
The Contract Value is the sum of all Accumulation Units. The number of
Accumulation Units credited to each Sub-Account is determined by dividing the
net amount allocated to the Sub-Account by the Accumulation Unit value for the
Sub-Account for the Valuation Period during which the Purchase Payment is
received by the Company. If part or all of the Contract Value is surrendered or
charges or deductions are made against the Contract Value, an appropriate number
of Accumulation Units will be deducted.
RIGHT TO REVOKE
The Contract Owner has a ten day free look to examine the Contract. Within ten
days of the date the Contract is received, it may be returned for any reason to
the Home Office at the address shown on page 1 of this prospectus. If the
Contract is returned to the Company in a timely manner, the Company will void
the Contract and refund the Contract Value in full, unless otherwise required by
law. State and/or federal law may provide additional free look privileges.
All IRA, Roth IRA and SEP-IRA refunds will be return of Purchase Payments.
The liability of the Variable Account under this provision is limited to the
Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
Transfers among the Sub-Accounts are permitted 12 times per year. Once the
Contract has been Annuitized, transfers may only be made on each anniversary of
the Annuitization Date. The Contract Owner's value in each Sub-Account will be
determined as of the date the transfer request is received in good order at the
Home Office.
Transfers may be made either in writing or, in states allowing such transfers,
by telephone. This telephone exchange privilege is made available to Contract
Owners automatically without the Contract Owner's election. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include the following: requesting
identifying information, such as name, contract number, Social Security Number,
and/or personal identification number; tape recording all telephone
transactions; or providing written confirmation thereof to both the Contract
Owner and any agent of record, at the last address of record; or such other
procedures as the Company may deem reasonable. Although the Company's failure to
follow reasonable procedures may result in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers, the Company will
not be liable for following instructions communicated by telephone which it
reasonably believes to be genuine. Any losses incurred pursuant to actions taken
by the Company in reliance on telephone instructions reasonably believed to be
genuine will be borne by the Contract Owner.
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Contracts described in this prospectus may be sold to individuals who
independently utilize the services of a firm or individual engaged in market
timing. Generally, such firms or individuals obtain authorization from multiple
Contract Owners to make transfers and exchanges among the Sub-Accounts on the
basis of perceived market trends. Because of the unusually large transfers of
funds associated with some of these transactions, the ability of the Company or
Underlying Mutual Funds to process such transactions may be compromised, and the
execution of such transactions may possibly disadvantage or work to the
detriment of other Contract Owners not utilizing market timing services.
Accordingly, the right to exchange Contract Values among the Sub-Accounts may be
subject to modification if such rights are exercised by a market timing firm or
any other third party authorized to initiate transfer or exchange transactions
on behalf of multiple Contract Owners. THE RIGHTS OF INDIVIDUAL CONTRACT OWNERS
TO EXCHANGE CONTRACT VALUES, WHEN INSTRUCTIONS ARE SUBMITTED DIRECTLY BY THE
CONTRACT OWNER, OR BY THE CONTRACT OWNER'S REPRESENTATIVE OF RECORD AS
AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF ATTORNEY
FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the Company
may, among other things, not accept: (1) the transfer or exchange instructions
of any agent acting under a power of attorney on behalf or more than one
Contract Owner; or (2) the transfer or exchange instructions of individual
Contract Owners who have executed preauthorized transfer or exchange forms which
are submitted by market timing firms or other third parties on behalf of more
than one Contract Owner at the same time. The Company will not impose any such
restrictions or otherwise modify exchange rights unless such action is
reasonably intended to prevent the use of such rights in a manner that will
disadvantage or potentially impair the contract rights of other Contract Owners.
CONTRACT OWNERSHIP
Unless the Contract otherwise provides, the Contract Owner has all rights under
the Contract. PURCHASERS NAMING SOMEONE OTHER THAN THEMSELVES AS OWNER WILL HAVE
NO RIGHTS UNDER THE CONTRACT. Prior to the Annuitization Date, the Contract
Owner may name a new Contract Owner in Non-Qualified Contracts. Such change may
be subject to state and federal gift taxes and may also result in federal income
taxation. Any change of Contract Owner designation will automatically revoke any
prior Contract Owner designation. Once proper notice of the change is recorded
by the Home Office, the change will become effective as of the date the written
request was signed. A change of Contract Owner will not apply and will not be
effective with respect to any payment made or action taken by the Company prior
to the time that the change was recorded by the Home Office.
Prior to the Annuitization Date, the Contract Owner may request a change in the
Annuitant, the Contingent Annuitant, Contingent Owner, Beneficiary, or
Contingent Beneficiary. Such a request must be made in writing on a form
acceptable to the Company and must be signed by the Contract Owner. Such request
must be received at the Home Office prior to the Annuitization Date. Any such
change is subject to review and approval by the Company. If the Contract Owner
is not a natural person and there is a change of the Annuitant, Distributions
will be made as if the Contract Owner died at the time of such change.
On the Annuitization Date, the Annuitant will become the Contract Owner.
JOINT OWNERSHIP
Joint Owners must be spouses at the time joint ownership is requested, unless
otherwise required by law. If a Joint Owner is named, the Joint Owner will
possess an undivided interest in the Contract. The exercise of any ownership
right in the Contract will require a written request signed by both Joint
Owners. The Company will not be liable for any loss, liability, cost, or expense
for acting in accordance with the instructions of either Joint Owners.
CONTINGENT OWNERSHIP
The Contingent Owner is the person who may receive certain benefits under the
Contract if a Contract Owner, who is not the Annuitant, dies prior to the
Annuitization Date and there is no surviving Joint Owner. If no Contingent Owner
survives a Contract Owner and there is no surviving Joint Owner, all rights and
interest of the Contingent Owner will vest in the Contract Owner's estate. If a
Contract Owner, who is also the Annuitant, dies before the Annuitization Date
the Contingent Owner will not have any rights in the Contract, unless the
Contingent Owner is also the named Beneficiary.
Subject to the terms of any existing assignment, the Contract Owner may change
the Contingent Owner prior to the Annuitization Date by written notice to the
Company. Once proper notice of the change is recorded by the Home Office, the
change will become effective as of the date the written request was signed,
whether or not the Contract
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Owner is living at the time of recording, but without further liability as to
any payment or settlement made by the Company before receipt of such change.
BENEFICIARY
The Beneficiary is the person(s) who may receive certain benefits under the
Contract in the event the Annuitant dies prior to the Annuitization Date. If
more than one Beneficiary survives the Annuitant, each will share equally unless
otherwise specified in the Beneficiary designation. If no Beneficiary survives
the Annuitant, all rights and interest of the Beneficiary will vest in the
Contingent Beneficiary. If more than one Contingent Beneficiary survives, each
will share equally unless otherwise specified in the Contingent Beneficiary
designation. If no Contingent Beneficiaries survive the Annuitant, all rights
and interest of the Contingent Beneficiary will vest with the Contract Owner or
the estate of the last surviving Contract Owner.
Subject to the terms of any existing assignment, the Contract Owner may change
the Beneficiary or Contingent Beneficiary during the lifetime of the Annuitant
by written notice to the Company. Once proper notice of the change is recorded
by the Home Office, the change will become effective as of the date the written
request was signed, whether or not the Annuitant is living at the time of
recording, but without further liability as to any payment or settlement made by
the Company before receipt of such change.
SURRENDER (REDEMPTION)
Prior to the earlier of the Annuitization Date or the death of the Annuitant,
the Company will allow the Contract Owner to surrender a portion or all of the
Contract Value. The request for surrender must be made in writing and must
include the Contract when surrendering the Contract in full. In some cases the
Company will require additional documentation. The Company may require that the
signature(s) be guaranteed by a member firm of a major stock exchange or other
depository institution qualified to give such a guaranty.
When requested, the Company will surrender a number of Accumulation Units from
all Sub-Accounts in which the Contract Owner has an interest equal to the gross
dollar amount requested. The number of Accumulation Units surrendered from each
Sub-Account will be in the same proportion that the Contract Owner's interest in
the Sub-Accounts bears to the total Contract Value.
The Company will pay any amounts surrendered from the Sub-Accounts within 7
days. However, the Company reserves the right to suspend or postpone the date of
any payment of any benefit or values for any Valuation Period when: (1) the New
York Stock Exchange ("Exchange") is closed; (2) trading on the Exchange is
restricted; (3) an emergency exists as a result of which disposal of securities
held in the Variable Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Variable Account's net
assets; or (4) during any other period when the SEC, by order, permits such
suspension or postponement for the protection of security holders. The
applicable rules and regulations of the SEC will govern as to whether the
conditions prescribed in (2) and (3) exist.
The Contract Value on surrender may be more or less than the total of Purchase
Payments made by a Contract Owner, depending on the market value of the
Underlying Mutual Fund shares.
SURRENDERS UNDER A QUALIFIED CONTRACT OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Contract Owner may surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a qualified cash or deferred arrangement (within the
meaning of Code Section 402(g)(3)(A)), a salary reduction agreement
(within the meaning of Code Section 402(g)(3)), or transfers from a
Custodial Account described in Section 403(b)(7) of the Code, may be
executed only:
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the
case of hardship may not include any income attributable to
salary reduction contributions.
B. The surrender limitations described in Section A above also apply to:
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1. salary reduction contributions to Tax Sheltered Annuities made
for plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts
(except that earnings, and employer contributions as of December
31, 1988 in such Custodial Accounts, may be withdrawn in the
case of hardship).
C. Any Distribution other than the above, including exercise of a
contractual ten day free look provision (when available) may result
in the immediate application of taxes and penalties and/or
retroactive disqualification of a Qualified Contract or Tax
Sheltered Annuity.
A premature Distribution may not be eligible for rollover treatment. To assist
in preventing disqualification of a Tax Sheltered Annuity in the event of a ten
day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Code Section
401(k)(2)(B), Code Section 403(b)(11) and Revenue Ruling 90-24. Such
restrictions are subject to legislative change and/or reinterpretation.
Distributions pursuant to Qualified Domestic Relations Orders will not be
considered to be a violation of the restrictions stated in this provision.
The Contract surrender provisions may also be modified pursuant to the plan
terms and tax provisions of the Code when the Contract is issued to fund a
Qualified Plan.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Contract Owner of a Qualified Contract or
Tax Sheltered Annuity Contract may receive a loan from the Contract Value
subject to the terms of the Contract, the plan, and the Code, which may impose
restrictions on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000, unless a lower minimum amount is mandated by state law. In
non-ERISA plans, for Contract Values up to $20,000, the maximum loan balance
which may be outstanding at any time is 80% of the Contract Value, but not more
than $10,000. If the Contract Value is $20,000 or more, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. For ERISA plans, the maximum loan balance which may be outstanding
at any time is 50% of the Contract Value, but not more than $50,000. The $50,000
limit will be reduced by the highest loan balances owed during the prior
one-year period. Additional loans are subject to the Contract minimum amount.
The aggregate of all loans may not exceed the Contract Value limitations stated
in this provision. For salary reduction Tax Sheltered Annuities, loans may only
be secured by the Contract Value.
All loans are made from a collateral fixed account. An amount equal to the
principal amount of the loan will be transferred to the collateral fixed
account. The Company will transfer to the collateral fixed account the
Sub-Account's Accumulation Units in proportion to the assets in each option
until the required balance is reached or all such Accumulation Units are
exhausted. No withdrawal charges are deducted at the time of the loan, or on the
transfer from the Variable Account to the collateral fixed account.
Until the loan has been repaid in full, that portion of the collateral fixed
account equal to the outstanding loan balance will be credited with interest at
a rate 2.25% less than the loan interest rate fixed by the Company for the term
of the loan. However, the interest rate credited to the collateral fixed account
will never be less than 3.0%. Specific loan terms are disclosed at the time of
loan application or loan issuance.
Loans must be repaid in substantially level payments, not less frequently than
quarterly, within five years. Loans used to purchase the principal residence of
the Contract Owner must be repaid within 15 years. During the loan term, the
outstanding balance of the loan will continue to earn interest at an annual rate
as specified in the loan agreement. Loan repayments will consist of principal
and interest in amounts set forth in the loan agreement. Loan repayments will be
processed in the same manner as a Purchase Payment. Loan repayments will be
allocated among the Sub-Accounts in accordance with the Contract, unless the
Contract Owner and the Company agree to amend the Contract at a later date on a
case by case basis.
Any amounts distributed will be reduced by the amount of the loan outstanding,
plus accrued interest, if:
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(1) the Contract is surrendered;
(2) the Contract Owner/Annuitant dies; or
(3) the Contract Owner who is not the Annuitant dies prior to
Annuitization.
In addition, the Contract Value will be reduced by the amount of any outstanding
loans plus accrued interest if annuity payments begin while the loan is
outstanding. Until the loan is repaid, the Company reserves the right to
restrict any transfer of the Contract which would otherwise qualify as a
transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available under the terms of the loan agreement. If a loan
payment is not made when due, or by the end of the applicable grace period, the
entire loan will be treated as a deemed Distribution, will be taxable to the
borrower, and may be subject to the early withdrawal tax penalty. Interest will
continue to accrue on the loan after default. Any defaulted amounts, plus
accrued interest, will be deducted from the Contract when the participant
becomes eligible for a Distribution of at least that amount. Additional loans
may not be available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions under the
terms of Qualified Plan or Tax Sheltered Annuity Plan. Loans permitted under
this Contract may still be taxable in whole or part if the Participant has
additional loans from other plans or contracts. The Company will calculate the
maximum nontaxable loan based on the information provided by the participant or
the employer.
Loan repayments must be identified as such or else they will be treated as
Purchase Payments, and will not be used to reduce the outstanding loan principal
or interest due. The Company reserves the right to modify the loan's term or
procedures if there is a change in applicable law. The Company also reserves the
right to assess a loan processing fee.
IRAs, Roth IRAs, SEP IRAs and Non-Qualified Contracts are not eligible for
loans.
ASSIGNMENT
The Contract Owner of a Non-Qualified Contract may assign some or all rights
under the Contract at any time during the lifetime of the Annuitant prior to the
Annuitization Date. Once proper notice of assignment is recorded by the Home
Office, the assignment will become effective as of the date the written request
was signed. The Company is not responsible for the validity or tax consequences
of any assignment. The Company will not be liable for any payment or other
settlement made by the Company before recording of the assignment. Where
necessary for the proper administration of the terms of the Contract, an
assignment will not be recorded until the Company has received sufficient
direction from the Contract Owner and assignee as to the proper allocation of
Contract rights under the assignment.
Any portion of the Contract Value, which is pledged or assigned, will be treated
as a Distribution and will be included in gross income to the extent that the
cash value exceeds the investment in the Contract for the taxable year in which
it was pledged or assigned. In addition, any Contract Value assigned may be
subject to a tax penalty equal to 10% of the amount which is included in gross
income. All rights in the Contract are personal to the Contract Owner and may
not be assigned without written consent of the Company. Assignment of the entire
Contract Value may cause the portion of the Contract Value exceeding the total
investment in the Contract and previously taxed amounts to be included in gross
income for federal income tax purposes each year that the assignment is in
effect.
IRAs, Roth IRAs, SEP IRAs, Tax Sheltered Annuities and Qualified Contracts may
not be assigned, pledged or otherwise transferred except under such conditions
as may be allowed by law.
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CONTRACT OWNER SERVICES
ASSET REBALANCING- The Contract Owner may direct the automatic reallocation of
Contract Values to the Sub-Accounts on a predetermined percentage basis. Asset
Rebalancing will occur every three months or on another frequency authorized by
the Company. If the last day of the three month period falls on a Saturday,
Sunday, recognized holiday or any other day when the New York Stock Exchange is
closed, the Asset Rebalancing reallocation will occur on the first business day
after that day. Asset Rebalancing requests must be in writing on a form provided
by the Company. The Contract Owner may want to contact a financial adviser to
discuss the use of Asset Rebalancing.
Asset Rebalancing may be subject to employer imposed limitations or restrictions
for Contracts issued to a Qualified Plan or Tax Sheltered Annuity Plan.
The Company reserves the right to discontinue establishing new Asset Rebalancing
programs. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING- If the Contract Value is $15,000 or more, the Contract
Owner may direct the Company to automatically transfer a specified amount from
the Fidelity VIP High Income Portfolio, NSAT-Government Bond Fund, NSAT-Money
Market Fund, or the Neuberger & Berman AMT-Limited Maturity Bond Portfolio to
any other Sub-Account. Dollar Cost Averaging will occur on a monthly basis or
on another frequency permitted by the Company. Dollar Cost Averaging is a
long-term investment program which provides for regular, level investments over
time. There is no guarantee that Dollar Cost Averaging will result in a profit
or protect against loss. The minimum monthly transfer is $100. Transfers will
be processed until either the value in the originating Sub-Account is exhausted
or the Contract Owner instructs the Home Office in writing to cancel the
transfers.
The Company reserves the right to discontinue establishing new Dollar Cost
Averaging programs. The Company also reserves the right to assess a processing
fee for this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing to begin receiving
withdrawals of a specified dollar amount (of at least $100) on a monthly,
quarterly, semi-annual, or annual basis. Unless otherwise instructed, the
withdrawals will be taken from the Sub-Accounts on a prorated basis. Unless
otherwise directed by the Contract Owner, the Company will withhold any
applicable federal income taxes. The IRS may assess 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.
Withdrawals may be discontinued at any time by notifying the Home Office in
writing.
The Company reserves the right to discontinue establishing new Systematic
Withdrawal programs. The Company also reserves the right to assess a processing
fee for this service. Systematic Withdrawals are not available prior to the
expiration of the ten day free look provision of the Contract (see "Right to
Revoke").
ANNUITY PAYMENT PERIOD, DEATH BENEFIT AND OTHER DISTRIBUTIONS
ANNUITY COMMENCEMENT DATE
An Annuity Commencement Date will be selected. Such date will be the first day
of a calendar month unless otherwise agreed upon. The date must be at least 2
years after the Date of Issue. In the event the Contract is issued subject to
the terms of a Qualified Plan or Tax Sheltered Annuity Plan, Annuitization may
occur during the first 2 years subject to approval by the Company.
The Annuity Commencement Date may be changed by the Contract Owner in writing
subject to approval by the Company.
ANNUITIZATION
Annuitization is irrevocable once payments have begun. When making an
Annuitization election, the Annuitant must choose:
(1) an Annuity Payout Option; and
(2) whether the Variable Account value will be applied to a Variable
Payment Annuity, a Fixed Payment Annuity or an available combination.
Payments under a Fixed Payment Annuity are guaranteed by the Company as to the
dollar amount during the annuity payment period. The dollar amount of each
payment under a Variable Payment Annuity will vary
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depending on the performance of the selected Underlying Mutual Fund options. The
dollar amount of each variable payment could be higher or lower than a previous
payment.
FIXED PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a Fixed Payment Annuity will be determined by applying
the portion of the total Contract Value specified by the Contract Owner to the
Fixed Payment Annuity table then in effect for the Annuity Payment Option
elected, after deducting any applicable premium taxes from the total Contract
Value. This will be done at the Annuitization Date on an age last birthday
basis. Subsequent payments will remain level unless the Annuity Payment Option
elected provides otherwise. The Company does not credit discretionary interest
paid by the Company to payments during the annuity payment period.
VARIABLE PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a Variable Payment Annuity will be determined by
applying the portion of the total Contract Value specified by the Contract Owner
to the Variable Payment Annuity table then in effect for the Annuity Payment
Option elected, after deducting any applicable premium taxes from the total
Contract Value. This will be done at the Annuitization Date on an age last
birthday basis. The dollar amount of the first payment is divided by the value
of an Annuity Unit as of the Annuitization Date to establish the number of
Annuity Units representing each monthly annuity payment. This number of Annuity
Units remains fixed during the annuity payment period. The dollar amount of the
second and subsequent payments is not predetermined and may change from month to
month. The dollar amount of each subsequent payment is determined by multiplying
the fixed number of Annuity Units by the Annuity Unit value for the Valuation
Period in which the payment is due. The Company guarantees that the dollar
amount of each payment after the first will not be affected by variations in
mortality experience from mortality assumptions used to determine the first
payment.
VARIABLE PAYMENT ANNUITY - ASSUMED INVESTMENT RATE
A 3.5% assumed investment rate is built into the Variable Payment Annuity
purchase rate basis in the Contracts. A higher assumption would mean a higher
initial payment but more slowly rising or more rapidly falling subsequent
payments. A lower assumption would have the opposite effect. If the actual net
investment rate is at the annual rate of 3.5%, the annuity payments will be
level.
VARIABLE PAYMENT ANNUITY - VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit for a Sub-Account for any subsequent Valuation
Period is determined by multiplying the Annuity Unit value from the immediately
preceding Valuation Period by the net investment factor for the Valuation Period
for which the Annuity Unit value is being calculated, and multiplying the result
by an interest factor to neutralize the assumed investment rate of 3.5% per
annum built into the Variable Payment Annuity purchase rate basis in the
Contracts (see "Net Investment Factor").
VARIABLE PAYMENT ANNUITY - EXCHANGES AMONG UNDERLYING MUTUAL FUND OPTIONS
During the annuity payment period, exchanges among the Underlying Mutual Fund
options must be made in writing and the exchange will take place on the
anniversary of the Annuitization Date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be made based on the Annuity Payment Option selected.
However, if the net amount available under any Annuity Payment Option is less
than $5,000, the Company will have the right to pay such amount in one lump sum
in lieu of periodic annuity payments. In addition, if the payments to be
provided would be or become less than $50, the Company will have the right to
change the frequency of payments to such intervals as will result in payments of
at least $50. In no event will the Company make payments under an annuity option
less frequently than annually.
ANNUITY PAYMENT OPTIONS
The Contract Owner may, upon prior written notice to the Company, at any time
prior to the Annuitization Date, elect one of the following Annuity Payment
Options:
(1) Life Annuity-An annuity payable periodically, but at least annually,
during the lifetime of the Annuitant, ending with the last payment due
prior to the death of the Annuitant. FOR EXAMPLE, IF THE ANNUITANT DIES
BEFORE THE SECOND ANNUITY PAYMENT DATE, THE ANNUITANT WILL
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RECEIVE ONLY ONE ANNUITY PAYMENT. THE ANNUITANT WILL ONLY RECEIVE TWO
ANNUITY PAYMENTS IF HE OR SHE DIES BEFORE THE THIRD ANNUITY PAYMENT DATE
AND SO ON.
(2) Joint and Last Survivor Annuity-An annuity payable periodically, but
at least annually, during the joint lifetimes of the Annuitant and
designated second individual and continuing thereafter during the
lifetime of the survivor. AS IS THE CASE UNDER OPTION 1 ABOVE, THERE IS
NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS
CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.
(3) Life Annuity With 120 or 240 Monthly Payments Guaranteed-An annuity
payable monthly during the lifetime of the Annuitant. If the Annuitant
dies before all of the guaranteed payments have been made, payments will
continue to be made for the remainder of the selected guaranteed period
to a designee chosen by the Contract Owner at the time the Annuity
Payment Option was elected.
Alternatively, the designee may elect to receive the present value of any
remaining guaranteed payments in a lump sum. The present value will be
computed as of the date on which the Company receives the notice of the
Annuitant's death.
Some of the stated Annuity Options may not be available in all states. The
Contract Owner may request an alternative option prior to the Annuitization Date
subject to approval by the Company.
For Non-Qualified Contracts, no Distribution will be made until an Annuity
Payment Option has been elected. Qualified Contracts, IRAs, SEP IRAs and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the Plan, Contract, or Code.
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
For Non-Qualified Contracts, if the Contract Owner and the Annuitant are not the
same and the Contract Owner dies prior to the Annuitization Date, then the Joint
Owner, if any, becomes the new Contract Owner. If there is no surviving Joint
Owner, the Contingent Owner becomes the new Contract Owner. If there is no
surviving Contingent Owner, the last surviving Contract Owner's estate becomes
the Contract Owner. The entire interest in the Contract Value, less any
applicable deductions, must be distributed in accordance with the "Required
Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the Contract Owner and Annuitant are not the same, and the Annuitant dies
prior to the Annuitization Date, a Death Benefit will be payable to the
Beneficiary, the Contingent Beneficiary, the Contract Owner, or the last
surviving Contract Owner's estate, as specified in the "Beneficiary" provision,
unless there is a surviving Contingent Annuitant. In such case, the Contingent
Annuitant becomes the Annuitant and no Death Benefit is payable.
The Beneficiary may elect to receive the Death Benefit:
(1) in a lump sum Distribution;
(2) as an annuity payout; or
(3) any Distribution permitted by law and approved by the Company.
An election must be received by the Company within 60 days of the Annuitant's
death. If the Annuitant dies on or after the Annuitization Date, any benefit
that may be payable will be paid according to the selected Annuity Payment
Option.
DEATH OF CONTRACT OWNER/ANNUITANT
If any Contract Owner and Annuitant are the same, and the Annuitant dies before
the Annuitization Date, a Death Benefit will be payable to the Beneficiary, the
Contingent Beneficiary, the Contract Owner, or the last surviving Contract
Owner's estate, as specified in the "Beneficiary" provision and in accordance
with the appropriate "Required Distributions" provisions.
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable will be paid according to the selected Annuity Payment Option.
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DEATH BENEFIT PAYMENT
For all Contracts issued on or after the later of May 1, 1998 or the date on
which state insurance authorities approve applicable Contract modifications, if
the Annuitant dies prior to his or her 86th birthday, the dollar amount of the
Death Benefit will be the greatest of:
(1) the Contract Value; or
(2) the sum of all Purchase Payments, less an adjustment for amounts
surrendered; or
(3) the Contract Value as of the most recent five-year Contract
Anniversary, less an adjustment for amounts surrendered since the
most recent 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 dates(s) of the
partial surrender(s).
For Contracts issued prior to May 1, 1998 or the date prior to approval of
applicable Contract modifications by state insurance authorities, if the
Annuitant dies prior to his or her 86th birthday, the dollar amount of the Death
Benefit will be the greatest of:
(1) the Contract Value; or
(2) the sum of all Purchase Payments, less any amounts surrendered; or
(3) the Contract Value as of the most recent five-year Contract
Anniversary, less any amounts surrendered since the most recent
five-year Contract Anniversary.
If the Annuitant dies on or after his or her 86th birthday and prior to
Annuitization, the Death Benefit will equal the Contract Value.
The Death Benefit value is determined as of the Valuation Date at or next
following the date the Home Office receives:
(1) proper proof of the Annuitant's death;
(2) an election specifying the Distribution method;
(3) ant state required form(s).
If the Annuitant dies on or after the Annuitization Date, any payment that may
be payable will be determined according to the selected annuity payment option.
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Upon the death of any Contract Owner or Joint Owner (including an Annuitant who
becomes the Contract Owner on the Annuitization Date), certain distributions for
Non-Qualified Contracts are required by Section 72(s) of the Code.
Notwithstanding any provision of the Contract to the contrary, the following
distributions will be made in accordance with such requirements:
1. If any Contract Owner dies on or after the Annuitization Date and
before the entire interest under the Contract has been distributed,
then the remaining interest will be distributed at least as rapidly
as under the method of distribution in effect as of the date of the
Contract Owner's death.
2. If any Contract Owner dies prior to the Annuitization Date, then the
entire interest in the Contract (consisting of either the Death
Benefit or the Contract Value reduced by certain charges as set forth
elsewhere in the Contract) will be distributed within 5 years of the
death of the Contract Owner, provided however:
(a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or
over a period not extending beyond the life expectancy of the
designated beneficiary. Payments must begin within one year of
the date of the Contract Owner's death unless otherwise
permitted by federal income tax regulations; and
(b) if the designated beneficiary is the surviving spouse of the
deceased Contract Owner, the spouse may elect to become the
Contract Owner in lieu of receiving a Death Benefit, and any
distributions required under these distribution rules will be
made upon the death of the spouse.
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In the event that this Contract is owned by a person that is not a natural
person (e.g., a trust or corporation), then, for purposes of these distribution
provisions:
(a) the death of the Annuitant will be treated as the death of
any Contract Owner;
(b) any change of the Annuitant will be treated as the death of
any Contract Owner; and
(c) in either case the appropriate distribution required under
these distribution rules will be made upon the death or
change, as the case may be. The Annuitant is the primary
annuitant as defined in Section 72(s)(6)(B) of the Code.
These distribution provisions will not be applicable to any Contract that is not
required to be subject to the provisions of 72(s) of the Code by reason of
Section 72(s)(5) or any other law or rule.
Upon the death of a Contract Owner, the designated beneficiary must elect a
method of distribution which complies with the above distribution provisions and
which is acceptable to the Company. Such election must be received by the
Company within 60 days of the Contract Owner's death.
REQUIRED DISTRIBUTIONS FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
Amounts in a Qualified Contract or Tax Sheltered Annuity Contract will be
distributed in a manner consistent with the Minimum Distribution and Incidental
Benefit (MDIB) provisions of Section 401(a)(9) of the Code and applicable
regulations. Amounts will be paid, notwithstanding anything else contained
herein, to the Annuitant under the Annuity Payments Option selected, over a
period not exceeding:
(a) the life of the Annuitant or the joint lives of the Annuitant
and the Annuitant's designated beneficiary under the selected
Annuity Payment Option; or
(b) a period not extending beyond the life expectancy of the
Annuitant or the joint life expectancies of the Annuitant and
the Annuitant's designated beneficiary under the selected
annuity Payment Option.
For Tax Sheltered Annuity Contracts, no Distributions will be required from this
Contract if Distributions otherwise required from this Contract are being
withdrawn from another Tax Sheltered Annuity Contract of the Annuitant.
If the Annuitant's entire interest in a Qualified Plan or Tax Sheltered Annuity
is to be distributed in equal or substantially equal payments over a period
described in (a) or (b) above, such payments will commence on the required
beginning date, which is the later of:
(a) the first day of April following the calendar year in which
the Annuitant attains age 70-1/2; or
(b) when the Annuitant retires.
However, provision (b) does not apply to any employee who is a 5% Owner (as
defined in Section 416 of the Code) with respect to the plan year ending in the
calendar year in which the employee attains the age of 70-1/2.
If the Annuitant dies prior to the commencement of his or her Distribution, the
interest in the Qualified Contract or Tax Sheltered Annuity must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs unless:
(a) the Annuitant names his or her surviving spouse as the
Beneficiary and the spouse elects to receive Distribution
of the Contract in substantially equal payments over his or
her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of
the year in which the Annuitant would have attained age
70-1/2; or
(b) the Annuitant names a Beneficiary other than his or her
surviving spouse and the Beneficiary elects to receive a
Distribution of the Contract in substantially equal
payments over his or her life (or a period not exceeding
his or her life expectancy) commencing not later than
December 31 of the year following the year in which the
Annuitant dies.
If the Annuitant dies after Distribution has commenced, the Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the required beginning date will not be less than the
lesser of the quotient obtained by dividing the entire interest of the Annuitant
by the life expectancy of the Annuitant, or the joint life expectancies of the
Annuitant and the Annuitant's designated beneficiary (if the Annuitant dies
prior to the required beginning date) or the Beneficiary under the selected
Annuity Payment Option (if the Annuitant dies after the required beginning
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date) whichever is applicable under the applicable minimum distribution or MDIB
provisions. Life expectancy and joint life expectancies are computed by the use
of return multiples contained in Section 1.72-9 of the Treasury Regulations.
If amounts distributed to the Annuitant are less than those mentioned above, a
penalty tax of 50% is levied on the excess of the amount that should have been
distributed for that year over the amount that actually was distributed for that
year.
REQUIRED DISTRIBUTIONS FOR IRAS OR SEP IRAS
Distribution from an IRA or SEP IRA must begin no later than April 1 of the
calendar year following the calendar year in which the Contract Owner attains
age 70-1/2. Distribution may be payable in a lump sum or in substantially equal
payments over:
(a) the Contract Owner's life or the lives of the Contract Owner and
his or her spouse or designated beneficiary; or
(b) a period not extending beyond the life expectancy of the Contract
Owner or the joint life expectancy of the Contract Owner and the
Contract Owner's designated beneficiary.
If the Contract Owner dies prior to the commencement of his or her Distribution,
the interest in the IRA or SEP IRA must be distributed by December 31 of the
calendar year in which the fifth anniversary of his or her death occurs, unless:
(a) The Contract Owner names his or her surviving spouse as the
Beneficiary and such spouse elects to:
(i) treat the annuity as an IRA or SEP IRA established for his
or her benefit; or
(ii) receive Distribution of the Contract in substantially equal
payments over his or her life (or a period not exceeding
his or her life expectancy) and commencing not later than
December 31 of the year in which the Contract Owner would
have attained age 70-1/2; or
(b) The Contract Owner names a Beneficiary other than his or her
surviving spouse and the Beneficiary elects to receive a
Distribution of the Contract in substantially equal payments over
his or her life (or a period not exceeding his or her life
expectancy) commencing not later than December 31 of the year
following the year in which the Contract Owner dies.
No Distribution will be required from this Contract if Distributions otherwise
required from this Contract are being withdrawn from another IRA or SEP IRA of
the Contract Owner.
If the Contract Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse who is the beneficiary under the
Annuity Payment Option, may treat the Contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If the amounts distributed to the Contract Owner are less than those mentioned
above, a penalty tax of 50% is levied on the excess of the amount that should
have been distributed for that year over the amount that actually was
distributed for that year.
A pro-rata portion of all Distributions will be included in the gross income of
the person receiving the Distribution and taxed at ordinary income tax rates.
The portion of the Distribution which is taxable is based on the ratio between
the amount by which non-deductible Purchase Payments exceed prior non-taxable
distributions and total account balances at the time of the distribution. The
Owner of an IRA or SEP IRA must annually report the amount of non-deductible
Purchase Payments, the amount of any Distribution, the amount by which
non-deductible Purchase Payments for all years exceed non-taxable Distributions
for all years, and the total balance of all IRAs.
IRA and SEP IRA Distributions will not receive the benefit of the tax treatment
of a lump sum Distribution from a Qualified Plan. If the Owner dies prior to the
time Distribution of his or her interest in the annuity is completed, the
balance will also be included in his or her gross estate.
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Simplified Employee Pensions (SEPs) and Salary Reduction Simplified Employee
Pensions (SAR SEPs), described in Section 408(k) of the Code are taxed in a
manner similar to IRAs, and are subject to similar distribution requirements as
IRAs. SAR SEPs cannot be established after 1996.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
Distributions from a Roth IRA, unlike other IRAs, are not required to commence
during the lifetime of the Contract Owner.
Upon the death of the Contract Owner, the Contract Owner's interest in the Roth
IRA must be distributed by December 31 of the calendar year in which the fifth
anniversary of his or her death occurs, unless:
(a) The Contract Owner names his or her surviving spouse as the
Beneficiary and such spouse elects to:
(i) treat the annuity as a Roth IRA established for his or her
benefit; or
(ii) receive Distribution of the account in substantially equal
payments over his or her life (or a period not exceeding
his or her life expectancy) and commencing not later than
December 31 of the year following the year in which the
Contract Owner would have attained age 70-1/2; or
(b) The Contract Owner names a Beneficiary other than his or her
surviving spouse and such Beneficiary elects to receive a
Distribution of the Contract in substantially equal payments over
his or her life (or a period not exceeding his or her life
expectancy) commencing not later than December 31 of the following
year in which the Contract Owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "nonqualified distributions" (see
"Federal Income Taxes").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts. Contract Owners should
consult a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the Contracts.
Section 72 of the Code governs federal income taxation of annuities in general.
That section sets forth different rules for: (1) Qualified Contracts; (2) IRAs,
including SEP IRAs; (3) Roth IRAs; (4) Tax Sheltered Annuities; and (5)
Non-Qualified Contracts. Each type of annuity is discussed below.
Distributions to participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on a formula required by the Code. The formula
required by the Code excludes from income an amount equal to the investment in
the Contract divided by the number of anticipated payments, as determined
pursuant to Section 72(d) of the Code, until the full investment in the Contract
is recovered; thereafter, all Distributions are fully taxable.
Distributions from IRAs and SEP IRAs and Contracts owned by Individual
Retirement Accounts are generally taxed when received. The portion of each
payment which is excludable is based on the ratio between the amount by which
nondeductible Purchase Payments to all Contracts exceeds prior non-taxable
Distributions from the Contracts, and the total account balances in the
Contracts at the time of the Distribution. The owner of such IRAs or SEP IRAs or
the Annuitant under Contracts held by Individual Retirement Accounts must
annually report to the IRS the amount of nondeductible Purchase Payments, the
amount of any Distribution, the amount by which nondeductible Purchase Payments
for all years exceed non-taxable Distributions for all years, and the total
balance in all IRAs, SEP IRAs and Individual Retirement Accounts.
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "nonqualified distributions."
A "qualified distribution" is one that satisfies the five year rule and meets
one of the following four requirements: (i) it is made on or after the date on
which the Contract Owner attains the age of 59-1/2; (ii) it is made to a
Beneficiary (or the Contract Owner's estate) on or after the death of the
Contract Owner; (iii) it is attributable to the Contract Owner's disability; or
(iv) it is a qualified first-time homebuyer distribution (as defined in Section
72(t)(2)(F) of the Code). If the Roth IRA does not have any qualified rollover
contributions from a retirement plan other than a Roth IRA (or income allocable
thereto), the five year rule is satisfied if the Distribution is not made within
the five year period beginning with the first contribution
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to the Roth IRA. If the Roth IRA has any qualified rollover contributions from a
retirement plan other than a Roth IRA (or income allocable thereto), the five
year rule is satisfied if the Distribution is not made within the five taxable
year period commencing with the taxable year in which the qualified rollover
contribution was made.
A nonqualified distribution is any Distribution that is not a qualified
distribution.
A qualified distribution is not included in gross income for federal income tax
purposes. A nonqualified distribution is not includible in gross income to the
extent that such Distribution, when added to all previous Distributions, does
not exceed that aggregate amount of contributions made to the Roth IRA. Any
nonqualified distribution in excess of the aggregate amount of contributions
will be included in the Contract Owner's gross income in the year that is
distributed to the Contract Owner.
Taxable Distributions will not receive the benefit of the tax treatment of a
lump sum Distribution from a qualified plan. If the Contract Owner dies prior to
the complete Distribution of the Contract, the balance will also be included in
the Contract Owner's gross estate for federal estate tax purposes.
A change of the Annuitant or Contingent Annuitant may be treated by the IRS as a
taxable transaction.
PUERTO RICO
Under the Puerto Rico tax code, Distributions from a Non-Qualified Contract
prior to Annuitization are treated as nontaxable return of principal until the
principal is fully recovered; thereafter, all Distributions are fully taxable.
Distributions after Annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
Annuitization is equal to the amount of the Distribution in excess of 3% of the
total Purchase Payments paid, until an amount equal to the total Purchase
Payments paid has been excluded; thereafter, the entire Distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
Distributions of income. A personal adviser should be consulted.
NON-QUALIFIED CONTRACTS- NATURAL PERSONS AS CONTRACT OWNERS
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment received is excludable from taxable income based on the ratio
between the Contract Owner's investment in the Contract and the expected return
on the Contract until the investment has been recovered; thereafter the entire
amount is includable in income. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are taxable
to the Contract Owner to the extent that the cash value of the Contract exceeds
the Contract Owner's investment at the time of the Distribution. Distributions,
for this purpose, include partial surrenders, dividends, loans, or any portion
of the Contract which is assigned or pledged; or for Contracts issued after
April 22, 1987, any portion of the Contract transferred by gift. For these
purposes, a transfer by gift may occur upon Annuitization if the Contract Owner
and the Annuitant are not the same individual. In determining the taxable amount
of a Distribution, all annuity contracts issued after October 21, 1988 by the
same company to the same contract owner during any 12 month period will be
treated as one annuity contract. Additional limitations on the use of multiple
contracts may be imposed by Treasury Regulations. Distributions prior to the
Annuitization Date with respect to that portion of the Contract invested prior
to August 14, 1982, are treated first as a recovery of the investment in the
Contract as of that date. A Distribution in excess of the amount of the
investment in the Contract as of August 14, 1982, will be treated as taxable
income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for immediate annuities and certain Contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium Contract on which payments begin within one year of purchase. If this
Contract is issued as the result of an exchange described in Section 1035 of the
Code, for purposes of determining whether the Contract is an immediate annuity,
it will generally be considered to have been purchased on the purchase date of
the contract given up in the exchange.
Code Section 72 also provides for a penalty tax, equal to 10% of the portion of
any Distribution that is includable in gross income, if such Distribution is
made prior to attaining age 59-1/2. The penalty tax does not apply if the
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<PAGE> 36
Distribution is attributable to the Contract Owner's death, disability or one of
a series of substantially equal periodic payments made over the life or life
expectancy of the Contract Owner (or the joint lives or joint life expectancies
of the Contract Owner and the beneficiary selected by the Contract Owner to
receive payment under the Annuity Payment Option selected by the Contract Owner)
or for the purchase of an immediate annuity, or is allocable to an investment in
the Contract before August 14, 1982. A Contract Owner wishing to begin taking
Distributions to which the 10% tax penalty does not apply should forward a
written request to the Company. Upon receipt of a written request from the
Contract Owner, the Company will inform the Contract Owner of the procedures
pursuant to Company policy and subject to limitations of the Contract including
but not limited to first year withdrawals. Such election shall be irrevocable
and may not be amended or changed.
In order to qualify as an annuity contract under Section 72 of the Code, the
contract must provide for Distribution of the entire contract to be made upon
the death of a Contract Owner. If a Contract Owner dies prior to the
Annuitization Date, then the Joint Owner, the Contingent Owner or other named
recipient must receive the Distribution within 5 years of the Contract Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy provided that such payments begin within one year from
the death of the Contract Owner. If the Joint Owner, Contingent Owner or other
named recipient is the surviving spouse, the spouse may be treated as the
Contract Owner and the Contract may be continued throughout the life of the
surviving spouse. In the event the Contract Owner dies on or after the
Annuitization Date and before the entire interest has been distributed, the
remaining portion must be distributed at least as rapidly as under the method of
Distribution being used on the date of the Contract Owner's death (see "Required
Distribution For Qualified Plans and Tax Sheltered Annuities"). If the Contract
Owner is not a natural person, the death of the Annuitant (or a change in the
Annuitant) will result in a Distribution pursuant to these rules, regardless of
whether a Contingent Annuitant is named.
The Code requires that any election to receive an annuity in lieu of a lump sum
payment must be made within 60 days after the lump sum becomes payable
(generally, the election must be made within 60 days after the death of an Owner
or the Annuitant). If the election is made more than 60 days after the lump sum
first becomes payable, the election will be ignored for tax purposes, and the
entire amount of the lump sum will be subject to immediate tax. If the election
is made within the 60 day period, each Distribution will be taxable when it is
paid.
NON-QUALIFIED CONTRACTS- NON-NATURAL PERSONS AS CONTRACT OWNERS
The foregoing discussion of the taxation of Non-Qualified Contracts applies to
Contracts owned (or, pursuant to Section 72(u) of the Code, deemed to be owned)
by individuals.
As a general rule, contracts owned by corporations, partnerships, trusts, and
similar entities ("non-natural persons"), rather than by one or more
individuals, are not treated as annuity contracts for most purposes under the
Code; in particular, they are not treated as annuity contracts for purposes of
Section 72. Therefore, the taxation rules for Distributions, as described above,
do not apply to Non-Qualified Contracts owned by non-natural persons. Rather the
income earned under a Non-Qualified Contract that is owned by a non-natural
person is taxed as ordinary income during the taxable year that it is earned,
and is not deferred, even if the income is not distributed out of the Contract
to the Contract Owner.
The foregoing non-natural person rule does not apply to all entity-owned
contracts. A Contract that is owned by a non-natural person as an agent for an
individual is treated as owned by the individual. This exception does not apply,
however, to a non-natural person who is an employer that holds the Contract
under a non-qualified deferred compensation arrangement for one or more
employees.
The non-natural person rules also do not apply to a Contract that is:
(a) acquired by the estate of a decedent by reason of the death of the
decedent;
(b) issued in connection with certain qualified retirement plans and
individual retirement plans;
(c) used in connection with certain structured settlements;
(d) purchased by an employer upon the termination of certain qualified
retirement plans; or
(e) an immediate annuity.
QUALIFIED PLANS, IRAS, SEP IRAS AND TAX SHELTERED ANNUITIES
Contract Owners seeking information regarding eligibility, limitations on
permissible amounts of Purchase Payments, and the tax consequences of
distributions from Qualified Plans, Tax Sheltered Annuities, IRAs, SEP
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IRAs and other plans that receive favorable tax treatment should seek competent
advice; the terms of such plans may limit the rights available under the
Contracts.
Pursuant to Section 403(b)(1)(E) Code, a Contract that is issued as a
Tax-Sheltered Annuity is required to limit the amount of the Purchase Payment
for any year to an amount that does not exceed the limit set forth in Section
402(g) of the Code ($7,000), as it is from time to time increased to reflect
increases in the cost of living. This limit may be reduced by any deposits,
contributions or payments made to any other Tax-Sheltered Annuity or other plan,
contract or arrangement by or on behalf of the Contract Owner.
The Code permits the rollover of most Distributions from Qualified Plans to
other Qualified Plans, IRAs or SEP IRAs. Most Distributions from Tax-Sheltered
Annuities may be rolled into another Tax-Sheltered Annuity, IRA or SEP IRA.
Distributions that may not be rolled over are those which are:
(a) one of a series of substantially equal annual (or more frequent)
payments made:
(i) over the life (or life expectancy) of the Contract Owner;
(ii)over the joint lives (or joint life expectancies) of the
Contract Owner and the Contract Owner's designated Beneficiary;
or
(iii) for a specified period of ten years or more; or
(b) a required minimum distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a rate of twenty percent (20%) unless the Distribution is
transferred directly to an appropriate plan as described above.
The Contract is available for Qualified Plans electing to comply with Section
404(c) of ERISA. It is the responsibility of the plan and its fiduciaries to
determine and satisfy the requirements of Section 404(c).
IRAs and SEP IRAs may not provide life insurance benefits. If the Death Benefit
exceeds the greater of the cash value of the Contract or the sum of all Purchase
Payments (less any surrenders), it is possible the IRS could determine that the
IRA or SEP IRA did not qualify for the desired tax treatment.
ROTH IRAS
The Contract may be purchased as a Roth IRA. The Contract Owner should seek
competent advice as to the tax consequences associated with the use of a
Contract as a Roth IRA, for information regarding eligibility to invest in a
Roth IRA, for limitations on permissible amounts of Purchase Payments that may
be made to a Roth IRA, and as to the tax consequences of Distributions from Roth
IRAs.
The Code permits the rollover of most Distributions from Individual Retirement
Accounts or IRAs to Roth IRAs. The rollovers are subject to federal income tax
as Distributions from the Individual Retirement Account or IRA. For rollovers
that take place in 1998, the income from rollover is included in income ratably
over the four year period commencing in 1998. For rollovers in subsequent years,
the entire amount of income from the rollover will be required to be included in
income in the year of the rollover Distribution from the Individual Retirement
Account or IRA.
A Distribution from a Roth IRA that received the proceeds of a rollover from an
Individual Retirement Account or IRA within the previous five years could be
subject to a 10% penalty even if the Distribution is not taxable. In addition,
if the rollover from the Individual Retirement Account or IRA was made in 1998
and the income from that rollover was included in income ratably over a four
year period, a Distribution from the Roth IRA within four years of the rollover
may be subject to an additional 10% penalty.
WITHHOLDING
The Company is required to withhold tax from certain Distributions to the extent
that such Distribution would constitute income to the Contract Owner or other
payee. The Contract Owner or other payee is entitled to elect not to have
federal income tax withheld from certain types of Distributions, but may be
subject to penalties in the event insufficient federal income tax is withheld
during a calendar year. However, if the IRS notifies the Company that the
Contract Owner or other payee has furnished an incorrect taxpayer identification
number, or if the Contract Owner or other payee fails to provide a taxpayer
identification number, the Distributions may be subject to back-up withholding
at the statutory rate, which is presently 31%, and which cannot be waived by the
Contract Owner or other payee.
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<PAGE> 38
NON-RESIDENT ALIENS
Distributions to nonresident aliens (NRAs) are generally subject to federal
income tax and tax withholding at a statutory rate of thirty percent (30%) of
the amount of income that is distributed. The Company may be required to
withhold such amount from the Distribution and remit it to the IRS.
Distributions to certain NRAs may be subject to lower, or in certain instances,
zero tax and withholding rates if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to the Company sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. For
Distributions, the NRA must obtain an Individual Taxpayer Identification Number
from the IRS and furnish that number to the Company prior to the Distribution.
If the Company does not have the proper proof of citizenship or residency and a
proper Individual Taxpayer Identification Number prior to any Distribution, the
Company will be required to withhold 30% of the income, regardless of any treaty
provision.
A payment may not be subject to withholding where the recipient sufficiently
establishes to the Company that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and that such
payment is includable in the recipient's gross income for United States federal
income tax purposes. Any such Distributions will be subject to the rules set
forth in the section entitled "Withholding."
FEDERAL ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAXES
A transfer of the Contract from one Contract Owner to another, or the payment of
a Distribution under the Contract to someone other than a Contract Owner, may
constitute a gift for federal gift tax purposes. Upon the death of the Contract
Owner, the value of the Contract may be included in his or her gross estate for
federal estate tax purposes, even if all or a portion of the value is also
subject to federal income taxes.
The Company may be required to determine whether the Death Benefit or any other
payment or Distribution constitutes a "direct skip" as defined in Section 2612
of the Code, and the amount of the generation skipping transfer tax, if any,
resulting from such direct skip. A direct skip may occur when property is
transferred to, or a Death Benefit or other Distribution is made to:
(a) an individual who is two or more generations younger than the
Contract Owner; or
(b) certain trusts, as described in Section 2613 of the Code (generally,
trusts that have no beneficiaries who are not 2 or more generations
younger than the Contract Owner).
If the Contract Owner is not an individual, then for this purpose only,
"Contract Owner" refers to any person who would be required to include the
Contract, Death Benefit, Distribution, or other payment in his or her federal
gross estate at his or her death, or who is required to report the transfer of
the Contract, Death Benefit, Distribution, or other payment for federal gift tax
purposes.
If the Company determines that a generation skipping transfer tax is required to
be paid by reason of a direct skip, the Company is required by Section 2603 of
the Code to reduce the amount of the Death Benefit, Distribution, or other
payment by the tax liability, and pay the tax liability directly to the IRS.
Federal estate, gift and generation-skipping transfer tax consequences, and
state and local estate, inheritance, succession, generation skipping transfer,
and other tax consequences of owning or transferring a Contract, and of
receiving a Distribution, Death Benefit or other payment, depend on the
circumstances of the person owning or transferring the Contract, or person
receiving a Distribution, Death Benefit or other payment.
CHARGE FOR TAX
The Company is no longer required to maintain a capital gain reserve liability
on Non-Qualified Contracts since capital gains attributable to assets held in
Sub-Accounts for such Contracts are not taxable to the Company. However, the
Company reserves the right to implement and adjust the tax charge in the future
if the tax laws change.
DIVERSIFICATION
The IRS has promulgated regulations under Section 817(h) of the Code relating to
diversification standards for the investments underlying a variable annuity
contract. The regulations provide that a variable annuity contract which does
not satisfy the diversification standards will not be treated as an annuity
contract unless the failure to satisfy the regulations was inadvertent, the
failure is corrected, and the Contract Owner or the Company pays an amount to
the IRS. The amount will be based on the tax that would have been paid by the
Contract Owner if the income, for the period the contract was not diversified,
had been received by the Contract Owner. If the failure to
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<PAGE> 39
diversify is not corrected in this manner, the Contract Owner will be deemed the
owner of the underlying securities and will be taxed on the earnings of his or
her account. The Company believes, under its interpretation of the Code and
regulations thereunder, that the investments underlying this Contract meet these
diversification standards.
Representatives of the IRS have suggested, from time to time, that the number of
Underlying Mutual Funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of Underlying Mutual Funds, transfers between
Underlying Mutual Funds, exchanges of Underlying Mutual Funds or changes in
investment objectives of Underlying Mutual Funds such that the Contract would no
longer qualify as an annuity under Section 72 of the Code, the Company will take
whatever steps are available to remain in compliance.
TAX CHANGES
The Code has been subjected to numerous amendments and changes and it is
reasonable to believe that it will continue to be revised. The United States
Congress has considered numerous legislative proposals that, if enacted, could
change the tax treatment of the Contracts. It is reasonable to believe that such
proposals may be enacted into law. In addition, the Treasury Department may
amend existing regulations, issue new regulations, or adopt new interpretations
of existing law that may be in variance with its current positions on these
matters. In addition, state law (which is not discussed herein), may affect the
tax consequences of the Contract.
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice. Statutes, regulations, and rulings are subject to
interpretation by the courts. The courts may determine that a different
interpretation than the currently favored interpretation is appropriate, thereby
changing the operation of the rules that are applicable to annuity contracts.
Any of the foregoing may change from time to time without any notice, and the
tax consequences arising out of a Contract may be changed retroactively. There
is no way of predicting whether, when, and to what extent any such change may
take place. No representation is made as to the likelihood of the continuation
of these current laws, interpretations, and policies.
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO
ANNUITY CONTRACTS. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD NOT
TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR.
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GENERAL INFORMATION
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to the Company by writing P.O. Box
16609, Columbus, Ohio 43216-6609, or calling 1-800-848-6331, TDD 1-800-238-3035.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address, any
statements and reports required by law. Contract Owners should promptly notify
the Company of any address change. Statements are mailed detailing the
Contract's quarterly activity. The Company will also send a confirmation
statement to Contract Owners each time a transaction is made affecting the
Contract Value. However, instead of receiving an immediate confirmation of
transactions made pursuant to some types of recurring payment plans (such as a
dollar cost averaging program or salary reduction arrangement), the Contract
Owner may receive confirmation of such transactions in their quarterly
statements. The Contract Owner should review the information in these statements
carefully. All errors or corrections must be reported to the Company immediately
to assure proper crediting to the Contract. The Company will assume all
transactions are accurately reported on quarterly statements or confirmation
statements unless the Contract Owner notifies the Home Office within 30 days
after receipt of the statement. The Company will also send to Contract Owners a
semi-annual report as of June 30 and an annual report as of December 31,
containing financial statements for the Variable Account.
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT-Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT-Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT-Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
The Company may also advertise the performance of a Sub-Account relative to the
performance of other variable annuity sub-accounts or underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the Sub-Accounts may be compared include, but
are not limited to: precious metals; real estate; stocks and bonds; closed-end
funds; CDs; bank money market deposit accounts and passbook savings; and the
Consumer Price Index.
The Sub-Accounts may also be compared to certain market indexes, which may
include, but are not limited to: S&P 500; Shearson/Lehman Intermediate
Government/Corporate Bond Index; Shearson/Lehman Long-Term Government or
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 the Dow Jones
Industrial Average.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar, Donoghue's,
magazines such as Money, Forbes, Kiplinger's Personal Finance Magazine,
Financial World, Consumer Reports, Business Week, Time, Newsweek, National
Underwriter, U.S. News and World Report; rating services such as LIMRA, Value,
Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports; and
other publications such as the Wall Street Journal, Barron's, Investor's Daily,
and Standard & Poor's Outlook. In addition, Variable Annuity Research & Data
Service (The VARDS Report) is an independent rating service that ranks over 500
variable annuity funds based upon total return performance. These rating
services and publications rank the performance of the Underlying Mutual Fund
options against all underlying mutual funds over specified periods and against
underlying mutual funds in specified categories. The rankings may or may not
include the effects of sales charges or other fees.
The Company is ranked and rated by independent financial rating services, among
which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of the
Company. The ratings are not intended to reflect the investment experience or
financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts. Furthermore, the
Company may occasionally
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include in advertisements comparisons of currently taxable and tax deferred
investment programs, based on selected tax brackets, or discussions of
alternative investment vehicles and general economic conditions.
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the Sub-Accounts
standardized "average annual total return," calculated in a manner prescribed by
the SEC, and nonstandardized "total return." "Average annual total return"
illustrates the percentage rate of return of a hypothetical initial investment
of $1,000 for the most recent one, five and ten year periods, or for a period
covering the time the Underlying Mutual Fund option has been available in the
Variable Account if the Underlying Mutual Fund option has not been available for
the prescribed periods. THIS CALCULATION REFLECTS THE DEDUCTION OF ALL
APPLICABLE CHARGES MADE TO THE CONTRACTS EXCEPT FOR PREMIUM TAXES, WHICH MAY BE
IMPOSED BY CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $25,000 for the most recent one, five and ten
year periods, or for a period covering the time the Underlying Mutual Fund
option has been in existence. For those Underlying Mutual Fund options which
have not been held as Sub-Accounts for one of the prescribed periods, the
nonstandardized total return illustrations will show the investment performance
such Underlying Mutual Fund options would have achieved (reduced by the same
charges) had such Underlying Mutual Fund options been available in the Variable
Account for the periods quoted. AN INITIAL INVESTMENT OF $25,000 IS ASSUMED
BECAUSE THAT AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF A TYPICAL CONTRACT
THAN DOES THE $1,000 ASSUMPTION USED IN CALCULATING THE STANDARDIZED AVERAGE
ANNUAL TOTAL RETURN QUOTATIONS.
The standardized average annual total return and nonstandardized total return
quotations reflected are calculated as described in this section using
Underlying Mutual Fund performance for the period ended December 31, 1997.
However, the Company generally provides performance quotations on a more
frequent basis, the results of which could reflect better or worse results than
shown. The quotations and other comparative material advertised by the Company
are based upon historical earnings and are not intended to represent or
guarantee future results. Contract Value at redemption may be more or less than
the original cost.
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<PAGE> 42
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
NON-STANDARDIZED TOTAL RETURN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
10 Years To
1 Year To 5 Years To 12/31/97 or Date Fund
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 Life of Fund Effective
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century Variable 14.13% 9.66% 9.44% 05-01-91
Portfolios, Inc.- American Century
VP Balanced
- --------------------------------------------------------------------------------------------------------
American Century Variable -4.66% 4.23% 7.12%* 11-20-87
Portfolios, Inc.- American Century
VP Capital Appreciation
- --------------------------------------------------------------------------------------------------------
American Century Variable 16.92% N/A 9.00% 05-01-94
Portfolios, Inc.- American Century
VP International
- --------------------------------------------------------------------------------------------------------
American Century Variable 24.26% N/A 21.40% 05-01-96
Portfolios, Inc.- American Century
VP Value
- --------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 31.03% 17.98% 14.19% 09-29-89
- --------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 26.23% N/A 18.16% 04-05-93
Fund- Capital Appreciation Portfolio
- --------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 14.53% N/A 22.28% 05-02-94
Fund - Growth & Income Portfolio
- --------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible 26.57% N/A 19.77% 10-06-93
Growth Fund, Inc.
- --------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.25% 18.29% 15.01%* 10-09-86
- --------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 21.69% 16.31% 15.51%* 10-09-86
- --------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 15.98% 12.29% 11.19%* 09-19-85
- --------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 9.94% 12.45% 8.04%* 01-28-87
- --------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager 18.90% 11.32% 11.10% 09-06-89
Portfolio
- --------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.34% N/A 26.35% 01-03-95
- --------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 28.09% N/A 25.02% 01-03-95
Opportunities Portfolio
- --------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Fund, N/A N/A N/A 06-16-97
Inc.- Emerging Markets Debt
Portfolio
- --------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation Fund 32.54% 17.26% 15.88% 04-15-92
- --------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 8.08% 5.84% 7.68%* 11-08-82
- --------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 3.73% 3.01% 4.09%* 11-10-81
- --------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Company Fund 15.65% N/A 23.83% 10-23-95
- --------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 27.55% 16.24% 13.97%* 11-08-82
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 27.14% 11.84% 13.23%* 09-10-84
Growth Portfolio
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 5.19% 4.10% 5.52%* 09-10-84
Limited Maturity Bond Portfolio
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 29.35% N/A 22.41% 03-22-94
Partners Portfolio
- --------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 43
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
NON-STANDARDIZED TOTAL RETURN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
10 Years To
1 Year To 5 Years To 12/31/97 or Date Fund
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 Life of Fund Effective
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds- 7.67% 6.66% 7.92%* 04-30-85
Oppenheimer Bond Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 20.65% 17.10% 10.65% 11-12-90
Oppenheimer Global Securities Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 24.87% 16.91% 15.00%* 04-30-85
Oppenheimer Growth Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 15.52% 11.68% 11.12%* 02-09-87
Oppenheimer Multiple Strategies Fund
- --------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 23.64% 17.60% 18.34% 05-08-92
- --------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 9.77% 10.27% 10.51% 05-08-92
Inc.- Discovery Fund II, Inc.
- --------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, -14.77% N/A -2.37% 10-20-95
Inc.- International Stock II
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- 0.90% 4.01% 4.62% 09-01-89
Worldwide Bond Fund
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- -12.89% N/A 3.80% 12-27-95
Worldwide Emerging Markets Fund
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- -3.17% 13.45% 5.45% 09-01-89
Worldwide Hard Assets Fund
- --------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life 19.71% N/A 25.64% 07-03-95
Investment Trust- Morgan Stanley
Real Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-International -3.67% N/A 4.02% 06-30-95
Equity Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 11.69% N/A 6.98% 09-30-96
Post-Venture Capital Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Small Company 13.97% N/A 20.31% 06-30-95
Growth Portfolio
- --------------------------------------------------------------------------------------------------------
* Represents 10 years to 12/31/97.
</TABLE>
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<PAGE> 44
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
10 Years or Date
1 Year To 5 Years To Fund Available in Date Fund Added to
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 Variable Account Variable Account
To 12/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable 14.13% N/A 11.93% 02-01-96
Portfolios, Inc.- American
Century VP Balanced
- ----------------------------------------------------------------------------------------------------------
American Century Variable -4.66% N/A -5.72% 02-01-96
Portfolios, Inc.- American
Century VP Capital
Appreciation
- ----------------------------------------------------------------------------------------------------------
American Century Variable 16.92% N/A 14.82% 02-01-96
Portfolios, Inc.- American
Century VP International
- ----------------------------------------------------------------------------------------------------------
American Century Variable 24.26% N/A 25.42% 12-23-96
Portfolios, Inc.- American
Century VP Value
- ----------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 31.03% N/A 24.71% 02-01-96
- ----------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment N/A N/A 4.01% 07-14-97
Fund- Capital Appreciation
Portfolio
- ----------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 14.53% N/A 14.05% 12-23-96
Fund - Growth & Income
Portfolio
- ----------------------------------------------------------------------------------------------------------
The Dreyfus Socially 26.57% N/A 21.13% 02-01-96
Responsible Growth Fund, Inc.
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 26.25% N/A 18.49% 02-01-96
Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 21.69% N/A 16.78% 02-01-96
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 15.96% N/A 13.40% 02-01-96
Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 9.94% N/A 10.00% 02-01-96
Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager 18.90% N/A 15.22% 02-01-96
Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 22.34% N/A 21.24% 02-01-96
Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth N/A N/A 20.92% 07-14-97
Opportunities Portfolio
- ----------------------------------------------------------------------------------------------------------
Morgan Stanley Universal N/A N/A -4.17% 07-14-97
Fund, Inc.- Emerging Markets
Debt Portfolio
- ----------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation 32.54% N/A 26.88% 02-01-96
Fund
- ----------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 8.08% N/A 4.95% 02-01-96
- ----------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 3.73% N/A 3.65% 01-31-96
- ----------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 15.65% N/A 19.46% 02-01-96
Company Fund
- ----------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 27.55% N/A 22.94% 02-01-96
- ----------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 27.14% N/A 16.12% 02-01-96
Growth Portfolio
- ----------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 5.19% N/A 3.80% 02-01-96
Limited Maturity Bond
Portfolio
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 45
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
10 Years or Date
Fund Available in
1 Year To 5 Years To Variable Account Date Fund Added to
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 To 12/31/97 Variable Account
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Neuberger & Berman AMT- 29.35% N/A 27.18% 02-01-96
Partners Portfolio
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 7.67% N/A 5.49% 02-01-96
Funds- Oppenheimer Bond Fund
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 20.65% N/A 17.19% 02-01-96
Funds- Oppenheimer Global
Securities Fund
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account N/A N/A 9.65% 07-14-97
Funds- Oppenheimer Growth Fund
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 15.52% N/A 14.03% 02-01-96
Funds- Oppenheimer Multiple
Strategies Fund
- ---------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, 23.46% N/A 19.20% 02-01-96
Inc.
- ---------------------------------------------------------------------------------------------------------
Strong Variable Insurance 9.77% N/A 4.46% 02-01-96
Funds, Inc.- Discovery Fund
II, Inc.
- ---------------------------------------------------------------------------------------------------------
Strong Variable Insurance -14.77% N/A -5.82% 02-01-96
Funds, Inc.- International
Stock II
- ---------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 0.90% N/A 1.46% 02-01-96
Trust- Worldwide Bond Fund
- ---------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance -12.89% N/A -11.97% 12-23-96
Trust- Worldwide Emerging
Markets Fund
- ---------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance -3.17% N/A -0.99% 02-01-96
Trust- Worldwide Hard Assets
Fund
- ---------------------------------------------------------------------------------------------------------
Van Kampen American Capital 19.71% N/A 29.14% 02-01-96
Life Investment Trust- Morgan
Stanley Real Estate
Securities Portfolio
- ---------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- -3.67% N/A 0.35% 02-01-96
International Equity Portfolio
- ---------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 11.69% N/A 13.22% 12-23-96
Post-Venture Capital Portfolio
- ---------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small 13.97% N/A 13.77% 02-01-96
Company Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 46
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the Year 2000.
The problem relates to many existing computer programs using only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company has been evaluating its exposure to the Year
2000 issue through a review of all of its operating systems as well as
dependencies on the systems of others since 1996. The Company expects all
system changes and replacements needed to achieve Year 2000 compliance to be
completed by the end of 1998. Compliance testing will be completed in the first
quarter of 1999. The Company's parent, Nationwide Life Insurance Company
("NLIC"), charges all costs associated with these system changes as the costs
are incurred.
Operating expenses for NLIC in 1997 include approximately $45 million on
technology projects, which includes costs related to Year 2000 and the
development of a new policy administration system for traditional life insurance
products and other system enhancements. NLIC anticipates spending a comparable
amount in 1998 on technology projects, including Year 2000 initiatives. These
expenses do not have an effect on the assets of the Variable Account and are not
charged through to the Contract Owner.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The General Distributor, Nationwide Advisory Services, Inc., is not engaged in
any litigation of any material nature.
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is expected to
have a material adverse effect on the Company.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History..............................................1
Services.....................................................................1
Purchase of Securities Being Offered.........................................1
Underwriters.................................................................2
Calculations of Performance..................................................2
Annuity Payments.............................................................2
Financial Statements.........................................................3
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APPENDIX
OBJECTIVES FOR PARTICIPATING UNDERLYING MUTUAL FUNDS
THE UNDERLYING MUTUAL FUNDS LISTED BELOW ARE DESIGNED PRIMARILY AS INVESTMENT
VEHICLES FOR VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES
ISSUED BY INSURANCE COMPANIES. THERE CAN BE NO ASSURANCE THAT THE
INVESTMENT OBJECTIVES WILL BE ACHIEVED.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
-AMERICAN CENTURY VP BALANCED
Investment Objective: Capital growth and current income. The Fund will
seek to achieve its objective by maintaining approximately 60% of the
assets of the Fund in common stocks (including securities convertible
into common stocks and other equity equivalents) that are considered by
management to have better-than-average prospects for appreciation and
approximately 40% in fixed income securities. A minimum of 25% of the
fixed income portion of the Fund will be invested in fixed income senior
securities. There can be no assurance that the Fund will achieve its
investment objective.
-AMERICAN CENTURY VP CAPITAL APPRECIATION
Investment Objective: Capital growth. The Fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion
of the Fund's investment manager, better than average potential for
appreciation. The Fund tries to stay fully invested in such securities,
regardless of the movement of stock prices generally.
The Fund may invest in cash and cash equivalents temporarily or when it
is unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least
three years continuous operation. There can be no assurance that the Fund
will achieve its investment objective.
-AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the
portfolio to match the risk characteristics of the S&P 500 Stock Index
and then optimizes each portfolio to achieve the desired balance of risk
and return potential. This includes targeting a dividend yield that
exceeds that of the S&P 500. Such a management technique known as
"portfolio optimization" may cause the Fund to be more heavily invested
in some industries than in others. However, the Fund may not invest more
than 25% of its total assets in companies whose principal business
activities are in the same industry.
-AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to
achieve its investment objective by investing primarily in securities of
foreign companies that meet certain fundamental and technical standards
of selection and, in the opinion of the investment manager, have
potential for appreciation. Under normal conditions, the Fund will invest
at least 65% of its assets in common stocks or other equity securities of
issuers from at least three countries outside the United States. While
securities of United States issuers may be included in the portfolio from
time to time, it is the primary intent of the manager to diversify
investments across a broad range of foreign issuers. Although the primary
investment of the Fund will be common stocks (defined to include
depository receipts for common stock and other equity equivalents), the
Fund may also invest in other types of securities consistent with the
Fund's objective. When the manager believes that the total capital growth
potential of other securities equals or exceeds the potential return of
common stocks, the Fund may invest up to 35% of its assets in such other
securities. There can be no assurance that the Fund will achieve its
objectives.
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<PAGE> 48
-AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of
well-established companies with intermediate-to-large market
capitalizations that are believed by management to be undervalued at the
time of purchase. Under normal market conditions, the Fund expects to
invest at least 80% of the value of its total asset in equity securities,
including common and preferred stock, convertible preferred stock and
convertible debt obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as
the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus,
serves as the Fund's index manager. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
Capital Appreciation Portfolio's subadviser and provides day-to-day management
of this Portfolio.
-CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This
Portfolio invests primarily in the common stocks of domestic and foreign
issuers.
-GROWTH & INCOME PORTFOLIO
Investment Objective: To provide long-term capital growth, current income
and growth of income, consistent with reasonable investment risk. The
Portfolio invests in equity securities, debt securities and money market
instruments of domestic and foreign issuers. The proportion of the
Portfolio's assets invested in each type of security will vary from time
to time in accordance with Dreyfus' assessment of economic conditions and
investment opportunities. In purchasing equity securities, Dreyfus will
invest in common stocks, preferred stocks and securities convertible into
common stocks, particularly those which offer opportunities for capital
appreciation and growth of earnings, while paying current dividends. The
Portfolio will generally invest in investment-grade debt obligations,
except that it may invest up to 35% of the value of its net assets in
convertible debt securities rated not lower than Caa by Moody's Investor
Service, Inc. or CCC by Standard & Poor's Ratings Group, Fitch Investors
Service, L.P. or Duff & Phelps Credit Rating Co., or if unrated, deemed
to be of comparable quality by Dreyfus. These securities are considered
to have predominantly speculative characteristics with respect to
capacity to pay interest and repay principal and are considered to be of
poor standing. See "Investment Considerations and Risks-Lower Rated
Securities" in the Portfolio's prospectuses.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation serves as the Fund's investment
adviser. NCM Capital Management Group, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
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<PAGE> 49
Investment Objective: Capital growth through equity investment in
companies that, in the opinion of the Fund's advisers, not only meet
traditional investment standards, but which also show evidence that they
conduct their business in a manner that contributes to the enhancement
of the quality of life in America. Current income is secondary to the
primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and 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 GROWTH PORTFOLIO
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is
also important to point out that this Portfolio makes most sense for you
if you can afford to ride out changes in the stock market, because it
invests primarily in common stocks. FMR can also make temporary
investments in securities such as investment-grade bonds, high-quality
preferred stocks and short-term notes, for defensive purposes when it
believes market conditions warrant.
-VIP HIGH INCOME PORTFOLIO
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are
lower-rated or that are unrated. Lower-rated securities are usually
defined as Ba or lower by Moody's Investor Services, Inc.
("Moody's"); BB or lower by Standard & Poor's and may be deemed to
be of a speculative nature. The Portfolio may also purchase
lower-quality bonds such as those rated Ca3 by Moody's or C- by
Standard & Poor's which provide poor protection for payment of
principal and interest (commonly referred to as "junk bonds"). For a
further discussion of lower-rated securities, please see the "Risks
of Lower-Rated Debt Securities" section of the Portfolio's
prospectus.
-VIP OVERSEAS PORTFOLIO
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
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<PAGE> 50
-VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed income instruments.
-VIP II CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the FMR believes to be undervalued due to an overly
pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The Portfolio primarily invests in common
stock and securities convertible into common stock, but it has the
flexibility to invest in any type of security that may produce capital
appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and its portfolios.
-VIP III GROWTH OPPORTUNITIES PORTFOLIO
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio,
under normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth
potential. Although the Portfolio invests primarily in common stock and
securities convertible into common stock, it has the ability to purchase
other securities, such as preferred stock and bonds, that may produce
capital growth. The Portfolio may invest in foreign securities without
limitation.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
Morgan Stanley Universal Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors. Its Emerging Markets Debt
Portfolio is managed by Morgan Stanley Asset Management, Inc.
-EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the funds listed below, each with its own investment objectives. Shares of
NSAT will be sold primarily to life insurance company separate accounts to fund
the benefits under variable life insurance policies and variable annuity
contracts issued by life insurance companies. The assets of NSAT are managed by
Nationwide Advisory Services, Inc. ("NAS"), a wholly-owned subsidiary of
Nationwide Life Insurance Company.
-CAPITAL APPRECIATION FUND
Investment Objective: Long-term growth by primarily investing in a
diversified portfolio of the common stock of companies which the NAS
determines have a better-than-average potential for sustained capital
growth over the long term.
-GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
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<PAGE> 51
-MONEY MARKET FUND
Investment Objective: As high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing
primarily in money market instruments.
-NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. Under normal market
conditions, at least 75% of the Fund's total assets will be invested in
equity securities of companies with market capitalizations at the time of
purchase of between $200 million and $2.5 billion. The Fund will invest
in equity securities of domestic and foreign issuers characterized as
"value" companies according to criteria established by The Dreyfus
Corporation, the Fund's subadviser.
-NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger & Berman, L.P., Pictet
International Management Limited with Van Eck Associates Corporation,
Strong Capital Management, Inc. and Warburg Pincus Asset Management, Inc.
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers were chosen because they utilize a number of different
investment styles when investing in small company stocks. By utilizing
different investment styles, NAS hopes to increase prospects for
investment return and to reduce market risk and volatility.
-TOTAL RETURN FUND
Investment Objective: Capital growth by investing in common stocks of
companies that NAS believes will have above-average earnings or otherwise
provide investors with above-average potential for capital appreciation.
To maximize this potential, NAS may also utilize from time to time,
securities convertible into common stock, warrants and options to
purchase such stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger and Berman Advisers Management Trust ("N&B AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of N&B AMT are offered in connection with certain variable annuity
contracts and variable life insurance policies issued through life insurance
company separate accounts and are also offered directly to qualified pension and
retirement plans outside of the separate account context.
The Guardian and Partners Portfolios of N&B AMT invest all of their investable
assets in a corresponding series of Advisers Managers Trust managed by Neuberger
& Berman Management Incorporated ("N&B Management"). Each series then invests in
securities in accordance with an investment objective, policies and limitations
identical to those of the Portfolio. This "master/feeder fund" structure is
different from that of many other investment companies which directly acquire
and manage their own portfolios of securities. (For more information regarding
"master/feeder fund" structure, see "Special Information Regarding Organization,
Capitalization and Other Matters" in the underlying mutual fund prospectus.) The
investment advisor for all the portfolios is N&B Management.
-AMT GROWTH PORTFOLIO
Investment Objective: Seeks capital growth through investments in common
stocks of companies that the investment adviser believes will have above
average earnings or otherwise provide investors with above average
potential for capital appreciation. To maximize this potential, the
investment adviser may also utilize, from time to time, securities
convertible into common stocks, warrants and options to purchase such
stocks.
-AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current
income. The Portfolio and its corresponding series seek to achieve these
objectives by investing in common stocks of long-established,
high-quality companies. N&B Management uses a value-oriented investment
approach in selecting
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<PAGE> 52
securities, looking for low price-to-earnings ratios, strong balance
sheets, solid management, and consistent earnings.
-AMT LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide high level of current income, consistent
with low risk to principal and liquidity. As a secondary objective, it
also seeks to enhance its total return through capital appreciation when
market factors, such as falling interest rates and rising bond prices,
indicate that capital appreciation may be available without significant
risk to principal. It seeks to achieve its objectives through investments
in a diversified portfolio of limited maturity debt securities.
-AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth by investing primarily in the common
stock of established companies. Its investment program seeks securities
believed to be undervalued based on fundamentals such as low
price-to-earnings ratios, consistent cash flows, and the company's track
record through all parts of the market cycle.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. OppenheimerFunds, Inc. is investment
adviser.
-OPPENHEIMER BOND FUND
Investment Objective: Primarily seeks a high level of current income by
investing at least 65% of its total assets in investment grade debt
securities, U.S. government securities and money market instruments.
Investment grade debt securities would include those rated in one of the
four highest ranking categories by any nationally recognized rating
organization or if unrated or split-rated (rated investment grade and
below investment grade by different rating organizations), determined by
OppenheimerFunds, Inc. to be of comparable quality. The Fund may invest
up to 35% of its total assets in debt securities rated less than
investment grade when consistent with the Fund's investment objectives.
The Fund seeks capital growth as a secondary objective when consistent
with its primary objective.
-OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by investing
a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not
an objective. These securities may be considered to be speculative.
-OPPENHEIMER GROWTH FUND
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a
history of earnings and dividends and are issued by seasoned companies
(companies which have an operating history of at least five years
including predecessors). Current income is a secondary consideration in
the selection of the Fund's portfolio securities.
-OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUND II, INC.")
Strong Opportunity Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. Strong Opportunity Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. is the
investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in
a diversified portfolio of equity securities.
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<PAGE> 53
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end management
investment company commonly referred to as a mutual fund. Incorporated in the
State of Wisconsin, the Corporation has been authorized to issue shares of
common stock and series and classes of series of common stock. The International
Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are offered by
the Corporation to insurance company separate accounts for the purpose of
funding variable life insurance policies and variable annuity contracts. Strong
Capital Management, Inc. is the investment advisor to the Funds.
-DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities,
the Fund has the flexibility to invest in any type of security that the
Advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate
to long-term corporate or U.S. government debt securities.
-INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in
the equity securities of issuers located outside the United States.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust ("Van Eck Trust") is an open-end management
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts on January 7, 1987. Shares of Van Eck Trust are
offered only to separate accounts of various insurance companies to fund the
benefits of life insurance policies and variable annuity contracts. The
investment advisor and manager is Van Eck Associates Corporation.
-WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities.
-WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund specifically emphasizes investment in countries that, compared to
the world's major economies, exhibit relatively low gross national
product per capita, as well as the potential for rapid economic growth.
-WORLDWIDE HARD ASSETS FUND
Investment Description: Seeks long-term capital appreciation by
investing, primarily in "Hard Assets Securities." For the Fund's
purpose, "Hard Assets" are real estate, energy, timber, and industrial
and precious metals. Income is a secondary consideration.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Van Kampen American Capital Life Investment Trust is an open-end diversified
management investment company organized as a Delaware business trust. Shares are
offered in separate portfolios which are sold only to insurance companies to
provide funding for variable life insurance policies and variable annuity
contracts. Van Kampen American Capital Asset Management, Inc. serves as the
Portfolio's investment adviser.
-MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally
in a diversified portfolio of securities of companies operating in the
real estate industry ("Real Estate Securities"). Current income is a
secondary consideration. Real Estate Securities include equity
securities, including common stocks and convertible securities, as well
as non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
51
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<PAGE> 54
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Portfolio's total assets will be invested
in Real Estate Securities, primarily equity securities of real estate
investment trusts. The Portfolio may invest up to 25% of its total assets
in securities issued by foreign issuers, some or all of which may also be
Real Estate Securities.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. The Portfolios are managed by Warburg Pincus Asset Management,
Inc. ("Warburg").
-INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing
primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that in the judgment of Warburg have their
principal business activities and interests outside the United States.
The Portfolio will ordinarily invest substantially all of its assets, but
no less than 65% of its total assets, in common stocks, warrants and
securities convertible into or exchangeable for common stocks. The
Portfolio intends to invest principally in the securities of financially
strong companies with opportunities for growth within growing
international economies and markets through increased earning power and
improved utilization or recognition of assets.
-POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy. Under normal
market conditions, the Portfolio will invest at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is one that has received venture capital
financing either: (a) during the early stages of the company's existence
or the early stages of the development of a new product or service; or
(b) as part of a restructuring or recapitalization of the company. The
Portfolio may invest up to 10% of its assets in venture capital and other
investment funds.
-SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: Capital growth by investing in a portfolio of
equity securities of small-sized domestic companies. The Portfolio
ordinarily will invest at least 65% of its total assets in common stocks
or warrants of small-sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the time of
purchase) that represent attractive opportunities for capital growth. The
Portfolio intends to invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. The
Portfolio's investments will be made on the basis of their equity
characteristics and securities ratings generally will not be a factor in
the selection process.
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<PAGE> 55
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY THROUGH ITS
NATIONWIDE VA SEPARATE ACCOUNT-B
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, 1998. The
prospectus may be obtained from Nationwide Life and Annuity Insurance Company by
writing P.O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-848-6331,
TDD 1-800-238-3035.
TABLE OF CONTENTS
PAGE
----
General Information and History.........................................1
Services................................................................1
Purchase of Securities Being Offered....................................1
Underwriters............................................................2
Calculations of Performance.............................................2
Annuity Payments........................................................2
Financial Statements....................................................3
GENERAL INFORMATION AND HISTORY
The Nationwide VA Separate Account-B (formerly Financial Horizons VA Separate
Account-2) is a separate investment account of Nationwide Life and Annuity
Insurance Company ("Company") (formerly Financial Horizons Life Insurance
Company). The Company is a member of the Nationwide Insurance Enterprise and all
of the Company's common stock is owned by Nationwide Life Insurance Company
which 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 the common stock is held by Nationwide Mutual Insurance Company
(95.3%) and Nationwide Mutual Fire Insurance Company (4.7%), the ultimate
controlling persons of Nationwide Insurance Enterprise. The Nationwide Insurance
Enterprise is one of America's largest insurance and financial services family
of companies, with combined assets of over $83.2 billion as of December 31,
1997.
SERVICES
The Company, which has responsibility for administration of the Contracts and
the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The Company
will maintain a record of all purchases and redemptions of shares of the
Underlying Mutual Funds. The Company, or subsidiaries of the Company may have
entered into agreements with either the investment adviser or distributor for
several of the Underlying Mutual Funds. The agreements relate to administrative
services furnished by the Company or an affiliate of the Company and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular Underlying Mutual Funds.
These fees in no way affect the net asset value of the Underlying Mutual Funds
or fees paid by the Contract Owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
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").
1
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<PAGE> 56
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43215, an
affiliate of the Company. No underwriting commissions have been paid by the
Company to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT- Money Market Fund, subject to Rule
482 of the Securities Act of 1933, will consist of a seven calendar day
historical yield, carried at least to the nearest hundredth of a percent. The
yield will be calculated by determining the net change, exclusive of capital
changes, in the value of hypothetical pre-existing account having a balance of
one accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from Contract Owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the
base period return by (365/7) or (366/7) in a leap year. At December 31, 1997,
the NSAT- Money Market Fund's seven-day current unit value yield was 3.89% The
NSAT- Money Market Fund's effective yield is computed similarly, but includes
the effect of assumed compounding on an annualized basis of the current unit
value yield quotations of the NSAT- Money Market Fund. At December 31, 1997
the NSAT- Money Market Fund's seven-day effective yield was 3.97%.
The NSAT- Money Market Fund's yield and effective yield will fluctuate daily.
Actual yields will depend on factors such as the type of instruments in the
Fund's portfolio, portfolio quality and average maturity, changes in interest
rates, and the Fund's expenses. Although the NSAT- Money Market Fund determines
its yield on the basis of a seven day period, it may use a different time period
on occasion. The yield quotes may reflect the expense limitation described
"Investment Manager and Other Services" in the NSAT- Money Market Fund's
Statement of Additional Information. There is no assurance that the yields
quoted on any given occasion will remain in effect for any period of time and
there is no guarantee that the Net Asset Values will remain constant. It should
be noted that a Contract Owner's investment in the NSAT- Money Market Fund is
not guaranteed or insured. Yield of other money market funds may not be
comparable if a different base period or another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual total return is found by taking
a hypothetical $1,000 investment in each of the Sub-Accounts' units on the first
day of the period at the offering price, which is the Accumulation Unit Value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
return reflects the deduction of a 1.45% Mortality Risk, Expense Risk and
Administration Charge. No deduction is made for premium taxes which may be
assessed by certain states. Nonstandardized total return may also be advertised,
and is calculated in a manner similar to standardized average annual total
return except the nonstandardized total return is based on a hypothetical
initial investment of $25,000. An assumed initial investment of $25,000 will be
used because that figure more closely approximates the size of a typical
Contract than does the $1,000 figure used in calculating the standardized
average annual total return quotations.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the Underlying Mutual Fund has been available in the Variable Account if
the Underlying Mutual Fund has not been available for one of the prescribed
periods. Nonstandardized average annual total return will based on rolling
calendar quarters and will cover periods of one, five and ten years, or a period
covering the time the Underlying Mutual Fund has been in existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance, is not a
guarantee of future performance. Factors affecting a Sub-Account's performance
include general market conditions, operating expenses and investment management.
A Contract Owner's account when redeemed may be more or less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the Prospectus
2
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<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VA Separate Account-B:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VA Separate Account-B as of December 31,
1997, and the related statements of operations and changes in contract owners'
equity for the year then ended and the period February 1, 1996 (commencement of
operations) through December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide VA Separate
Account-B as of December 31, 1997, and the results of its operations and its
changes in contract owners' equity for the year then ended and the period
February 1, 1996 (commencement of operations) through December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Balanced (ACVPBal)
190,054 shares (cost $1,483,415) ................................................................... $ 1,566,049
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
137,815 shares (cost $1,378,410) ................................................................... 1,334,046
American Century VP - American Century VP International (ACVPInt)
720,696 shares (cost $4,793,362) ................................................................... 4,929,564
American Century VP - American Century VP Value (ACVPValue)
244,181 shares (cost $1,678,657) ................................................................... 1,692,172
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
134,318 shares (cost $3,383,690) ................................................................... 3,353,914
Dreyfus Stock Index Fund (DryStkIx)
628,044 shares (cost $15,638,679) .................................................................. 16,172,142
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
13,552 shares (cost $379,544) ...................................................................... 378,096
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
59,470 shares (cost $1,282,421) .................................................................... 1,235,780
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
1,213,251 shares (cost $25,854,072) ................................................................ 29,457,726
Fidelity VIP - Growth Portfolio (FidVIPGr)
661,176 shares (cost $22,268,498) .................................................................. 24,529,640
Fidelity VIP - High Income Portfolio (FidVIPHI)
1,488,608 shares (cost $19,111,149) ................................................................ 20,215,295
Fidelity VIP - Overseas Portfolio (FidVIPOv)
188,497 shares (cost $3,700,378) ................................................................... 3,619,147
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
269,138 shares (cost $4,456,767) ................................................................... 4,847,174
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
1,078,487 shares (cost $19,699,408) ................................................................ 21,505,026
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
153,498 shares (cost $2,835,058) ................................................................... 2,957,905
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
11,044 shares (cost $115,001) ...................................................................... 106,793
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
216,453 shares (cost $4,346,686) ................................................................... 4,590,962
Nationwide SAT - Government Bond Fund (NSATGvtBd)
344,475 shares (cost $3,916,322) ................................................................... 3,920,125
Nationwide SAT - Money Market Fund (NSATMyMkt)
28,653,938 shares (cost $28,653,938) ............................................................... 28,653,938
Nationwide SAT - Small Company Fund (NSATSmCo)
376,394 shares (cost $5,943,953) ................................................................... 5,965,844
Nationwide SAT - Total Return Fund (NSATTotRe)
350,246 shares (cost $5,372,998) ................................................................... 5,737,027
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
46,594 shares (cost $1,304,323) .................................................................... 1,422,968
Neuberger & Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
457,640 shares (cost $6,318,021) ................................................................... 6,461,880
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
891,315 shares (cost $17,166,190) .................................................................. 18,361,093
Oppenheimer VAF - Bond Fund (OppBdFd)
357,304 shares (cost $4,203,595) ................................................................... 4,255,486
Oppenheimer VAF - Global Securities Fund (OppGlSec)
204,717 shares (cost $3,985,979) ................................................................... 4,374,809
Oppenheimer VAF - Growth Fund (OppGro)
4,389 shares (cost $143,605) ....................................................................... 142,379
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
189,568 shares (cost $3,142,466) ................................................................... 3,224,548
Strong Opportunity Fund II, Inc. (StOpp2)
612,630 shares (cost $12,308,604) .................................................................. 13,294,075
Strong VIF - Strong Discovery Fund II (StDisc2)
91,534 shares (cost $1,137,826) .................................................................... 1,101,152
Strong VIF - Strong International Stock Fund II (StIntStk2)
310,248 shares (cost $3,430,958) ................................................................... 2,891,507
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
175,787 shares (cost $1,887,801) ................................................................... 1,931,899
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
140,263 shares (cost $1,930,299) ................................................................... 1,542,896
(Continued)
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
92,070 shares (cost $1,522,580) .................................................................... 1,447,333
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
469,049 shares (cost $7,348,786) ................................................................... 7,434,426
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
696,811 shares (cost $8,209,358) ................................................................... 7,309,552
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
46,578 shares (cost $521,054) ...................................................................... 515,154
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
527,076 shares (cost $7,768,534) ................................................................... 8,686,217
------------
Total investments ............................................................................... 271,165,739
Accounts receivable ...................................................................................... 396,253
------------
Total assets .................................................................................... 271,561,992
ACCOUNTS PAYABLE ............................................................................................ 16
------------
CONTRACT OWNERS' EQUITY (NOTE 4) ............................................................................ $271,561,976
============
</TABLE>
See accompanying notes to financial statements.
- -----------------------------------------------
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
TOTAL ACVPBal
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................................... $ 3,264,187 599,351 6,748 3,261
Mortality, expense and administration
charges (note 2) ......................................... (2,625,203) (502,691) (14,031) (3,237)
-------------- -------------- -------------- --------------
Net investment activity .................................. 638,984 96,660 (7,283) 24
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ...................... 223,236,625 76,703,639 432,187 178,027
Cost of mutual fund shares sold ............................ (214,504,322) (75,779,842) (400,447) (168,902)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ...................... 8,732,303 923,797 31,740 9,125
Change in unrealized gain (loss) on investments ............ 10,048,773 2,494,576 65,584 17,050
-------------- -------------- -------------- --------------
Net gain (loss) on investments ........................... 18,781,076 3,418,373 97,324 26,175
-------------- -------------- -------------- --------------
Reinvested capital gains ................................... 4,937,879 204,775 28,016 -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 24,357,939 3,719,808 118,057 26,199
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 169,332,709 95,174,558 762,078 501,901
Transfers between funds .................................... - - 262,407 9,439
Redemptions ................................................ (18,867,088) (2,157,551) (99,821) (11,452)
Adjustments to maintain reserves ........................... (2,565) 4,166 (2,476) 4
-------------- -------------- -------------- --------------
Net equity transactions ................................ 150,463,056 93,021,173 922,188 499,892
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ...................... 174,820,995 96,740,981 1,040,245 526,091
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ................ 96,740,981 - 526,091 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ...................... $ 271,561,976 96,740,981 1,566,336 526,091
============== ============== ============== ==============
<CAPTION>
ACVPCapAp ACVPInt
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................................... - - 22,729 3,115
Mortality, expense and administration
charges (note 2) ......................................... (19,639) (7,009) (46,316) (6,649)
------------- -------------- -------------- --------------
Net investment activity .................................. (19,639) (7,009) (23,587) (3,534)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ...................... 1,970,507 985,905 1,572,496 495,206
Cost of mutual fund shares sold ............................ (2,131,768) (979,960) (1,357,421) (476,619)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ...................... (161,261) 5,945 215,075 18,587
Change in unrealized gain (loss) on investments ............ 18,432 (62,797) 78,372 57,830
------------- -------------- -------------- --------------
Net gain (loss) on investments ........................... (142,829) (56,852) 293,447 76,417
------------- -------------- -------------- --------------
Reinvested capital gains ................................... 17,313 129 43,835 1,038
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... (145,155) (63,732) 313,695 73,921
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 604,929 978,621 2,980,677 1,075,760
Transfers between funds .................................... 3,613 319,535 638,549 33,262
Redemptions ................................................ (344,351) (19,242) (167,142) (19,209)
Adjustments to maintain reserves ........................... (179) 22 32 25
-------------- -------------- -------------- --------------
Net equity transactions ................................ 264,012 1,278,936 3,452,116 1,089,838
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ...................... 118,857 1,215,204 3,765,811 1,163,759
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ................ 1,215,204 - 1,163,759 -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ...................... 1,334,061 1,215,204 4,929,570 1,163,759
============= ============== ============== ==============
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
ACVPValue DrySRGro
-------------------------- ------------------------------
1997 1996 1997 1996
---------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 1,292 - 12,102 874
Mortality, expense and administration
charges (note 2) .................................... (14,045) - (25,947) (1,520)
---------- -------------- -------------- --------------
Net investment activity ............................. (12,753) - (13,845) (646)
---------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 2,171,228 - 3,430,773 96,419
Cost of mutual fund shares sold ....................... (2,031,644) - (3,098,404) (88,012)
---------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 139,584 - 332,369 8,407
Change in unrealized gain (loss) on investments ....... 13,515 - (19,478) (10,298)
---------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 153,099 - 312,891 (1,891)
---------- -------------- -------------- --------------
Reinvested capital gains .............................. 2,414 - 94,837 15,508
---------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 142,760 - 393,883 12,971
---------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 1,137,286 - 1,210,701 137,873
Transfers between funds ............................... 437,858 - 1,685,435 302,311
Redemptions ........................................... (25,736) - (387,613) (1,650)
Adjustments to maintain reserves ...................... 13 - 16 6
---------- -------------- -------------- --------------
Net equity transactions ........................... 1,549,421 - 2,508,539 438,540
---------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 1,692,181 - 2,902,422 451,511
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... - - 451,511 -
---------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $1,692,181 - 3,353,933 451,511
========== ============== ============== ==============
<CAPTION>
DryStkIx DryCapAp
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. 167,679 20,443 2,624 -
Mortality, expense and administration
charges (note 2) .................................... (139,726) (11,785) (1,353) -
------------- -------------- -------------- --------------
Net investment activity ............................. 27,953 8,658 1,271 -
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 6,868,998 1,304,525 35,302 -
Cost of mutual fund shares sold ....................... (5,807,826) (1,213,680) (34,746) -
------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 1,061,172 90,845 556 -
Change in unrealized gain (loss) on investments ....... 492,395 41,068 (1,448) -
------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 1,553,567 131,913 (892) -
------------- -------------- -------------- --------------
Reinvested capital gains .............................. 413,260 32,437 220 -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 1,994,780 173,008 599 -
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 9,290,153 2,131,083 188,858 -
Transfers between funds ............................... 2,880,855 877,923 193,079 -
Redemptions ........................................... (947,321) (228,466) (4,447) -
Adjustments to maintain reserves ...................... 273 52 (7) -
------------- -------------- -------------- --------------
Net equity transactions ........................... 11,223,960 2,780,592 377,483 -
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 13,218,740 2,953,600 378,082 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 2,953,600 - - -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 16,172,340 2,953,600 378,082 -
============= ============== ============== ==============
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
DryGrInc FidVIPEI
------------------------- ------------------------------
1997 1996 1997 1996
--------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 6,248 - 204,640 -
Mortality, expense and administration
charges (note 2) .................................... (6,686) - (288,383) (66,476)
--------- -------------- -------------- --------------
Net investment activity ............................. (438) - (83,743) (66,476)
--------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 477,409 - 4,034,511 1,752,115
Cost of mutual fund shares sold ....................... (459,619) - (3,594,772) (1,709,141)
--------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 17,790 - 439,739 42,974
Change in unrealized gain (loss) on investments ....... (46,641) - 2,894,709 708,944
--------- -------------- -------------- --------------
Net gain (loss) on investments ...................... (28,851) - 3,334,448 751,918
--------- -------------- -------------- --------------
Reinvested capital gains .............................. 68,534 - 1,028,884 -
--------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 39,245 - 4,279,589 685,442
--------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 489,118 - 13,782,024 10,013,478
Transfers between funds ............................... 720,972 - 1,770,973 400,487
Redemptions ........................................... (13,558) - (1,367,993) (109,409)
Adjustments to maintain reserves ...................... 5 - 2,091 1,483
--------- -------------- -------------- --------------
Net equity transactions ........................... 1,196,537 - 14,187,095 10,306,039
--------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 1,235,782 - 18,466,684 10,991,481
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... - - 10,991,481 -
--------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $1,235,782 - 29,458,165 10,991,481
========= ============== ============== ==============
<CAPTION>
FidVIPGr FidVIPHI
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. 94,039 - 337,770 -
Mortality, expense and administration
charges (note 2) .................................... (276,160) (44,793) (144,268) (27,497)
------------- -------------- -------------- --------------
Net investment activity ............................. (182,121) (44,793) 193,502 (27,497)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 12,400,367 5,805,415 4,973,688 6,999,024
Cost of mutual fund shares sold ....................... (11,364,418) (5,768,910) (4,894,377) (6,877,491)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 1,035,949 36,505 79,311 121,533
Change in unrealized gain (loss) on investments ....... 2,154,124 107,018 975,597 128,550
------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 3,190,073 143,523 1,054,908 250,083
------------- -------------- -------------- --------------
Reinvested capital gains .............................. 420,937 - 41,747 -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 3,428,889 98,730 1,290,157 222,586
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 6,128,449 5,241,982 12,510,478 3,482,761
Transfers between funds ............................... 3,513,641 7,395,956 1,193,107 2,257,316
Redemptions ........................................... (1,163,627) (114,600) (678,694) (62,395)
Adjustments to maintain reserves ...................... 129 316 (65) 81
------------- -------------- -------------- --------------
Net equity transactions ........................... 8,478,592 12,523,654 13,024,826 5,677,763
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 11,907,481 12,622,384 14,314,983 5,900,349
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 12,622,384 - 5,900,349 -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 24,529,865 12,622,384 20,215,332 5,900,349
============= ============== ============== ==============
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Year Ended DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
FidVIPOv FidVIPAM
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 27,355 - 46,047 -
Mortality, expense and administration
charges (note 2) .................................... (41,098) (8,091) (42,376) (6,798)
-------------- -------------- -------------- --------------
Net investment activity ............................. (13,743) (8,091) 3,671 (6,798)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 3,062,464 289,172 485,808 194,518
Cost of mutual fund shares sold ....................... (2,836,711) (281,039) (441,012) (183,795)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 225,753 8,133 44,796 10,723
Change in unrealized gain (loss) on investments ....... (150,814) 69,582 326,514 63,893
-------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 74,939 77,715 371,310 74,616
-------------- -------------- -------------- --------------
Reinvested capital gains .............................. 108,590 - 115,507 -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 169,786 69,624 490,488 67,818
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 2,013,073 1,281,789 2,679,138 1,150,006
Transfers between funds ............................... 191,729 146,096 755,845 (85,254)
Redemptions ........................................... (195,586) (57,484) (203,214) (8,007)
Adjustments to maintain reserves ...................... 80 49 (46) 43
-------------- -------------- -------------- --------------
Net equity transactions ........................... 2,009,296 1,370,450 3,231,723 1,056,788
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 2,179,082 1,440,074 3,722,211 1,124,606
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 1,440,074 - 1,124,606 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 3,619,156 1,440,074 4,846,817 1,124,606
============== ============== ============== ==============
<CAPTION>
FidVIPCon FidVIPGrOp
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. 79,097 - - -
Mortality, expense and administration
charges (note 2) .................................... (206,479) (33,796) (9,973) -
------------- -------------- -------------- --------------
Net investment activity ............................. (127,382) (33,796) (9,973) -
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 13,315,382 2,379,624 726,030 -
Cost of mutual fund shares sold ....................... (12,210,990) (2,200,887) (716,514) -
------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 1,104,392 178,737 9,516 -
Change in unrealized gain (loss) on investments ....... 1,439,401 366,217 122,846 -
------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 2,543,793 544,954 132,362 -
------------- -------------- -------------- --------------
Reinvested capital gains .............................. 209,041 - - -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 2,625,452 511,158 122,389 -
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 7,590,781 4,699,841 1,745,119 -
Transfers between funds ............................... 4,579,042 2,611,362 1,150,039 -
Redemptions ........................................... (1,044,227) (68,568) (59,495) -
Adjustments to maintain reserves ...................... 167 163 (184) -
------------- -------------- -------------- --------------
Net equity transactions ........................... 11,125,763 7,242,798 2,835,479 -
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 13,751,215 7,753,956 2,957,868 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 7,753,956 - - -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. 21,505,171 7,753,956 2,957,868 -
============= ============== ============== ==============
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Year Ended DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
MSEmMkt NSATCapAp
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 2,855 - 28,299 6,329
Mortality, expense and administration
charges (note 2) .................................... (826) - (36,484) (3,924)
-------------- -------------- -------------- --------------
Net investment activity ............................. 2,029 - (8,185) 2,405
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 163,852 - 2,917,900 880,473
Cost of mutual fund shares sold ....................... (173,412) - (2,600,662) (816,917)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. (9,560) - 317,238 63,556
Change in unrealized gain (loss) on investments ....... (8,208) - 246,705 (2,429)
-------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... (17,768) - 563,943 61,127
-------------- -------------- -------------- --------------
Reinvested capital gains .............................. 1,239 - 97,097 55,159
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ (14,500) - 652,855 118,691
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 10,146 - 2,518,104 303,105
Transfers between funds ............................... 115,222 - 57,514 1,505,852
Redemptions ........................................... (4,078) - (557,273) (8,026)
Adjustments to maintain reserves - - 59 128
-------------- -------------- -------------- --------------
Net equity transactions ........................... 121,290 - 2,018,404 1,801,059
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 106,790 - 2,671,259 1,919,750
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD - - 1,919,750 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 106,790 - 4,591,009 1,919,750
============== ============== ============== ==============
<CAPTION>
NSATGvtBd NSATMyMkt
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. 137,812 48,164 1,083,859 274,717
Mortality, expense and administration
charges (note 2) .................................... (29,398) (9,883) (307,636) (81,209)
------------- -------------- -------------- --------------
Net investment activity ............................. 108,414 38,281 776,223 193,508
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 1,955,059 306,532 98,322,127 40,578,631
Cost of mutual fund shares sold ....................... (1,883,110) (307,285) (98,322,127) (40,578,631)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 71,949 (753) - -
Change in unrealized gain (loss) on investments ....... (11,975) 15,778 - -
------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 59,974 15,025 - -
------------- -------------- -------------- --------------
Reinvested capital gains .............................. - - - -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 168,388 53,306 776,223 193,508
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 1,694,494 1,213,578 57,123,968 35,272,121
Transfers between funds ............................... 1,216,393 43,219 (33,482,476) (25,073,360)
Redemptions ........................................... (465,572) (3,716) (4,787,228) (974,956)
Adjustments to maintain reserves 8 42 (404) 1,284
------------- -------------- -------------- --------------
Net equity transactions ........................... 2,445,323 1,253,123 18,853,860 9,225,089
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 2,613,711 1,306,429 19,630,083 9,418,597
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 1,306,429 - 9,418,597 -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. 3,920,140 1,306,429 29,048,680 9,418,597
============= ============== ============== ==============
(Continued)
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
NATIONWIDE SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
NSATSmCo NSATTotRe
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ - 3,752 51,421 9,424
Mortality, expense and administration
charges (note 2) .................................... (51,451) (8,901) (46,011) (5,767)
-------------- -------------- -------------- --------------
Net investment activity ............................. (51,451) (5,149) 5,410 3,657
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 2,809,142 1,578,449 639,641 507,524
Cost of mutual fund shares sold ....................... (2,497,219) (1,536,205) (521,320) (504,371)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 311,923 42,244 118,321 3,153
Change in unrealized gain (loss) on investments ....... 5,784 16,108 329,844 34,184
-------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 317,707 58,352 448,165 37,337
-------------- -------------- -------------- --------------
Reinvested capital gains .............................. 163,972 7,889 180,642 39,481
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 430,228 61,092 634,217 80,475
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 2,904,246 1,013,194 2,504,724 873,425
Transfers between funds ............................... 1,438,504 416,892 1,827,273 89,756
Redemptions ........................................... (257,483) (40,967) (274,662) 1,776
Adjustments to maintain reserves ...................... (39) 26 82 12
-------------- -------------- -------------- --------------
Net equity transactions ........................... 4,085,228 1,389,145 4,057,417 964,969
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 4,515,456 1,450,237 4,691,634 1,045,444
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 1,450,237 - 1,045,444 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 5,965,693 1,450,237 5,737,078 1,045,444
============== ============== ============== ==============
<CAPTION>
NBAMTGro NBAMTLMat
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. - 1 258,163 16,130
Mortality, expense and administration
charges (note 2) .................................... (20,908) (3,895) (71,942) (24,392)
------------- -------------- -------------- --------------
Net investment activity ............................. (20,908) (3,894) 186,221 (8,262)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 6,321,736 680,363 4,094,715 457,151
Cost of mutual fund shares sold ....................... (6,182,637) (670,336) (4,068,427) (462,260)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 139,099 10,027 26,288 (5,109)
Change in unrealized gain (loss) on investments ....... 103,035 15,609 34,840 109,020
------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 242,134 25,636 61,128 103,911
------------- -------------- -------------- --------------
Reinvested capital gains .............................. 65,376 255 - -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 286,602 21,997 247,349 95,649
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 557,548 412,644 5,079,839 4,232,524
Transfers between funds ............................... 130,489 178,170 (1,711,098) (178,697)
Redemptions ........................................... (161,294) (3,202) (1,222,649) (81,112)
Adjustments to maintain reserves ...................... 15 13 9 76
------------- -------------- -------------- --------------
Net equity transactions ........................... 526,758 587,625 2,146,101 3,972,791
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 813,360 609,622 2,393,450 4,068,440
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 609,622 - 4,068,440 -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. 1,422,982 609,622 6,461,890 4,068,440
============= ============== ============== ==============
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
NBAMTPart OppBdFd
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 20,903 364 197,133 71,205
Mortality, expense and administration
charges (note 2) .................................... (164,270) (18,809) (44,787) (13,291)
-------------- -------------- -------------- --------------
Net investment activity ............................. (143,367) (18,445) 152,346 57,914
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 13,279,727 2,205,480 2,061,340 556,412
Cost of mutual fund shares sold ....................... (11,966,396) (2,032,067) (2,018,985) (551,602)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 1,313,331 173,413 42,355 4,810
Change in unrealized gain (loss) on investments ....... 1,003,571 191,332 48,032 3,859
-------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 2,316,902 364,745 90,387 8,669
-------------- -------------- -------------- --------------
Reinvested capital gains .............................. 321,907 4,547 8,144 120
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 2,495,442 350,847 250,877 66,703
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 5,824,372 2,288,104 1,887,783 1,763,434
Transfers between funds ............................... 5,978,753 2,191,604 493,944 316,722
Redemptions ........................................... (733,276) (34,676) (511,176) (12,838)
Adjustments to maintain reserves ...................... 7 139 (7) 45
-------------- -------------- -------------- --------------
Net equity transactions ........................... 11,069,856 4,445,171 1,870,544 2,067,363
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 13,565,298 4,796,018 2,121,421 2,134,066
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 4,796,018 - 2,134,066 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 18,361,316 4,796,018 4,255,487 2,134,066
============== ============== ============== ==============
<CAPTION>
OppGiSec OppGro
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. 22,759 - - -
Mortality, expense and administration
charges (note 2) .................................... (43,231) (6,119) (429) -
------------- -------------- -------------- --------------
Net investment activity ............................. (20,472) (6,119) (429) -
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 744,294 131,310 84,498 -
Cost of mutual fund shares sold ....................... (568,436) (127,107) (87,993) -
------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 175,858 4,203 (3,495) -
Change in unrealized gain (loss) on investments ....... 309,552 79,279 (1,226) -
------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 485,410 83,482 (4,721) -
------------- -------------- -------------- --------------
Reinvested capital gains .............................. - - - -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 464,938 77,363 (5,150) -
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 2,335,737 1,053,645 83,147 -
Transfers between funds ............................... 519,017 170,668 64,419 -
Redemptions ........................................... (236,334) (10,279) (37) -
Adjustments to maintain reserves ...................... 39 21 7 -
------------- -------------- -------------- --------------
Net equity transactions ........................... 2,618,459 1,214,055 147,536 -
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 3,083,397 1,291,418 142,386 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 1,291,418 - - -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. 4,374,815 1,291,418 142,386 -
============= ============== ============== ==============
(Continued)
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
OppMult StOpp2
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 75,849 8,349 33,272 14,747
Mortality, expense and administration
charges (note 2) .................................... (26,768) (2,185) (130,868) (23,617)
-------------- -------------- -------------- --------------
Net investment activity ............................. 49,081 6,164 (97,596) (8,870)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 1,002,267 192,712 13,162,912 1,921,006
Cost of mutual fund shares sold ....................... (911,071) (181,320) (12,494,689) (1,854,665)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 91,196 11,392 668,223 66,341
Change in unrealized gain (loss) on investments ....... 70,280 11,801 827,058 158,413
-------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 161,476 23,193 1,495,281 224,754
-------------- -------------- -------------- --------------
Reinvested capital gains .............................. 26,880 - 355,754 603
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 237,437 29,357 1,753,439 216,487
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 2,187,072 523,113 3,964,068 2,801,281
Transfers between funds ............................... 413,253 (95,205) 1,274,003 3,997,175
Redemptions ........................................... (60,166) (10,111) (658,713) (53,475)
Adjustments to maintain reserves ...................... (186) (1) (124) 60
-------------- -------------- -------------- --------------
Net equity transactions ........................... 2,539,973 417,796 4,579,234 6,745,041
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 2,777,410 447,153 6,332,673 6,961,528
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 447,153 - 6,961,528 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 3,224,563 447,153 13,294,201 6,961,528
============== ============== ============== ==============
<CAPTION>
StDisc2 StIntStk2
------------------------------- ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ - 39,068 47,896 4,904
Mortality, expense and administration
charges (note 2) .................................... (19,756) (6,753) (43,210) (12,658)
-------------- -------------- -------------- --------------
Net investment activity ............................. (19,756) 32,315 4,686 (7,754)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 4,012,306 1,034,138 1,174,862 227,465
Cost of mutual fund shares sold ....................... (3,727,265) (1,103,038) (1,210,804) (225,623)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 285,041 (68,900) (35,942) 1,842
Change in unrealized gain (loss) on investments ....... (56,510) 19,836 (542,090) 2,640
-------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 228,531 (49,064) (578,032) 4,482
-------------- -------------- -------------- --------------
Reinvested capital gains .............................. - 14,620 69,509 -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 208,775 (2,129) (503,837) (3,272)
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 791,629 943,659 1,870,857 1,586,566
Transfers between funds ............................... (471,966) (112,020) (427,717) 750,557
Redemptions ........................................... (243,741) (13,048) (313,725) (66,919)
Adjustments to maintain reserves ...................... 38 (35) (1,009) 17
-------------- -------------- -------------- --------------
Net equity transactions ........................... 75,960 818,556 1,128,406 2,270,221
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 284,735 816,427 624,569 2,266,949
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 816,427 - 2,266,949 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 1,101,162 816,427 2,891,518 2,266,949
============== ============== ============== ==============
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
VEWrldBd VEWrldEMkt
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 30,017 3,196 3,520 -
Mortality, expense and administration
charges (note 2) .................................... (19,604) (3,479) (15,983) (2)
-------------- -------------- -------------- --------------
Net investment activity ............................. 10,413 (283) (12,463) (2)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 475,287 115,540 2,611,677 -
Cost of mutual fund shares sold ....................... (481,377) (115,011) (2,534,542) -
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. (6,090) 529 77,135 -
Change in unrealized gain (loss) on investments ....... 27,767 16,331 (387,463) 61
-------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... 21,677 16,860 (310,328) 61
-------------- -------------- -------------- --------------
Reinvested capital gains .............................. - - - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 32,090 16,577 (322,791) 59
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 1,130,555 712,819 1,226,712 7,500
Transfers between funds ............................... 48,037 48,432 882,679 -
Redemptions ........................................... (53,183) (3,435) (251,274) -
Adjustments to maintain reserves ...................... 20 7 - (1)
-------------- -------------- -------------- --------------
Net equity transactions ........................... 1,125,429 757,823 1,858,117 7,499
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 1,157,519 774,400 1,535,326 7,558
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 774,400 - 7,558 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 1,931,919 774,400 1,542,884 7,558
============== ============== ============== ==============
<CAPTION>
VEWrldHAs MSRESec
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. 14,354 1,287 189,133 18,236
Mortality, expense and administration
charges (note 2) .................................... (18,473) (4,097) (62,959) (6,352)
------------- -------------- -------------- --------------
Net investment activity ............................. (4,119) (2,810) 126,174 11,884
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ................. 1,170,448 999,109 1,455,763 771,558
Cost of mutual fund shares sold ....................... (1,170,355) (991,569) (1,231,322) (669,540)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ................. 93 7,540 224,441 102,018
Change in unrealized gain (loss) on investments ....... (94,132) 18,885 (95,680) 181,319
------------- -------------- -------------- --------------
Net gain (loss) on investments ...................... (94,039) 26,425 128,761 283,337
------------- -------------- -------------- --------------
Reinvested capital gains .............................. 19,447 1,262 629,933 8,686
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ (78,711) 24,877 884,868 303,907
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 751,547 761,083 4,083,002 1,006,359
Transfers between funds ............................... 106,718 (38,954) 892,778 484,653
Redemptions ........................................... (49,249) (30,095) (186,537) (34,584)
Adjustments to maintain reserves ...................... 2 32 1 25
------------- -------------- -------------- --------------
Net equity transactions ........................... 809,018 692,066 4,789,244 1,456,453
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 730,307 716,943 5,674,112 1,760,360
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 716,943 - 1,760,360 -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. 1,447,250 716,943 7,434,472 1,760,360
============= ============== ============== ==============
(Continued)
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1996
WPIntEq WPPVenCap
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................................... $ 58,498 51,785 74 -
Mortality, expense and administration
charges (note 2) ......................................... (93,063) (24,030) (4,887) (1)
-------------- -------------- -------------- --------------
Net investment activity .................................. (34,565) 27,755 (4,813) (1)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ...................... 998,275 721,268 2,232,029 -
Cost of mutual fund shares sold ............................ (933,450) (718,378) (2,262,483) -
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ...................... 64,825 2,890 (30,454) -
Change in unrealized gain (loss) on investments ............ (915,087) 15,280 (5,984) 83
-------------- -------------- -------------- --------------
Net gain (loss) on investments ........................... (850,262) 18,170 (36,438) 83
-------------- -------------- -------------- --------------
Reinvested capital gains ................................... 404,844 23,041 - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... (479,983) 68,966 (41,251) 82
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 3,807,280 3,837,363 380,854 -
Transfers between funds .................................... 490,876 201,958 181,949 7,300
Redemptions ................................................ (600,892) (15,852) (13,836) -
Adjustments to maintain reserves ........................... (294) 107 23 (3)
-------------- -------------- -------------- --------------
Net equity transactions ................................ 3,696,970 4,023,576 548,990 7,297
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ...................... 3,216,987 4,092,542 507,739 7,379
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ................ 4,092,542 - 7,379 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ...................... $ 7,309,529 4,092,542 515,118 7,379
============== ============== ============== ==============
<CAPTION>
WPSmCoGr
------------------------------
1997 1996
------------- --------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................................... - -
Mortality, expense and administration
charges (note 2) ......................................... (95,779) (25,676)
------------- --------------
Net investment activity .................................. (95,779) (25,676)
------------- --------------
Proceeds from mutual fund shares sold ...................... 5,589,618 2,358,568
Cost of mutual fund shares sold ............................ (5,275,571) (2,385,481)
------------- --------------
Realized gain (loss) on investments ...................... 314,047 (26,913)
Change in unrealized gain (loss) on investments ............ 797,552 120,130
------------- --------------
Net gain (loss) on investments ........................... 1,111,599 93,217
------------- --------------
Reinvested capital gains ................................... - -
------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 1,015,820 67,541
------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .......................................... 3,502,163 3,873,946
Transfers between funds .................................... (15,708) 826,845
Redemptions ................................................ (521,885) (61,554)
Adjustments to maintain reserves ........................... (661) (72)
------------- --------------
Net equity transactions ................................ 2,963,909 4,639,165
------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ...................... 3,979,729 4,706,706
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ................ 4,706,706 -
------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ...................... 8,686,435 4,706,706
============= ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 15
NATIONWIDE VA SEPARATE ACCOUNT-B
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VA Separate Account-B (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
and Annuity Insurance Company (the Company) on March 6, 1991. 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
distribution for the contracts is through the brokerage community;
however, other distributors are utilized.
(b) The Contracts
Only contracts without a sales charge, but with certain other fees are
offered for purchase. See note 2 for a discussion of contract expenses.
Contract owners in either the accumulation or payout phase may invest
in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP) (formerly TCI Portfolios, Inc.);
American Century VP - American Century VP Balanced (ACVPBal)
(formerly TCI Portfolios - TCI Balanced)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp) (formerly TCI Portfolios - TCI Growth)
American Century VP - American Century VP International
(ACVPInt) (formerly TCI Portfolios - TCI International)
American Century VP - American Century VP Value (ACVPValue)
(formerly TCI Portfolios - TCI Value)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
<PAGE> 16
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
Neuberger & Berman AMT - Limited Maturity Bond Portfolio
(NBAMTLMat)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Bond Fund (OppBdFd)
Oppenheimer VAF - Global Securities Fund (OppGlSec)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
Strong Opportunity Fund II, Inc. (StOpp2)
(formerly Strong Special Fund II, Inc.)
Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF);
Strong VIF - Strong Discovery Fund II (StDisc2)
Strong VIF - Strong International Stock Fund II (StIntStk2)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
(formerly Van Eck WIT - Gold and Natural Resources Fund)
Portfolio of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (MSRESec) (formerly Van Kampen American
Capital LIT - Real Estate Securities Fund)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio
(WPPVenCap)
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1997, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2).
The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their
contracts and exclude any purchase payments for fixed dollar benefits,
the latter being included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1997. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(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.
<PAGE> 17
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
period presentation.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments made for
these contracts, nor is any sales charge deducted upon the surrender of the
contract.
The following contract charges are deducted by the Company: 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 0.20%, respectively.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 18
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
-------- --------- -------
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Balanced:
Tax qualified ................................ 43,518 $ 12.407611 $ 539,954 14%
Non-tax qualified ............................ 82,722 12.407611 1,026,382 14%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ................................ 51,907 8.934300 463,753 (5)%
Non-tax qualified ............................ 97,412 8.934300 870,308 (5)%
American Century VP -
American Century VP International:
Tax qualified ................................ 111,405 13.027680 1,451,349 17%
Non-tax qualified ............................ 266,987 13.027680 3,478,221 17%
American Century VP -
American Century VP Value:
Tax qualified ................................ 19,668 12.602262 247,861 24%
Non-tax qualified ............................ 114,608 12.602262 1,444,320 24%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ................................ 105,131 14.432845 1,517,339 27%
Non-tax qualified ............................ 127,251 14.432845 1,836,594 27%
Dreyfus Stock Index Fund:
Tax qualified ................................ 355,678 15.258148 5,426,988 31%
Non-tax qualified ............................ 704,237 15.258148 10,745,352 31%
Dreyfus VIF - Capital Appreciation Portfolio:
Tax qualified ................................ 1,527 10.184856 15,552 2%(a)
Non-tax qualified ............................ 35,595 10.184856 362,530 2%(a)
Dreyfus VIF - Growth and Income Portfolio:
Tax qualified ................................ 43,110 11.437343 493,064 15%
Non-tax qualified ............................ 64,938 11.437343 742,718 15%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ................................ 629,906 13.835418 8,715,013 26%
Non-tax qualified ............................ 1,499,279 13.835418 20,743,152 26%
Fidelity VIP - Growth Portfolio:
Tax qualified ................................ 594,211 13.455923 7,995,657 22%
Non-tax qualified ............................ 1,228,768 13.455923 16,534,208 22%
Fidelity VIP - High Income Portfolio:
Tax qualified ................................ 538,510 12.721046 6,850,410 16%
Non-tax qualified ............................ 1,050,615 12.721046 13,364,922 16%
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................ 125,092 12.000570 1,501,175 10%
Non-tax qualified ............................ 176,490 12.000570 2,117,981 10%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ................................ 95,815 13.114181 1,256,535 19%
Non-tax qualified ............................ 273,771 13.114181 3,590,282 19%
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ................................ 625,349 14.455907 9,039,987 22%
Non-tax qualified ............................ 862,290 14.455907 12,465,184 22%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ................................ 57,285 10.924397 625,804 9%(a)
Non-tax qualified ............................ 213,473 10.924397 2,332,064 9%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ................................ 1,079 9.803540 10,578 (2)%(a)
Non-tax qualified ............................ 9,814 9.803540 96,212 (2)%(a)
Nationwide SAT - Capital Appreciation Fund:
Tax qualified ................................ 122,279 15.772381 1,928,631 33%
Non-tax qualified ............................ 168,800 15.772381 2,662,378 33%
Nationwide SAT - Government Bond Fund:
Tax qualified ................................ 112,607 10.968893 1,235,174 8%
Non-tax qualified ............................ 244,780 10.968893 2,684,966 8%
Nationwide SAT - Money Market Fund:
Tax qualified ................................ 638,508 10.711730 6,839,525 4%
Non-tax qualified ............................ 2,073,349 10.711730 22,209,155 4%
Nationwide SAT - Small Company Fund:
Tax qualified ................................ 140,739 14.053920 1,977,935 16%
Non-tax qualified ............................ 283,747 14.053920 3,987,758 16%
Nationwide SAT - Total Return Fund:
Tax qualified ................................ 157,002 14.846819 2,330,980 28%
Non-tax qualified ............................ 229,416 14.846819 3,406,098 28%
Neuberger & Berman AMT - Growth Portfolio:
Tax qualified ................................ 39,613 13.311087 527,292 27%
Non-tax qualified ............................ 67,289 13.311087 895,690 27%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified ................................ 232,553 10.739513 2,497,506 5%
Non-tax qualified ............................ 369,140 10.739513 3,964,384 5%
Neuberger & Berman AMT Partners Portfolio:
Tax qualified ................................ 551,365 15.843430 8,735,513 29%
Non-tax qualified ............................ 607,558 15.843430 9,625,803 29%
Oppenheimer VAF - Bond Fund:
Tax qualified ................................ 102,577 11.077843 1,136,332 8%
Non-tax qualified ............................ 281,567 11.077843 3,119,155 8%
Oppenheimer VAF - Global Securities Fund:
Tax qualified ................................ 96,027 13.545830 1,300,765 21%
Non-tax qualified ............................ 226,937 13.545830 3,074,050 21%
Oppenheimer VAF - Growth Fund:
Tax qualified ................................ 7,039 10.420499 73,350 4%(a)
Non-tax qualified ............................ 6,625 10.420499 69,036 4%(a)
Oppenheimer VAF - Multiple Strategies Fund:
Tax qualified ................................ 56,867 12.856596 731,116 16%
Non-tax qualified ............................ 193,943 12.856596 2,493,447 16%
(Continued)
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
Strong Opportunity Fund II, Inc.:
Tax qualified ................................ 436,276 13.995266 6,105,799 24%
Non-tax qualified ............................ 513,631 13.995266 7,188,402 24%
Strong VIF - Strong Discovery Fund II:
Tax qualified ................................ 27,509 10.870948 299,049 10%
Non-tax qualified ............................ 73,785 10.870948 802,113 10%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ................................ 88,170 8.916485 786,166 (15)%
Non-tax qualified ............................ 236,119 8.916485 2,105,352 (15)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ................................ 52,244 10.281856 537,165 1%
Non-tax qualified ............................ 135,652 10.281856 1,394,754 1%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ................................ 65,901 8.778805 578,532 (13)%
Non-tax qualified ............................ 109,850 8.778805 964,352 (13)%
Van Eck WIT - Worldwide Hard Assets Fund:
Tax qualified ................................ 36,777 9.817789 361,069 (3)%
Non-tax qualified ............................ 110,634 9.817789 1,086,181 (3)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio:
Tax qualified ................................ 143,467 16.312466 2,340,301 20%
Non-tax qualified ............................ 312,287 16.312466 5,094,171 20%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ................................ 224,358 10.066530 2,258,507 (4)%
Non-tax qualified ............................ 501,764 10.066530 5,051,022 (4)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ................................ 7,811 11.351955 88,670 12%
Non-tax qualified ............................ 37,566 11.351955 426,448 12%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ................................ 182,340 12.800371 2,334,020 14%
Non-tax qualified ............................ 496,268 12.800371 6,352,415 14%
======== ========= -----------
$ 271,561,976
=============
</TABLE>
(a) This investment option was not being utilized for the entire period.
- -------------------------------------------------------------------------
<PAGE> 58
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life and Annuity Insurance Company:
We have audited the accompanying balance sheets of Nationwide Life and Annuity
Insurance Company, a wholly owned subsidiary of Nationwide Life Insurance
Company, as of December 31, 1997 and 1996, and the related statements of income,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nationwide Life and Annuity
Insurance Company as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
December 31, 1997 and 1996
($000's omitted)
<TABLE>
<CAPTION>
Assets 1997 1996
------ ---------- ------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $ 796,919 $ 648,076
Equity securities 14,767 12,254
Mortgage loans on real estate, net 218,852 150,997
Real estate, net 2,824 1,090
Policy loans 215 126
Short-term investments 18,968 492
---------- ----------
1,052,545 813,035
---------- ----------
Cash 5,163 4,296
Accrued investment income 10,778 9,189
Deferred policy acquisition costs 30,087 16,168
Other assets 15,624 37,482
Assets held in Separate Accounts 891,101 486,251
---------- ----------
$2,005,298 $1,366,421
========== ==========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $ 986,191 $ 80,720
Funds withheld under coinsurance agreement with affiliate -- 679,571
Other liabilities 29,426 35,842
Liabilities related to Separate Accounts 891,101 486,251
---------- ----------
1,906,718 1,282,384
---------- ----------
Commitments (notes 6 and 7)
Shareholder's equity:
Common stock, $40 par value. Authorized, issued and outstanding 66,000 shares 2,640 2,640
Additional paid-in capital 52,960 52,960
Retained earnings 35,812 25,209
Unrealized gains on securities available-for-sale, net 7,168 3,228
---------- ----------
98,580 84,037
---------- ----------
$2,005,298 $1,366,421
========== ==========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 3
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
Years ended December 31, 1997, 1996 and 1995
($000's omitted)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 11,244 $ 6,656 $ 4,322
Traditional life insurance premiums 363 246 674
Net investment income 11,577 51,045 49,108
Realized losses on investments (246) (3) (702)
Other income 1,057 -- --
-------- -------- --------
23,995 57,944 53,402
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 3,948 34,711 33,276
Other benefits and claims 433 813 904
Amortization of deferred policy acquisition costs 1,402 7,380 5,508
Other operating expenses 1,860 7,247 6,567
-------- -------- --------
7,643 50,151 46,255
-------- -------- --------
Income before federal income tax expense 16,352 7,793 7,147
Federal income tax expense 5,749 2,707 2,373
-------- -------- --------
Net income $ 10,603 $ 5,086 $ 4,774
======== ======== ========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1997, 1996 and 1995
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Common paid-in Retained available-for- shareholder's
stock capital earnings sale, net equity
----- ------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $2,640 $52,960 $15,349 $(3,703) $ 67,246
Net income -- -- 4,774 -- 4,774
Unrealized gains on securities available-
for-sale, net -- -- -- 8,157 8,157
------ ------- ------- ------- --------
December 31, 1995 2,640 52,960 20,123 4,454 80,177
Net income -- -- 5,086 -- 5,086
Unrealized losses on securities available-
for-sale, net -- -- -- (1,226) (1,226)
------ ------- ------- ------- --------
December 31, 1996 2,640 52,960 25,209 3,228 84,037
Net income -- -- 10,603 -- 10,603
Unrealized gains on securities available-
for-sale, net -- -- -- 3,940 3,940
------ ------- ------- ------- --------
December 31, 1997 $2,640 $52,960 $35,812 $ 7,168 $ 98,580
====== ======= ======= ======= ========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 5
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
($000's omitted)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 10,603 $ 5,086 $ 4,774
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to policyholder account balances 3,948 34,711 33,276
Capitalization of deferred policy acquisition costs (20,099) (19,987) (6,754)
Amortization of deferred policy acquisition costs 1,402 7,380 5,508
Commission and expense allowances under coinsurance
agreement with affiliate -- 26,473 --
Amortization and depreciation 250 1,721 878
Realized losses on invested assets, net 246 3 702
Increase in accrued investment income (1,589) (725) (423)
Decrease (increase) in other assets 21,858 (32,539) 62
Increase (decrease) in policy liabilities and funds withheld
on coinsurance agreement with affiliate 228,898 (7,101) 627
(Decrease) increase in other liabilities (7,488) 23,198 1,427
--------- --------- --------
Net cash provided by operating activities 238,029 38,220 40,077
--------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 95,366 73,966 41,729
Proceeds from sale of securities available-for-sale 30,431 2,480 3,070
Proceeds from maturity of fixed maturity securities held-to-maturity -- -- 11,251
Proceeds from repayments of mortgage loans on real estate 15,199 10,975 8,673
Proceeds from sale of real estate -- -- 655
Proceeds from repayments of policy loans 67 23 50
Cost of securities available-for-sale acquired (267,899) (179,671) (79,140)
Cost of fixed maturity securities held-to maturity acquired -- -- (8,000)
Cost of mortgage loans on real estate acquired (84,736) (57,395) (18,000)
Cost of real estate acquired (13) -- (10)
Policy loans issued (155) (55) (66)
Short-term investments, net (18,476) 4,352 (4,479)
--------- --------- --------
Net cash used in investing activities (230,216) (145,325) (44,267)
--------- --------- --------
Cash flows from financing activities:
Increase in investment product and universal life insurance
product account balances 6,952 200,575 46,247
Decrease in investment product and universal life insurance
product account balances (13,898) (89,174) (42,057)
--------- --------- --------
Net cash (used in) provided by financing activities (6,946) 111,401 4,190
--------- --------- --------
Net increase in cash 867 4,296 --
Cash, beginning of year 4,296 -- --
--------- --------- --------
Cash, end of year $ 5,163 $ 4,296 $
========= ========= ========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
($000's omitted)
(1) Organization and Description of Business
Nationwide Life and Annuity Insurance Company (the Company) is a wholly
owned subsidiary of Nationwide Life Insurance Company (NLIC).
The Company sells primarily fixed and variable rate annuities through
banks and other financial institutions. In addition, the Company sells
universal life insurance and other interest-sensitive life insurance
products and is subject to competition from other financial services
providers throughout the United States. The Company is subject to
regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, which differ from statutory
accounting practices prescribed or permitted by regulatory authorities.
An Annual Statement, filed with the Department of Insurance of the
State of Ohio (the Department), is 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 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 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) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
<PAGE> 7
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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. 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.
(b) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual variable and
fixed annuities. Universal life insurance products include
universal life insurance, variable universal life insurance and
other interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of 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.
(c) 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(a).
(d) Separate Accounts
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. 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
statements of income and cash flows except for the fees the
Company receives.
<PAGE> 8
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(e) 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.
(f) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC). The members of the
consolidated tax return group have a tax sharing agreement 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.
(g) Reinsurance Ceded
Reinsurance revenues ceded and reinsurance recoveries on benefits
and expenses incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(h) Statements of Cash Flows
The Company routinely invests its available cash balances in
highly liquid, short-term investments with affiliated companies.
See note 11. As such, the Company had no cash balance as of
December 31, 1995.
(i) Recently Issued Accounting Pronouncements
Statement of Financial Accounting Standards No. 130 - Reporting
Comprehensive Income was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(j) Reclassification
Certain items in the 1996 and 1995 financial statements have been
reclassified to conform to the 1997 presentation.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 5,923 $ 109 $ (27) $ 6,005
Obligations of states and political subdivisions 267 5 -- 272
Debt securities issued by foreign governments 6,077 57 (1) 6,133
Corporate securities 482,478 10,964 (509) 492,933
Mortgage-backed securities 285,224 6,458 (106) 291,576
-------- -------- --------- --------
Total fixed maturity securities 779,969 17,593 (643) 796,919
Equity securities 11,704 3,063 -- 14,767
-------- -------- --------- --------
$791,673 $ 20,656 $ (643) $811,686
======== ======== ========= ========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 3,695 $ 7 $ (78) $ 3,624
Obligations of states and political subdivisions 269 -- (2) 267
Debt securities issued by foreign governments 6,129 133 (8) 6,254
Corporate securities 393,371 5,916 (1,824) 397,463
Mortgage-backed securities 236,839 4,621 (992) 240,468
-------- -------- --------- --------
Total fixed maturity securities 640,303 10,677 (2,904) 648,076
Equity securities 10,854 1,540 (140) 12,254
-------- -------- --------- --------
$651,157 $ 12,217 $ (3,044) $660,330
======== ======== ========= ========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $ 31,421 $ 31,623
Due after one year through five years 231,670 235,764
Due after five years through ten years 175,633 180,174
Due after ten years 56,021 57,782
-------- --------
494,745 505,343
Mortgage-backed securities 285,224 291,576
-------- --------
$779,969 $796,919
======== ========
</TABLE>
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Gross unrealized gains $20,013 $ 9,173
Adjustment to deferred policy acquisition costs (8,985) (4,207)
Deferred federal income tax (3,860) (1,738)
------- -------
$ 7,168 $ 3,228
======= =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 9,177 $(8,764) $30,647
Equity securities 1,663 249 1,283
Fixed maturity securities held-to-maturity -- -- 3,941
------- ------- -------
$10,840 $(8,515) $35,871
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $30,431, $2,480 and $3,070, respectively. During
1997, gross gains of $825 ($181 and $64 in 1996 and 1995, respectively)
and gross losses of $1,124 (none and $6 in 1996 and 1995, respectively)
were realized on those sales. See note 11.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $2,000 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $600.
As permitted by the Financial Accounting Standards Board's Special
Report, A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities, issued in November
1995, the Company transferred all of its fixed maturity securities
previously classified as held-to-maturity to available-for-sale. As of
December 14, 1995, the date of transfer, the fixed maturity securities
had amortized cost of $77,405, resulting in a gross unrealized gain of
$1,709.
The Company had no investments in mortgage loans on real estate
considered to be impaired as of December 31, 1997. The recorded
investment of mortgage loans on real estate considered to be impaired
as of December 31, 1996 was $955, for which the related valuation
allowance was $184. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $386 ($964 in
1996) and no interest income was recognized on those loans ($16 in
1996), which is equal to interest income recognized using a cash-basis
method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Allowance, beginning of year $ 934 $750
(Reductions) additions charged to operations (53) 184
Direct write-downs charged against the allowance (131) --
----- ----
Allowance, end of year $ 750 $934
===== ====
</TABLE>
<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Real estate is presented at cost less accumulated depreciation of $153
as of December 31, 1997 ($108 as of December 31, 1996) and valuation
allowances of $229 as of December 31, 1997 ($229 as of December 31,
1996).
The Company has no investments which were non-income producing for the
twelve month periods preceding December 31, 1997 and 1996.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $53,491 $40,552 $35,093
Equity securities 375 598 713
Fixed maturity securities held-to-maturity -- -- 4,530
Mortgage loans on real estate 14,862 9,991 9,106
Real estate 318 214 273
Short-term investments 899 507 348
Other 90 57 41
------- ------- -------
Total investment income 70,035 51,919 50,104
Less:
Investment expenses 1,386 874 996
Net investment income ceded (note 11) 57,072 -- --
------- ------- -------
Net investment income $11,577 $51,045 $49,108
======= ======= =======
</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>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $(299) $ 181 $(822)
Mortgage loans on real estate 53 (184) 110
Real estate and other -- -- 10
----- ----- -----
$(246) $ (3) $(702)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $3,383 and $3,403
as of December 31, 1997 and 1996, respectively, were on deposit with
various regulatory agencies as required by law.
(4) Future Policy Benefits
The liability for future policy benefits for investment contracts has
been established based on policy terms, interest rates and various
contract provisions. The average interest rate credited on investment
product policies was approximately 5.1%, 5.6% and 5.6% for the years
ended December 31, 1997, 1996 and 1995, respectively.
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(5) Federal Income Tax
The Company's current federal income tax liability was $806 and $7,914
as of December 31, 1997 and 1996, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 13,168 $ 1,070
Liabilities in Separate Accounts 8,080 5,311
Mortgage loans on real estate and real estate 336 407
Other assets and other liabilities 48 3,836
-------- -------
Total gross deferred tax assets 21,632 10,624
-------- -------
Deferred tax liabilities:
Fixed maturity securities 7,186 3,268
Deferred policy acquisition costs 6,159 2,131
Equity securities 1,072 490
Other 7,892 --
-------- -------
Total gross deferred tax liabilities 22,309 5,889
-------- -------
$ (677) $ 4,735
======== =======
</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. All future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. The
Company has determined that valuation allowances are not necessary as
of December 31, 1997, 1996 and 1995 based on its analysis of future
deductible amounts.
Federal income tax expense for the years ended Decmber 31 was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Currently payable $2,458 $ 9,612 $2,012
Deferred tax expense (benefit) 3,291 (6,905) 361
------ ------- ------
$5,749 $ 2,707 $2,373
====== ======= ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ---------------- ----------------
Amount % Amount % Amount %
------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $5,723 35.0 $2,728 35.0 $2,501 35.0
Tax exempt interest and dividends
received deduction -- (0.0) (175) (2.3) (150) (2.1)
Other, net 26 (0.2) 154 2.0 22 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $5,749 35.2 $2,707 34.7 $2,373 33.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $9,566, $2,335 and $1,314 during the
years ended December 31, 1997, 1996 and 1995, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(6) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
Mortgage loans on real estate: 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 mortgages in default is the estimated fair value of
the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the balance sheets for these instruments approximates
their fair value.
Separate Account assets and liabilities: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Policy reserves on life insurance contracts: 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 value because of the short-term nature of such
commitments. See note 7.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------ -----------------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $796,919 $796,919 $648,076 $648,076
Equity securities 14,767 14,767 12,254 12,254
Mortgage loans on real estate, net 218,852 229,881 150,997 152,496
Policy loans 215 215 126 126
Short-term investments 18,968 18,968 492 492
Cash 5,163 5,163 4,296 4,296
Assets held in Separate Accounts 891,101 891,101 486,251 486,251
Liabilities
Investment contracts 980,263 950,105 75,417 72,262
Policy reserves on life insurance contracts 5,928 6,076 5,303 5,390
Liabilities related to Separate Accounts 891,101 868,056 486,251 471,125
</TABLE>
(7) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, 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 operating throughout the
United States, thus reducing its exposure to any single jurisdiction,
and also by employing underwriting practices which identify and
minimize the adverse impact of this risk.
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties which owe the Company money, will
not pay. The Company minimizes this risk by adhering to a conservative
investment strategy, by maintaining credit and collection policies and
by providing for any amounts deemed uncollectible.
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
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 $61,200 extending into
1998 were outstanding as of December 31, 1997. The Company also had
$4,000 of commitments to purchase fixed maturity securities as of
December 31, 1997.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 29% (31% in 1996) in any geographic area and no more than 3% (5%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997 37% (42% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed apartment
building properties.
(8) Pension Plan
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
of service. The Company funds an allocation of pension costs accrued
for employees of affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $257, $189 and $214,
respectively.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77,303 $ 75,466 $ 64,524
Interest cost on projected benefit obligation 118,556 105,511 95,283
Actual return on plan assets (327,965) (210,583) (249,294)
Net amortization and deferral 196,366 101,795 143,353
--------- --------- ---------
$ 64,260 $ 72,189 $ 53,866
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547,462 $1,338,554
Nonvested 13,531 11,149
---------- ----------
$1,560,993 $1,349,703
========== ==========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033,761 $1,847,828
Plan assets at fair value 2,212,848 1,947,933
---------- ----------
Plan assets in excess of projected benefit obligation 179,087 100,105
Unrecognized prior service cost 34,658 37,870
Unrecognized net gains (330,656) (201,952)
Unrecognized net asset at transition 33,337 37,158
---------- ----------
$ (83,574) $ (26,819)
========== ==========
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau, an affiliate.
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(9) Postretirement Benefits Other Than Pensions
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1997 and 1996 was $891 and $840, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1997, 1996 and 1995 was $94,
$78 and $66, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93,327 $ 92,954
Fully eligible, active plan participants 31,580 23,749
Other active plan participants 112,951 83,986
--------- ---------
Accumulated postretirement benefit obligation 237,858 200,689
Plan assets at fair value 69,165 63,044
--------- ---------
Plan assets less than accumulated postretirement
benefit obligation (168,693) (137,645)
Unrecognized transition obligation of affiliates 1,481 1,654
Unrecognized net gains 1,576 (23,225)
--------- ---------
$(165,636) $(159,216)
========= =========
</TABLE>
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7,077 $ 6,541 $ 6,235
Interest cost on accumulated postretirement
benefit obligation 14,029 13,679 14,151
Actual return on plan assets (3,619) (4,348) (2,657)
Amortization of unrecognized transition
obligation of affiliates 173 173 2,966
Net amortization and deferral (528) 1,830 (1,619)
------- ------- -------
$17,132 $17,875 $19,076
======= ======= =======
</TABLE>
<PAGE> 18
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1997, 1996 and 1995 and the NPPBC for 1997, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $410 and the NPPBC for the year ended December 31, 1997 by $46.
(10) Regulatory Risk-Based Capital and Dividend Restriction
Ohio, the Company'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. The Company exceeds the
minimum risk-based capital requirements.
The statutory capital shares and surplus of the Company as reported to
regulatory authorities as of December 31, 1997, 1996 and 1995 was
$74,820, $71,390 and $54,978, respectively. The statutory net income of
the Company as reported to regulatory authorities for the years ended
December 31, 1997, 1996 and 1995 was $7,446, $670 and $8,023,
respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1997,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $7,482.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(11) Transactions With Affiliates
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $703, $410
and $287, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $2,564, $2,682 and $2,596 in 1997, 1996
and 1995, respectively. The allocations are based on techniques and
procedures in accordance with insurance regulatory guidelines. Measures
used to allocate expenses among companies include individual employee
estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
inter-company agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $4,981 and $2,275 as of December 31, 1997 and 1996,
respectively.
Effective December 31, 1996, the Company entered into an intercompany
reinsurance agreement with NLIC whereby certain inforce and
subsequently issued fixed individual deferred annuity contracts are
ceded on a 100% coinsurance with funds withheld basis. On December 31,
1997, the agreement was amended to a modified coinsurance basis. Under
modified coinsurance agreements, invested assets and liabilities for
future policy benefits are retained by the ceding company and net
investment earnings on the invested assets are paid to the assuming
company. Under terms of the Company's agreement, the investment risk
associated with changes in interest rates is borne by NLIC. Risk of
asset default is retained by the Company, although a fee is paid by
NLIC to the Company for the Company's retention of such risk. The
agreement will remain inforce until all contract obligations are
settled. The ceding of risk does not discharge the original insurer
from its primary obligation to the contractholder. The Company believes
that the terms of the modified coinsurance agreement are consistent in
all material respects with what the Company could have obtained with
unaffiliated parties. Amounts ceded to NLIC in 1997 are included in
NLIC's results of operations for 1997 and include premiums of $300,617,
net investment income of $57,072 and benefits, claims and other
expenses of $343,426.
Under the 100% coinsurance with funds withheld agreement, the Company
recorded a liability equal to the amount due to NLIC as of December 31,
1996 for $679,571, which represents the future policy benefits of the
fixed individual deferred annuity contracts ceded. In consideration for
the initial inforce business reinsured, NLIC paid the Company $26,473
in commission and expense allowances which were applied to the
Company's deferred policy acquisition costs as of December 31, 1996. No
significant gain or loss was recognized as a result of the agreement.
During 1997, the Company sold fixed maturity securities
available-for-sale at fair value of $27,253 to NLIC. The Company
recognized a $693 gain on the transactions.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as 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 $18,968 and $492 as of December 31,
1997 and 1996, respectively, and are included in short-term investments
on the accompanying balance sheets.
Certain annuity products are sold through an affiliated company. Total
commissions paid to the affiliate for the three years ended December
31, 1997 were $8,053, $14,644 and $5,949, respectively.
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(12) Segment Information
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by an affiliated company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses are reported
in the Corporate and Other segment.
The following table summarizes the revenues and income (loss) before
federal income tax expense for the years ended December 31, 1997, 1996
and 1995 and assets as of December 31, 1997, 1996 and 1995, by segment.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 9,950 $ 4,591 $ 2,927
Fixed Annuities 7,752 51,643 50,056
Life Insurance 182 165 185
Corporate and Other 6,111 1,545 234
----------- ----------- ---------
$ 23,995 $ 57,944 $ 53,402
=========== =========== =========
Income (loss) before federal income tax expense:
Variable Annuities $ 7,267 $ 1,094 $ 1,196
Fixed Annuities 3,202 5,156 5,633
Life Insurance (228) (1) (381)
Corporate and Other 6,111 1,544 699
----------- ----------- ---------
$ 16,352 $ 7,793 $ 7,147
=========== =========== =========
Assets:
Variable Annuities $ 925,021 $ 503,111 $ 267,097
Fixed Annuities 989,116 787,682 643,313
Life Insurance 2,228 2,597 2,665
Corporate and Other 88,933 73,031 54,507
----------- ----------- ---------
$ 2,005,298 $ 1,366,421 $ 967,582
=========== =========== =========
</TABLE>
<PAGE> 59
PART C. OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE
(a) Financial Statements:
(1) Financial statements included
in Prospectus
(Part A): 15
(2) Financial statements included
in Part B as required: 57
Nationwide VA Separate Account-B:
Independent Auditors' Report. 57
Statement of Assets, Liabilities and Contract Owners' 58
Equity as of December 31, 1997.
Statements of Operations and Changes in 61
Contract Owners' Equity for the year ended
December 31, 1997 and for the period February 1, 1996
(commencement of operations) through December 31, 1996.
Notes to Financial Statements. 71
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report. 77
Balance Sheets as of December 31, 1997 and 1996. 78
Statements of Income for the 79
years ended December 31, 1997, 1996 and
1995.
Statements of Shareholder's 80
Equity for the years ended December 31,
1997, 1996 and 1995.
Statements of Cash Flows for 81
the years ended December 31, 1997, 1996
and 1995.
Notes to Financial Statements. 82
Schedule I - Summary of Investments - Other
Than Investments in Related Parties 116
Schedule III - Supplementary Insurance Information 117
Schedule IV - Reinsurance 118
Schedule V - Valuation and Qualifying Accounts 119
</TABLE>
97 of 120
<PAGE> 60
<TABLE>
<S> <C> <C>
Item 24. (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 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.
*Filed previously in connection with this registration statement
(SEC File No. 33-86408) on November 14, 1994, and
hereby incorporated by reference.
</TABLE>
98 of 120
<PAGE> 61
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
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
99 of 120
<PAGE> 62
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<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
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
100 of 120
<PAGE> 63
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President
Columbus, OH 43215
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
</TABLE>
101 of 120
<PAGE> 64
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
102 of 120
<PAGE> 65
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
</TABLE>
103 of 120
<PAGE> 66
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring,
or otherwise disposing of shares,
bonds, and other evidences of
indebtedness, securities, and
contracts of other persons,
associations, corporations,
domestic or foreign and to form or
acquire the control of other
corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena
development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware Organized for the purpose of acquiring,
holding, encumbering, transferring,
or otherwise disposing of shares,
bonds, and other evidences of
indebtedness, securities, and
contracts of other persons,
associations, corporations,
domestic or foreign and to form or
acquire the control of other
corporations
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation III Ohio Investment Company
</TABLE>
104 of 120
<PAGE> 67
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
105 of 120
<PAGE> 68
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
Public Employees Benefit Services Delaware Markets and Administers Deferred Compensation
Corporation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
106 of 120
<PAGE> 69
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS
OF ORGANIZATION OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-C Separate Account Policies
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
107 of 120
<PAGE> 70
<TABLE>
<S> <C> <C> <C>
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
108 of 120
<PAGE> 71
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| KEY HEALTH PLAN, INC. | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 1,000 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
| 80% $1,828,478 | |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $1,461,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | AGENCY, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | |
| Cost | | | Cost | | | Cost | | Cost |
| ---- | | | ---- | | | ---- | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | |WSC-100% $10,000 |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | PENSION ASSOCIATES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | OF WAUSAU, INC. |
| | | | | | | CORPORATION | |Common Stock: 1,000 |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | |------------ Shares |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |
| |-------| | |---|Preferred Stock: 11,540 | | |
| | | | | | |--------------- Shares | |Companies Cost |
| | | | | | | | |Agency, Inc. ---- |
| Cost | | | Cost | | | Cost | |(Wisconsin)-100% $10,000 |
| ---- | | | ---- | | | ---- | | |
|WSC-100% $1,000 | | |WSC-100% $1,000 | | |WSC-33-1/3% $6,215,459| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| |
| --------------------------- | ----------------------------
| | WAUSAU | | | PREVEA HEALTH |
| | (BERMUDA) LTD. | | | INSURANCE PLAN, INC. |
| | Common Stock: 120,000 | | |Common Stock: 3,000 Shares|
| | ------------- Shares | | |------------ |
----| | ----| |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| WSC-100% $5,000,000| |WSC-33-1/3% $500,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 10,330 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-18.6% $88,320 | || | | Cost | | Cost |
|Fire-18.6% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-6.8% $100,000 | || | | | | | |
|Fire-6.8% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate |-------- | |------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | | |
- -------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WINCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ | ------| |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | |
- -------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |-------- |----|------------ Shares | ---- |--------|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
| | | | | | | | |
| | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares |------------ | | Common Stock: 100,000 | | | |Common Stock: 1 Share |
| | | | ------------ Shares | ---| |--------|------------ |
| Cost | | | | | | | Cost |
|Casualty-99.9% ---- | | | Cost | | | | ---- |
|Other Capital: $26,714,335 | | | ---- | | | |Neckura-100% DM 51,639 |
|------------- | | | SIC-100% $6,000,000 | | | | |
|Casualty-Ptd. $ 713,576 | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |------------- |------------ Shares |----- ---------|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
| | | | | | |
| | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
- -------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1,500 Shares |
| | |------------ |----------------- |------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
| |------------ Shares | | | Cost |
| | Cost | | | ---- |
| | ---- | | |Casualty-90% $9,000 |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
| -------------------------------- | --------------------------------
| || |
| -------------------------------- | --------------------------------
| | COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| | INSURANCE COMPANY | | | MANAGEMENT |
| | | | | (Inactive) |
| |Surplus Debentures | | | |
| |------------------ | |----| |
| | Cost | | | |
| | ---- | | | |
| |Colonial $500,000 | | |Casualty-100% |
| |Lone Star 150,000 | | | |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | THE BEAK AND |
| | INSURANCE COMPANY | | | WIRE CORPORATION |
| |Common Stock 12,500 | | | |
-----|------------ Shares | | |Common Stock: 750 Shares |
| | | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $1,419,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE/DISPATCH LLC |
| | ENTERPRISE SERVICES, LTD. | | | |
| | | | | |
| |Single Member Limited | | | |
- - - |Liability Company | - - -| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- | |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
Limited Liability Company -- Dotted Line
December 31, 1997
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
(Left Side)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| PROPERTIES, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ - -| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE | | | NATIONWIDE | ||
| PROPERTIES, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: - -| | | ||
| ------ | | |==||
| | | | ||
| | | | ||
| NW Life -97.6% | | | ||
| NW Mutual -2.4% | | COMMON LAW TRUST | ||
--------------------------- --------------------------- ||
||
--------------------------- ||
| NATIONWIDE | ||
| SEPARATE ACCOUNT | ||
| TRUST | ||
| | ||
| |__||
| |
| |
| |
| COMMON LAW TRUST |
---------------------------
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|-----------------------------------------------------------------
--------------------------- |
| NATIONWIDE FINANCIAL | |
| SERVICES, INC. (NFS) | |
| | |
| Common Stock: Control | |
| ------------ ------- | |
| | |
| | |
| Class A Public--100% | |
| Class B NW Corp--100% | |
--------------------------- |
| |
---------------------------------------------------------------------- |
| | | |
--------------------------- --------------------------- --------------------------- | -------------------------
| IRVIN L. SCHWARTZ | | PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | | NATIONWIDE GLOBAL |
| & ASSOCIATES | | SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | | HOLDINGS, INC. |
| | | (PEBSCO) | | (NEA) | | | |
| Common Stock: Control | | Common Stock: 236,494 |==|| | Common Stock: 500 |= || | | Common Stock: 1 Share |
| ------------ ------- | | ------------ Shares | || | ------------ Shares | || |--| ------------ |
| | | | || | | || | | |
| | | | || | | || | | Cost |
| Class A Other -100% | | | || | | || | | ---- |
| Class B NFS -100% | | NFS -100% | || | NFS -100% | || | | NW Corp-100% $7,000,00 |
- ---------------------------- ---------------------------- || ---------------------------- || | --------------------------
--------------------------- || --------------------------- || |
| PEBSCO OF | || | NEA VALUEBUILDER | || | --------------------------
| ALABAMA | || | INVESTOR SERVICES | || | | MRM INVESTMENT, INC. |
| | || | OF ALABAMA, INC. | || | | |
| Common Stock: 100,000 | || | Common Stock: 500 | || | | |
| ------------ Shares |--|| | ------------ Shares |--|| __ | Common Stock: 1 Share |
| | || | | || | ----------- |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | Cost |
| PEBSCO -100% $1,000 | || | NEA -100% $5,000 | || | ---- |
--------------------------- || --------------------------- || | NW Corp.-100% $7,000,000|
|| || --------------------------
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC. | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $500 | || | NEA -100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $1,000 | || | NEA -100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| MONTANA | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF NEVADA, INC. | || | OF OHIO, INC. |
| Common Stock: 500 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $500 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| NEW MEXICO | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF WYOMING, INC. | || | OF OKLAHOMA, INC. |
| Common Stock: 1,000 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $1,000 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || --------------------------
| | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| | || | SERVICES INSURANCE | || | INVESTOR SERVICES |
| PEBSCO OF | || | AGENCY, INC. | || | OF TEXAS, INC. |
| TEXAS, INC. | || | Common Stock: 100 | || | |
| |==|| | ------------ Shares |--||=== | |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA -100% $1,000 | | |
--------------------------- --------------------------- --------------------------
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | HEALTH PLANS, INC. (NHP) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP. -100% $25,683,532 | | | NW CORP. -100% $126,509,480 | | | NW CORP. -100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 200 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NHP Cost |
| | ---- | | ---- | | | ---- |
| | GATES -100% $106,947 | | ELIOW -100% $57,413,193 | | | Inc. -100% $25,149 |
| ----------------------------- ------------------------------ | ------------------------------
| |
| ----------------------------- | ------------------------------
| | GATES, MCDONALD & COMPANY | | | NATIONWIDE |
| | OF NEVADA | | | AGENCY, INC. |
| | | | | |
| | Common Stock: 40 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares |
| | | | |
| | Cost | | Cost |
| | ---- | | NHP ---- |
| | Gates -100% $93,750 | | Inc. -99% $116,077 |
| ----------------------------- ------------------------------
|
| -----------------------------
| | GATESMCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| Gates -100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1997
Page 2
</TABLE>
<PAGE> 77
Item 27. NUMBER OF CONTRACT OWNERS
The number of Contract Owners of Qualified and Non-Qualified
Contracts as of January 31, 1998 was 2,283 and 1,384,
respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by the Company of
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of the Company, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide DC Variable
Account, Nationwide DCVA II, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
Nationwide Variable Account-9, Nationwide VA Separate
Account-A, Nationwide VA Separate Account-B, Nationwide VA
Separate Account-C, Nationwide VL Separate Account-A,
Nationwide VL Separate Account-B, Nationwide VL Separate
Account-C, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, Nationwide VLI Separate Account-4,
NACo Variable Account and the Nationwide Variable Account,
all of which are separate investment accounts of the
Company or its affiliates.
NAS also acts as principal underwriter for Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, Nationwide Asset
Allocation Trust and Nationwide Investing Foundation II, and
Nationwide Investing Foundation III which are open-end
management investment companies.
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
</TABLE>
111 of 120
<PAGE> 78
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Dennis W. Click Secretary
One Nationwide Plaza
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Edwin P. Mc Causland Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
Charles Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
<S> <C> <C> <C> <C>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
112 of 120
<PAGE> 79
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a 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 Code is issued by the
Company through the Registrant in reliance upon, and in compliance
with, a no-action letter issued by the Staff of the Securities and
Exchange Commission to the American Council of Life Insurance
(publicly available November 28, 1988) permitting withdrawal
restrictions to the extent necessary to comply with Section
403(b)(11) of the Code.
The Company represents that the fees and charges deducted under
the Contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred and risks
assumed by the Company.
113 of 120
<PAGE> 80
Offered by
Nationwide Life and Annuity Insurance Company
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide VA Separate Account-B
Deferred Variable Annuity Contract
PROSPECTUS
May 1, 1998
114 of 120
<PAGE> 81
INDEPENDENT AUDITORS' CONSENT AND REPORT
ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of the Nationwide Variable Account-B:
The audits referred to in our report on Nationwide Life and Annuity Insurance
Company (the Company) dated January 30, 1998 included the related financial
statement schedules as of December 31, 1997, and for each of the years in the
three-year period ended December 31, 1997, included in the registration
statement. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth herein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 24, 1998
115 of 120
<PAGE> 82
<PAGE> 1
SCHEDULE I
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
($000's omitted)
As of December 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------- ---------- ---------- ---------
Column A Column B Column C Column D
- -------------------------------------------------------------------------- ---------- ---------- ---------
Amount at
which shown
in the
Type of Investment Cost Market value balance sheet
- -------------------------------------------------------------------------- ---------- ------------ -------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale:
Bonds:
U.S. Government and government agencies and authorities $ 284,851 $291,184 $ 291,184
States, municipalities and political subdivisions 267 272 272
Foreign governments 6,077 6,133 6,133
Public utilities 81,611 83,307 83,307
All other corporate 407,163 416,023 416,023
---------- -------- ----------
Total fixed maturity securities available-for-sale 779,969 796,919 796,919
---------- -------- ----------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 11,704 14,767 14,767
---------- -------- ----------
Total equity securities available-for-sale 11,704 14,767 14,767
---------- -------- ----------
Mortgage loans on real estate, net 219,602 218,852 (1)
Real estate, net:
Investment properties 1,428 1,062 (1)
Acquired in satisfaction of debt 1,779 1,762 (1)
Policy loans 215 215
Short-term investments 18,968 18,968
---------- ----------
Total investments $1,033,665 $1,052,545
========== ==========
</TABLE>
- -------------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 3 to the financial statements.
See accompanying independent auditor's report.
<PAGE> 2
SCHEDULE III
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
SUPPLEMENTARY INSURANCE INFORMATION
($000's omitted)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, Unearned claims and
acquisition claims and premiums benefits payable Premium
Segment costs loss expenses (1) (1) revenue
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
<C> <C> <C> <C>
1997: Variable Annuities $ 34,026 $ -- $ --
Fixed Annuities 4,708 984,408 363
Life Insurance 338 1,783 --
Corporate and Other (8,985) -- --
-------- -------- ----
Total $ 30,087 $986,191 $363
======== ======== ====
1996: Variable Annuities $ 17,335 $ -- $ --
Fixed Annuities 2,691 78,947 246
Life Insurance 349 1,773 --
Corporate and Other (4,207) -- --
-------- -------- ----
Total $ 16,168 $ 80,720 $246
======== ======== ====
1995: Variable Annuities $ 9,966 $ -- $ --
Fixed Annuities 23,913 619,400 674
Life Insurance 360 1,880 --
Corporate and Other (10,834) -- --
-------- -------- ----
Total $ 23,405 $621,280 $674
======== ======== ====
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Other
Net investment Benefits, claims, Amortization operating
income losses and of deferred policy expenses Premiums
Segment (2) settlement expenses acquisition costs (2) written
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
1997: Variable Annuities $ (873) $ 238 $ 1,035 $1,410
Fixed Annuities 5,927 4,023 347 180
Life Insurance 166 120 20 270
Corporate and Other 6,357 -- -- --
-------- ------- ------- ------
Total $ 11,577 $ 4,381 $ 1,402 $1,860
======== ======= ======= ======
1996: Variable Annuities $ (849) $ 238 1,473 $1,786
Fixed Annuities 50,197 35,193 5,888 5,407
Life Insurance 149 93 19 54
Corporate and Other 1,548 -- -- --
-------- ------- ------- ------
Total $ 51,045 $35,524 7,380 $7,247
======== ======= ======= ======
1995: Variable Annuities $ (450) $ 107 739 $ 886
Fixed Annuities 48,454 33,974 5,211 5,238
Life Insurance 169 99 24 443
Corporate and Other 935 -- (466) --
-------- ------- ------- ------
Total $ 49,108 $34,180 5,508 $6,567
======== ======= ======= ======
</TABLE>
(1) Unearned premiums and other policy claims and benefits are included in
Column C amounts.
(2) Allocations of net investment income and certain operating expenses are
based on a number of assumptions and estimates, and reported operating
results would change by segment if different methods were applied.
See accompanying independent auditor's report.
<PAGE> 3
SCHEDULE IV
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
REINSURANCE
($000's omitted)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- -------------------------------- --------------- -------------- ------------- ------------- -------------
Column A Column B Column C Column D Column E Column F
- -------------------------------- --------------- -------------- ------------- ------------- -------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
-------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Life Insurance in force $6,519 $456 $ -- $6,063 0.0%
====== ==== ==== ====== ===
Premiums:
Life insurance $ 363 $ -- $ -- $ 363 0.0%
------ ---- ---- ------ ---
Total $ 363 $ -- $ -- $ 363 0.0%
====== ==== ==== ====== ===
1996:
Life Insurance in force $7,221 $463 $ -- $6,758 0.0%
====== ==== ==== ====== ===
Premiums:
Life insurance $ 246 $ -- $ -- $ 246 0.0%
------ ---- ---- ------ ---
Total $ 246 $ -- $ -- $ 246 0.0%
====== ==== ==== ====== ===
1995:
Life Insurance in force $8,186 $468 $ -- $7,718 0.0%
====== ==== ==== ====== ===
Premiums:
Life insurance $ 674 $ -- $ -- $ 674 0.0%
------ ---- ---- ------ ---
Total $ 674 $ -- $ -- $ 674 0.0%
====== ==== ==== ====== ===
</TABLE>
- --------------
Note: The life insurance caption represents premiums from life-contingent
immediate annuities and excludes deposits on investment products and
universal life insurance products.
See accompanying independent auditor's report.
<PAGE> 4
SCHEDULE V
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
VALUATION AND QUALIFYING ACCOUNTS
($000's omitted)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------ ----------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------ ------------ ----------------------------- ------------- -------------
Balance at Charged to Charged to Balance at
beginning costs and other Deductions end of
Description of period expenses accounts (1) period
- ------------------------------------------------------ ------------ -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Valuation allowances - fixed maturity securities $ -- $ 1,011 $ -- $1,011 $ --
Valuation allowances - mortgage loans on real estate 934 (53) -- 131 750
Valuation allowances - real estate 229 -- -- -- 229
------ ------- ---- ------ ------
Total $1,163 $ 958 $ -- $1,142 $ 979
====== ======= ==== ====== ======
1996:
Valuation allowances - mortgage loans on real estate $ 750 $ 184 $ -- $ -- $ 934
Valuation allowances - real estate 229 -- -- -- 229
------ ------- ---- ------ ------
Total $ 979 $ 184 $ -- $ -- $1,163
====== ======= ==== ====== ======
1995:
Valuation allowances - fixed maturity securities $ -- $ 996 $ -- $ 996 $ --
Valuation allowances - mortgage loans on real estate 860 (110) -- -- 750
Valuation allowances - real estate 472 (243) -- -- 229
------ ------- ---- ------ ------
Total $1,332 $ 643 $ -- $ 996 $ 979
====== ======= ==== ====== ======
</TABLE>
- --------
(1) Amounts represent direct write-downs charged against the valuation
allowance.
See accompanying independent auditor's report.
<PAGE> 83
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NATIONWIDE VA SEPARATE ACCOUNT-B, certifies that it
meets the requirements of Securities Act Rule 485 for effectiveness of this
Registration Statement and has caused this Registration Statement to be signed
on its behalf in the City of Columbus, and State of Ohio, on this 24th day of
April, 1998.
NATIONWIDE VA SEPARATE ACCOUNT-B
---------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
---------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
----------------------------------------------
Joseph P. Rath
Vice President-Product and Market Compliance
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 24th day of
April, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
- -------------------------------------------------
Lewis J. Alphin
A. I. BELL Director
- -------------------------------------------------
A. I. Bell
KEITH W. ECKEL Director
- -------------------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -------------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- -------------------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- ------------------------------------------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ------------------------------------------------- Nationwide Insurance Enterprise and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
C. RAY NOECKER Director
- -------------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- -------------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -------------------------------------------------
Harold W. Weihl
</TABLE>
120 of 120
<PAGE> 1
EXHIBIT NO. 5
VARIABLE ANNUITY APPLICATION
<PAGE> 2
<TABLE>
<CAPTION>
[THE BEST OF AMERICA(R)
AMERICA'S EXCLUSIVE ANNUITY (R) II - GRAPHIC]
THE BEST OF AMERICA(R) AMERICA'S EXCLUSIVE ANNUITY(R) II
APPLICATION/ENROLLMENT CARD
$15,000 MINIMUM INITIAL PAYMENT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PLAN TYPE AN OPTION MUST BE SELECTED DEATH BENEFIT OPTION
IF NO OPTION IS SELECTED, THE DEATH BENEFIT
This contract is established as a: [ ] SEP-IRA WILL BE THE STANDARD 5 YEAR ANNIVERSARY
[ ] NON-QUALIFIED [ ] IRA [ ] STANDARD 5-YEAR ANNIVERSARY
[ ] 403(b) TRANSFER Disclosure form required. [ ] ROTH IRA Custodial Form & [ ] 1-YEAR ANNIVERSARY *
[ ] CRT (Charitable Remainder Trust) Statement of Understanding [ ] 5% INTEREST *
Transmittal form Required Required * Additional charge, please see prospectus
[ ] 401 (a)(Investment Only) Available to annuitants aged less than 85
Disclosure form required & $100,000 minimum
- -------------------------------- ---------------------------------- ---------------------------------------------------------------
CONTRACT OWNER [ ]CONTINGENT OWNER [ ]JOINT OWNER
- --------------------------------
Last Name or Plan Name Last Name Spouse only unless prohibited by law
- ------------------------------------------------ ----------------------------------------------------------------
First Name or Plan Name (continued) MI First Name MI
- ------------------------------------------------ ------- ----------------------------------------------------------- ---
Address Address
---------------------------------------- --------------------------------------------------------
---------------------------------------- --------------------------------------------------------
Sex [ ] M [ ] F Birthdate / / Sex [ ]M [ ]F Birthdate / /
----------------------------------- ------------------------------
MM DD YYYY MM DD YYYY
Soc. Sec. No. or Tax ID Soc. Sec. No. or Tax ID
-------------------------------------- ----------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
ANNUITANT Complete only if different from CONTINGENT ANNUITANT
Last Name primary contract owner. Last Name
- ------------------------------------------------ ----------------------------------------------------------------
First Name or Plan Name (continued) MI First Name MI
- ------------------------------------------------ ------- ----------------------------------------------------------- ---
Address Address
---------------------------------------- --------------------------------------------------------
---------------------------------------- --------------------------------------------------------
Maximum issueage through age 85
Sex [ ] M [ ] F Birthdate / / Sex [ ] M [ ] F Birthdate / /
----------------------------------- ------------------------------
MM DD YYYY MM DD YYYY
Soc. Sec. No. Soc. Sec. No. or Tax ID
-------------------------------------- ----------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
BENEFICIARY BENEFICIARY WILL RECEIVE DEATH BENEFIT UPON DEATH OF ANNUITANT (AND CONTINGENT ANNUITANT, IF NAMED).
Relationship Birthdate
Primary Contingent Print Full Name (Last, First, MI) Allocation to Annuitant Soc. Sec. No. MM/DD/YYYY
[ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
[ ] [ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
[ ] [ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
[ ] [ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
- ---------------------------------------------------- -------------------------------------------------------------------------------
ANNUITY PURCHASE PAYMENTS [ ] PAYMENT ENCLOSED [ ]SALARY REDUCTION [ ] 1035 (requires transfer form)
[ ]TRANSFER [ ] ROLLOVER [ ]OTHER [ ] APPLY FOR TAX YEAR
First Purchase Payment $____________________ ($15,000 MINIMUM INITIAL PAYMENT; $100,000 MINIMUM INITIAL PAYMENT FOR 401(a)
CONTRACTS) submitted. A copy of this application properly signed by the producer will constitute receipt for such amount. If this
application is declined by the Company, there will be no liability on the part of the Company, and any payments submitted with this
application will be refunded. -------------------
- ------------------------------------------------------------------------------------------------------------------------------------
REMARKS
</TABLE>
APO-3277-A Product of Nationwide Life Insurance Co. ID-EXCLUSIVE-AO (04/98)
<PAGE> 3
- ------------------------------------------------------- -----------------------
PURCHASE PAYMENT ALLOCATION WHOLE PERCENTAGES ONLY, MUST TOTAL 100%.
- ---------------------------
A CONTRACT CANNOT BE ISSUED UNLESS THIS SECTION IS COMPLETE.
AMERICAN CENTURY
[ ]__________% VP Income & Growth
[ ]__________% VP International
[ ]__________% VP Value
DREYFUS
[ ]__________% Capital Appreciation Portfolio
[ ]__________% Stock Index Fund
[ ]__________% Socially Responsible Growth Fund
FIDELITY
[ ]__________% Contrafund Portfolio
[ ]__________% Equity-Income Portfolio
[ ]__________% Growth Portfolio
[ ]__________% Growth Opportunities Portfolio
[ ]__________% High Income Portfolio
[ ]__________% Overseas Portfolio
MORGAN STANLEY
[ ]__________% Emerging Markets Debt Port.
[ ]__________% Real Estate Securities Port.
NATIONWIDE(R)
[ ]__________% Capital Appreciation Fund
[ ]__________% Government Bond Fund
[ ]__________% Money Market Fund
[ ]__________% Total Return Fund
NATIONWIDE SUB-ADVISED FUNDS
Fund Name (Subadvisor)
__________% Balanced Fund
(Salomon Brothers)
__________% Equity Income Fund
(Federated)
__________% Global Equity Fund
(JP Morgan)
__________% High Income Bond Fund
(Federated)
__________% Multi Sector Bond Fund
(Salomon Brothers)
__________% Small Cap Value (Dreyfus)
__________% Small Company Fund
(Multi-Manager)
__________% Strategic Growth Fund
(Strong)
__________% Strategic Value Fund
(Strong/Schafer)
__________% Select Advisors Mid Cap
Fund (Three UAM Managers)
NEUBERGER & BERMAN
__________% AMT Guardian Portfolio
__________% AMT Partners Portfolio
__________% AMT Mid-Cap Growth
OPPENHEIMER FUNDS
__________% Capital Appreciation Fund
__________% Growth Fund
__________% Growth & Income Fund
VAN ECK
__________% Worldwide Hard Assets Fund
__________% Worldwide Emerging Markets Fund
WARBURG PINCUS
__________% International Equity Portfolio
__________% Growth & Income Portfolio
__________% Post-Venture Capital Portfolio
MVA/GUAR. TERM OPTION
__________% 3 Year $1,000 minimum for each
__________% 5 Year MVZ/GTO option
__________% 7 Year
__________% 10 Year
- ------------------------------------------------------------------------------
CONTRACT OWNER SIGNATURES
- ------------------------------------------------------
I hereby represent my answers to the above questions to be accurate and complete
and acknowledge that I have received a copy of the current prospectus for this
variable annuity contract.
[ ] Yes [ ] No Do you have any reason to believe the Contract applied for is to
replace existing annuities or insurance? [ ]Please send me a copy
of the Statement of Additional Information to the Prospectus.
STATE IN WHICH APPLICATION WAS SIGNED __________________ DATE__________________
State
CONTRACT OWNER__________________________ JOINT OWNER __________________________
Signature Signature
- -------------------------------------------------------------------------------
PRODUCER INFORMATION
- -------------------------------------------
[ ] Yes [ ] No Do you have any reason to believe the Contract applied for is to
replace existing annuities or insurance?
PRODUCER SIGNATURE________________________________________________
Signature
NAME _____________________________ PRODUCER SSN _______________________
BROKER/DEALER _____________________ PHONE ( ) ______________________
ADDRESS ____________________________
_____________________________
_____________________________
<TABLE>
<CAPTION>
REGULAR MAIL EXPRESS MAIL
----------------------------------- ----------------------------------- --------------------------------------
<S> <C> <C>
Nationwide Life Insurance Co. THE BEST OF AMERICA Nationwide Life Insurance Co.
P.O. Box 182008 Service Center Individual Annuity Products, 1-05-P1
Columbus, Ohio 43218-2008 1-800-321-9332 One Nationwide Plaza
Columbus, Ohio 43215-2220
----------------------------------- ----------------------------------- --------------------------------------
</TABLE>
