<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. 8
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, 1999 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
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
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..................... 21
Item 6. Deductions and Expenses................................................................... 22
Item 7. General Description of Variable Annuity Contracts......................................... 24
Item 8. Annuity Period............................................................................ 29
Item 9. Death Benefit and Distributions........................................................... 31
Item 10. Purchases and Contract Value.............................................................. 25
Item 11. Redemptions............................................................................... 26
Item 12. Taxes..................................................................................... 35
Item 13. Legal Proceedings......................................................................... 42
Item 14. Table of Contents of the Statement of Additional Information.............................. 48
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page................................................................................ 58
Item 16. Table of Contents......................................................................... 58
Item 17. General Information and History........................................................... 58
Item 18. Services.................................................................................. 58
Item 19. Purchase of Securities Being Offered...................................................... 59
Item 20. Underwriters.............................................................................. 59
Item 21. Calculation of Performance Information.................................................... 59
Item 22. Annuity Payments.......................................................................... 60
Item 23. Financial Statements...................................................................... 61
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits......................................................... 104
Item 25. Directors and Officers of the Depositor................................................... 106
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant............ 108
Item 27. Number of Contract Owners................................................................. 118
Item 28. Indemnification........................................................................... 118
Item 29. Principal Underwriter..................................................................... 118
Item 30. Location of Accounts and Records.......................................................... 120
Item 31. Management Services....................................................................... 120
Item 32. Undertakings.............................................................................. 120
</TABLE>
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Modified Single Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life and Annuity Insurance Company
through its Nationwide VA Separate Account - B
The date of this prospectus is May 1, 1999.
================================================================================
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE AVAILABLE UNDER THE CONTRACTS:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
o American Century VP Balanced
o American Century VP Capital Appreciation
o American Century VP Income & Growth
o American Century VP International
o American Century VP Value
DREYFUS
o Dreyfus Stock Index Fund, Inc.
o The Dreyfus Socially Responsible Growth Fund, Inc.
DREYFUS VARIABLE INVESTMENT FUNDS, INC.
o Dreyfus Variable Investment Fund- Capital Appreciation Portfolio
o Dreyfus Variable Investment Fund- Growth & Income Portfolio*
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
o VIP Equity-Income Portfolio
o VIP Growth Portfolio
o VIP High Income Portfolio*
o VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
o VIP II Asset Manager Portfolio
o VIP II Contrafund Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
o VIP III Growth Opportunities Portfolio
MORGAN STANLEY
o Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging Markets
Debt Portfolio
o Van Kampen Life Investment Trust - Morgan Stanley Real Estate
Securities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
o Capital Appreciation Fund
o Government Bond Fund
o Money Market Fund
o Total Return Fund
o Nationwide Small Cap Value Fund
(sub-adviser: The Dreyfus Corporation)
o Nationwide Small Company Fund
(sub-advisers: The Dreyfus Corporation, Neuberger Berman, LLC., Lazard
Asset Management, Strong Capital Management, Inc. and Warburg Pincus
Asset Management, Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
o AMT Growth Portfolio
o AMT Guardian Portfolio
o AMT Limited Maturity Bond Portfolio
o AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
o Oppenheimer Bond Fund/VA
o Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth
Fund)
o Oppenheimer Global Securities Fund/VA
o Oppenheimer Multiple Strategies Fund/VA
STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUNDS II. INC.")
STRONG VARIABLE INSURANCE FUNDS, INC.
o Strong Discovery Fund II, Inc.
o International Stock Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
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WARBURG PINCUS TRUST
o International Equity Portfolio
o Post-Venture Capital Portfolio
o Small Company Growth Portfolio
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
The Statement of Additional Information (dated May 1, 1999) which contains
additional information about the contracts and the variable account, has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The table of contents for the Statement of Additional
Information is on page 46.
For general information or to obtain FREE copies of the:
o Statement of Additional Information;
o prospectus for any underlying mutual fund; or
o required Nationwide forms,
call: 1-800-243-6295
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 182356
COLUMBUS, OHIO 43218-2356
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
Information about this and other Best of America products can be found at:
www.bestofamerica.com
THIS ANNUITY IS NOT:
o A BANK DEPOSIT;
o FEDERALLY INSURED;
o ENDORSED BY A BANK OR GOVERNMENT AGENCY; OR
o AVAILABLE IN EVERY STATE.
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit used to calculate the variable payment annuity
payments.
CONTRACT VALUE- The total of all accumulation units in a contract.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
INDIVIDUAL RETIREMENT ANNUITY- An annuity contract that qualifies for favorable
tax treatment under Section 408(b) of the Internal Revenue Code, but does not
include Roth IRAs.
NATIONWIDE- Nationwide Life and Annuity Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
or Tax Sheltered Annuity.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 of the Internal Revenue Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Internal Revenue Code.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408(k) of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
TAX SHELTERED ANNUITY- An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide VA Separate Account - B, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.......................... 3
SUMMARY OF CONTRACT
EXPENSES...................................... 6
UNDERLYING MUTUAL FUND ANNUAL
EXPENSES...................................... 7
EXAMPLE............................................ 9
SYNOPSIS OF THE CONTRACTS.......................... 12
FINANCIAL STATEMENTS............................... 12
CONDENSED FINANCIAL INFORMATION.................... 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY...... 19
NATIONWIDE ADVISORY SERVICES, INC.................. 19
INVESTING IN THE CONTRACT.......................... 19
The Variable Account and Underlying
Mutual Funds
STANDARD CHARGES AND DEDUCTIONS.................... 20
Mortality and Expense Risk Charges
Administration Charge
Premium Taxes
CONTRACT OWNERSHIP................................. 21
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT.......................... 22
Minimum Initial and Subsequent Purchase
Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE.................................... 24
SURRENDER (REDEMPTION)............................. 24
Surrenders Under a Qualified Contract or
Tax Sheltered Annuity
LOAN PRIVILEGE..................................... 25
Minimum & Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Interest
Loan Repayment
Distributions & Annuity Payments
Transferring the Contract
Grace Period & Loan Default
ASSIGNMENT......................................... 26
CONTRACT OWNER SERVICES............................ 27
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE.......................... 27
ANNUITIZING THE CONTRACT........................... 28
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Assumed Investment Rate
Value of an Annuity Unit
Exchanges among Underlying Mutual Funds
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS..................................... 29
Death of Contract Owner - Non-Qualified
Contracts
Death of Annuitant - Non-Qualified
Contracts
Death of Contract Owner/Annuitant
How the Death Benefit Value is Determined
Death Benefit Payment
REQUIRED DISTRIBUTIONS............................. 31
Required Distributions for Non-Qualified
Contracts
Required Distributions for Qualified Plans
and Tax Sheltered Annuities
Required Distributions for IRAs and SEP
IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS......................... 33
Federal Income Taxes
Qualified Plans IRAs, SEP IRAs, and Tax
Sheltered Annuities
Roth IRAs
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation
Skipping Transfer Taxes
Puerto Rico
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS............................. 39
YEAR 2000 COMPLIANCE ISSUES........................ 39
LEGAL PROCEEDINGS.................................. 40
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY.... 41
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION........................ 46
APPENDIX A: OBJECTIVES FOR UNDERLYING
MUTUAL FUNDS.................................. 47
</TABLE>
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<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless the contract owner
meets an available exception.
VARIABLE ACCOUNT CHARGES(1)
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charges............1.25%
Administration Charge(2)......................0.20%
Total Variable Account Charges...........1.45%
</TABLE>
(1) These expenses are charged on a daily basis at the annual rate noted above.
(2) The administration charge is deducted to reimburse Nationwide for expenses
related to the issuance and maintenance of the contracts.
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<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.-American 0.97% 0.00% 0.00% 0.97%
Century VP Balanced
American Century Variable Portfolios, Inc.-American 1.00% 0.00% 0.00% 1.00%
Century VP Capital Appreciation
American Century Variable Portfolios, Inc.-American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
American Century Variable Portfolios, Inc.-American 1.47% 0.00% 0.00% 1.47%
Century VP International
American Century Variable Portfolios, Inc.-American 1.00% 0.00% 0.00% 1.00%
Century VP Value
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
Dreyfus Variable Investment Fund- Capital Appreciation 0.75% 0.05% 0.00% 0.80%
Portfolio
Dreyfus Variable Investment Fund- Growth & Income 0.75% 0.03% 0.00% 0.78%
Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.05% 0.00% 0.80%
Fidelity VIP Equity-Income Portfolio 0.49% 0.08% 0.00% 0.57%
Fidelity VIP Growth Portfolio 0.59% 0.07% 0.00% 0.66%
Fidelity VIP High Income Portfolio 0.58% 0.12% 0.00% 0.70%
Fidelity VIP Overseas Portfolio 0.74% 0.15% 0.00% 0.89%
Fidelity VIP II Asset Manager Portfolio 0.54% 0.09% 0.00% 0.63%
Fidelity VIP II Contrafund Portfolio 0.59% 0.07% 0.00% 0.66%
Fidelity VIP III Growth Opportunities Portfolio 0.59% 0.11% 0.00% 0.70%
Morgan Stanley Dean Witter Universal Funds, 0.27% 1.25% 0.00% 1.52%
Inc.-Emerging Markets Debt Portfolio
NSAT-Capital Appreciation Fund 0.60% 0.07% 0.00% 0.67%
NSAT-Government Bond Fund 0.50% 0.07% 0.00% 0.57%
NSAT-Money Market Fund 0.40% 0.06% 0.00% 0.46%
NSAT-Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
NSAT - Nationwide Small Company Fund 1.00% 0.07% 0.00% 1.07%
NSAT-Total Return Fund 0.59% 0.06% 0.00% 0.65%
Neuberger Berman AMT- Growth Portfolio 0.83% 0.09% 0.00% 0.92%
Neuberger Berman AMT- Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
Neuberger Berman AMT- Limited Maturity Bond Portfolio 0.65% 0.11% 0.00% 0.76%
Neuberger Berman AMT- Partners Portfolio 0.78% 0.06% 0.00% 0.84%
Oppenheimer VAF - Oppenheimer Bond Fund/VA 0.72% 0.02% 0.00% 0.74%
Oppenheimer VAF - Oppenheimer Global Securities Fund/VA 0.68% 0.06% 0.00% 0.74%
Oppenheimer VAF - Oppenheimer Capital Appreciation 0.72% 0.03% 0.00% 0.75%
Fund/VA (formerly Oppenheimer Growth Fund)
Oppenheimer VAF - Oppenheimer Multiple Strategies 0.72% 0.04% 0.00% 0.76%
Fund/VA
Strong Opportunity Fund II, Inc. 1.00% 0.16% 0.00% 1.16%
Strong Variable Insurance Funds, Inc.- Discovery Fund 1.00% 0.18% 0.00% 1.18%
II, Inc.
</TABLE>
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<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
<S> <C> <C> <C> <C>
Strong Variable Insurance Funds, Inc.-International 1.00% 0.62% 0.00% 1.62%
Stock Fund II
Van Eck Worldwide Insurance Trust- Worldwide Bond Fund 1.00% 0.15% 0.00% 1.15%
Van Eck Worldwide Insurance Trust- Worldwide Emerging 1.00% 0.50% 0.00% 1.50%
Markets Fund
Van Eck Worldwide Insurance Trust- Worldwide Hard 1.00% 0.16% 0.00% 1.16%
Assets Fund
Van Kampen Life Investment Trust- Morgan Stanley Real 1.20% 0.00% 0.00% 1.20%
Estate Securities Portfolio
Warburg Pincus Trust- International Equity Portfolio 1.00% 0.33% 0.00% 1.33%
Warburg Pincus Trust-Post- Venture Capital Portfolio 1.08% 0.32% 0.00% 1.40%
Warburg Pincus Trust- Small Company Growth Portfolio 0.90% 0.24% 0.00% 1.14%
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 0.49% 0.09% 0.00% 0.58%
Fidelity VIP Growth Portfolio 0.59% 0.09% 0.00% 0.68%
Fidelity VIP Overseas Portfolio 0.74% 0.17% 0.00% 0.91%
Fidelity VIP II Asset Manager Portfolio 0.54% 0.10% 0.00% 0.64%
Fidelity VIP II Contrafund Portfolio 0.59% 0.11% 0.00% 0.70%
Fidelity VIP III Growth Opportunities Portfolio 0.59% 0.12% 0.00% 0.71%
Morgan Stanley Dean Witter Universal Funds, Inc. - 0.80% 1.25% 0.00% 2.05%
Emerging Markets Debt Portfolio
NSAT- Nationwide Small Cap Value Fund 0.90% 0.43% 0.00% 1.33%
Van Eck Worldwide Insurance Trust - Worldwide Emerging 1.00% 0.61% 0.00% 1.61%
Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide Hard 1.00% 0.20% 0.00% 1.20%
Assets Fund
</TABLE>
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<PAGE> 11
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under this contract assuming a $1,000 investment, 5% annual return, and
no change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown below.
The example reflects expenses of both the variable account and the underlying
mutual funds. The example reflects the maximum amount of variable account
charges that could be assessed to a contract (1.45%).
Deductions for premium taxes are not reflected but may apply.
The summary of contract expenses and example are to help contract owners
understand the expenses associated with the contract.
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
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 25 78 133 284 25 78 133 284 * 78 133 284
Portfolios, Inc.- American
Century VP Balanced
American Century Variable 26 79 135 287 25 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 94 159 335 31 94 159 335 * 94 159 335
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, Inc. 18 56 96 208 18 56 96 208 * 56 96 208
Dreyfus Variable Investment 24 73 125 266 24 73 125 266 * 73 125 266
Fund- Capital Appreciation
Portfolio
Dreyfus Variable Investment 23 72 123 264 23 72 123 264 * 72 123 264
Fund- Growth & Income
Portfolio
The Dreyfus Socially 24 73 125 266 24 73 125 266 * 73 125 266
Responsible Growth Fund, Inc.
Fidelity VIP Equity-Income 21 65 112 242 21 65 112 242 * 65 112 242
Portfolio
Fidelity VIP Growth Portfolio 22 68 117 251 22 68 117 251 * 68 117 251
Fidelity VIP High Income 23 70 119 256 23 70 119 256 * 70 119 256
Portfolio
Fidelity VIP Overseas 25 76 129 276 25 76 129 276 * 76 129 276
Portfolio
Fidelity VIP II Asset Manager 22 167 116 248 22 67 116 248 * 67 116 248
Portfolio
</TABLE>
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<PAGE> 12
EXAMPLE (CONTINUED)
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP II Contrafund 22 68 117 251 22 68 117 251 * 68 117 251
Portfolio
Fidelity VIP III Growth 23 70 119 256 23 70 119 256 * 70 119 256
Opportunities Portfolio
Morgan Stanley Dean Witter 31 95 162 340 31 95 162 340 * 95 162 340
Universal Funds, Inc.-
Emerging Markets Debt
Portfolio
NSAT- Capital Appreciation 22 69 118 253 22 69 118 253 * 69 118 253
Fund
NSAT- Government Bond Fund 21 65 112 242 21 65 112 242 * 65 112 242
NSAT- Money Market Fund 20 62 106 230 20 62 106 230 * 62 106 230
NSAT- Nationwide Small Cap 26 81 138 292 26 81 138 292 * 81 138 292
Value Fund
NSAT- Nationwide Small 26 81 139 294 26 81 139 294 * 81 139 294
Company Fund
NSAT- Total Return Fund 22 68 117 250 22 68 117 250 * 68 117 250
Neuberger Berman AMT-Growth 25 77 131 279 25 77 131 279 * 77 131 279
Portfolio
Neuberger Berman AMT- 26 79 135 287 26 79 135 287 * 79 135 287
Guardian Portfolio
Neuberger Berman AMT-Limited 23 71 122 262 23 71 122 262 * 71 122 262
Maturity Bond Portfolio
Neuberger Berman AMT- 24 74 127 271 24 71 127 271 * 74 127 271
Partners Portfolio
Oppenheimer VAF - Oppenheimer 23 71 121 260 23 71 121 260 * 71 121 260
Bond Fund/VA
Oppenheimer VAF - Oppenheimer 23 71 121 260 23 71 121 260 * 71 121 260
Global Securities Fund/VA
Oppenheimer VAF - Oppenheimer 23 71 122 261 23 71 122 261 * 71 122 261
Capital Appreciation Fund/VA
(formerly Oppenheimer Growth
Fund)
Oppenheimer VAF - Oppenheimer 23 71 122 262 23 71 122 262 * 71 122 262
Multiple Strategies Fund/VA
Strong Opportunity Fund II, 27 84 143 304 27 84 143 304 * 84 143 304
Inc.
Strong Variable Insurance 28 85 144 306 28 85 144 306 * 85 144 306
Funds, Inc.- Discovery Fund
II, Inc.
Strong Variable Insurance 32 98 167 349 32 98 167 349 * 98 167 349
Funds, Inc. - International
Stock Fund II
Van Eck Worldwide Insurance 27 84 143 303 27 84 143 303 * 84 143 303
Trust - Worldwide Bond Fund
</TABLE>
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<PAGE> 13
EXAMPLE (CONTINUED)
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your
at the end of the applicable contract at the end of the contract
time period applicable time period at the end of the applicable
time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Van Eck Worldwide Insurance 31 95 161 338 31 95 161 338 * 95 161 338
Trust - Worldwide Emerging
Markets Fund
Van Eck Worldwide Insurance 27 84 143 304 27 84 143 304 * 84 143 304
Trust - Worldwide Hard Assets
Fund
Van Kampen Life Investment 28 85 145 308 28 85 145 308 * 85 145 308
Trust - Morgan Stanley Real
Estate Securities Portfolio
Warburg Pincus 29 89 153 321 29 89 152 321 * 89 152 321
Trust-International Equity
Portfolio
Warburg Pincus 30 92 156 328 30 92 156 328 * 92 156 328
Trust-Post-Venture Capital
Portfolio
Warburg Pincus Trust-Small 27 83 142 302 27 83 142 302 * 83 142 302
Company Growth Portfolio
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
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<PAGE> 14
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract owner" will also mean "participant"
unless the plan otherwise permits or requires the contract owner to exercise
contract rights under authority of the plan terms.
The contracts can be categorized as:
o Non-Qualified;
o Individual Retirement Annuities;
o Roth IRAs;
o SEP IRAs;
o Tax Sheltered Annuities; and
o Qualified.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
<S> <C> <C>
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
SEP IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
Qualified $15,000 $1,000
</TABLE>
CHARGES AND EXPENSES
Nationwide does not deduct a sales charge from purchase payments upon deposit
into or withdrawal from the contract.
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 1.25% of the daily net assets of the variable account. Nationwide assesses
these charges in return for bearing certain mortality and administrative risks.
Nationwide deducts an Administration Charge equal to an annual rate of 0.20% of
the daily net assets of the variable account. This charge reimburses Nationwide
for administrative expenses related to issuance and maintenance of the
contracts.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained, without charge, by contacting Nationwide's home
office at the telephone number listed on page 2 of this prospectus.
12
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<PAGE> 15
CONDENSED FINANCIAL INFORMATION
Accumulation unit values for an accumulation unit outstanding throughout the
period.
<TABLE>
<CAPTION>
PERCENT CHANGE NUMBER OF
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT IN ACCUMULATION
VALUE AT END OF VALUE AT END OF ACCUMULATION UNIT UNITS AT END YEAR
PERIOD PERIOD VALUE OF PERIOD
<S> <C> <C> <C> <C> <C>
American Century 12.156329 14.156329 14.09% 88,999 1998
Variable Portfolios, 10.871600 12.407611 14.13% 43,518 1997
Inc.- American Century 10.000000 10.871600 8.72% 13,228 1996
VP Balanced-Q
American Century 12.407611 14.156329 14.09% 192,338 1998
Variable Portfolios, 10.871600 12.407611 14.13% 82,722 1997
Inc.- American Century 10.000000 10.871600 8.72% 35,163 1996
VP Balanced-NQ
American Century 8.934300 8.614847 -3.58% 53,093 1998
Variable Portfolios, 9.371161 8.934300 -4.66% 51,907 1997
Inc.- American Century 10.000000 9.371161 -6.29% 46,612 1996
VP Capital
Appreciation-Q
American Century 8.934300 8.614847 -3.58% 123,997 1998
Variable Portfolios, 9.371161 8.934300 -4.66% 97,412 1997
Inc.- American Century 10.000000 9.371161 -6.29% 83,063 1996
VP Capital
Appreciation- NQ
American Century 10.000000 10.814821 8.15% 48,895 1998(2)
Variable Portfolios,
Inc. - American Century
VP Income & Growth - Q
American Century 10.000000 10.814821 8.15% 180,254 1998(2)
Variable Portfolios,
Inc. - American Century
VP Income & Growth - NQ
American Century 13.027680 15.247438 17.04% 263,771 1998
Variable Portfolios, 11.142834 13.027680 16.92% 111,405 1997
Inc.- American Century 10.000000 11.142834 11.43% 27,097 1996
VP International-Q
American Century 13.027680 15.247438 17.04% 631,540 1998
Variable Portfolios, 11.142834 13.027680 16.92% 266,987 1997
Inc.- American Century 10.000000 11.142834 11.43% 77,343 1996
VP International-NQ
American Century 12.602262 13.017145 3.29% 62,022 1998
Variable Portfolio, Inc. 10.142228 12.602262 24.26% 19,668 1997
Inc.- American Century 10.000000 10.142228 1.42% 0 1996(1)
VP Value-Q
American Century 12.602262 13.017145 3.29% 189,388 1998
Variable Portfolio, Inc. 10.142228 12.602262 24.26% 114,608 1997
Inc.- American Century 10.000000 10.142228 1.42% 0 1996(1)
VP Value-NQ
Dreyfus Stock Index 15.258148 19.279341 26.35% 1,097,971 1998
Fund, Inc.-Q 11.644617 15.258148 31.03% 355,678 1997
10.000000 11.644617 16.45% 64,418 1996
Dreyfus Stock Index 15.258148 19.279341 26.35% 1,707,874 1998
Fund, Inc.-NQ 11.644617 15.258148 31.03% 704,237 1997
10.000000 11.644617 16.45% 189,227 1996
</TABLE>
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<PAGE> 16
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
PERCENT CHANGE NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT IN ACCUMULATION
UNDERLYING MUTUAL FUND VALUE AT END OF VALUE AT END OF ACCUMULATION UNIT UNITS AT END YEAR
PERIOD PERIOD VALUE OF PERIOD
<S> <C> <C> <C> <C> <C>
Dreyfus Variable 10.184856 13.070279 28.33% 129,414 1998
Investment Fund- 10.000000 10.184856 1.85% 1,527 1997(1)
Capital Appreciation
Portfolio-Q
Dreyfus Variable 10.184856 13.070279 28.33% 243,945 1998
Investment Fund- 10.000000 10.184856 1.85% 35,595 1997(1)
Capital Appreciation
Portfolio-NQ
Dreyfus Variable 11.437343 12.603139 10.19% 122,527 1998
Investment Fund 9.986593 11.437343 14.53% 43,110 1997
Growth & Income 10.000000 9.986593 -0.13% 0 1996(1)
Portfolio -Q
Dreyfus Variable 11.437343 12.603139 10.19% 151,537 1998
Investment Fund- 9.986593 11.437343 14.53% 64,938 1997
Growth & Income 10.000000 9.986593 -0.13% 0 1996(1)
Portfolio-NQ
The Dreyfus Socially 14.432845 18.402864 27.51% 131,385 1998
Responsible Growth 11.402663 14.432845 26.57% 105,131 1997
Fund, Inc.-Q 10.000000 11.402663 14.03% 10,096 1996
The Dreyfus Socially 14.432845 18.402864 27.51% 164,801 1998
Responsible Growth 11.402663 14.432845 26.57% 127,251 1997
Fund, Inc.-NQ 10.000000 11.402663 14.03% 29,501 1996
Fidelity VIP Equity- 13.835418 15.220240 10.01% 1,277,079 1998
Income 10.958584 13.835418 26.25% 629,906 1997
Portfolio-Q 10.000000 10.958584 9.59% 320,026 1996
Fidelity VIP Equity- 13.835418 15.220240 10.01% 1,944,054 1998
Income Portfolio-NQ 10.958584 13.835418 26.25% 1,499,279 1997
10.000000 10.958584 9.59% 682,976 1996
Fidelity VIP Growth 13.455923 18.497774 37.47% 670,173 1998
Portfolio-Q 11.057399 13.455923 21.69% 594,211 1997
10.000000 11.057399 10.57% 230,586 1996
Fidelity VIP Growth 13.455923 18.497774 37.47% 1,007,812 1998
Portfolio-NQ 11.057399 13.455923 21.69% 1,228,768 1997
10.000000 11.057399 10.57% 910,947 1996
Fidelity VIP High 12.721046 11.993921 -5.72% 946,162 1998
Income Portfolio-Q 10.970108 12.721046 15.96% 538,510 1997
10.000000 10.970108 9.70% 291,879 1996
Fidelity VIP High 12.721046 11.993921 -5.72% 1,718,358 1998
Income Portfolio-NQ 10.970108 12.721046 15.96% 1,050,615 1997
10.000000 10.970108 9.70% 245,978 1996
Fidelity VIP 12.000570 13.334585 11.12% 148,300 1998
Overseas Portfolio-Q 10.915770 12.000570 9.94% 125,092 1997
10.000000 10.915770 9.16% 36,697 1996
Fidelity VIP 12.000570 13.334585 11.12% 278,110 1998
Overseas Portfolio-NQ 10.915770 12.000570 9.94% 176,490 1997
10.000000 10.915770 9.16% 95,229 1996
Fidelity VIP II 13.114181 14.869310 13.38% 192,670 1998
Asset Manager 11.029343 13.114181 18.90% 95,815 1997
Portfolio-Q 10.000000 11.029343 10.29% 38,401 1996
</TABLE>
14
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<PAGE> 17
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
PERCENT NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT CHANGE IN ACCUMULATION
UNDERLYING MUTUAL FUND VALUE AT END OF VALUE AT END OF ACCUMULATION UNIT UNITS AT END YEAR
PERIOD PERIOD VALUE OF PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP II 13.114181 14.869310 13.38% 454,481 1998
Asset Manager 11.029343 13.114181 18.90% 273,771 1997
Portfolio-NQ 10.000000 11.029343 10.29% 63,564 1996
Fidelity VIP II 14.455907 18.517428 28.10% 770,623 1998
Contrafund Portfolio-Q 11.815914 14.455907 22.34% 625,349 1997
10.000000 11.815914 18.16% 255,409 1996
Fidelity VIP II 14.455907 18.517428 28.10% 1,288,311 1998
Contrafund Portfolio-NQ 11.815914 14.455907 22.34% 862,290 1997
10.000000 11.815914 18.16% 400,821 1996
Fidelity VIP III Growth 10.924397 13.416112 22.81% 292,587 1998
Opportunities Portfolio-Q 10.000000 10.924397 9.24% 57,285 1997(1)
Fidelity VIP III Growth 10.924397 13.416112 22.81% 1,310,788 1998
Opportunities Portfolio- 10.000000 10.924397 9.24% 213,473 1997(1)
NQ
Morgan Stanley Dean 9.803540 6.919419 -29.42% 30,554 1998
Witter Universal Funds, 10.000000 9.803540 -1.96% 1,079 1997(1)
Inc., - Emerging Markets
Debt Portfolio - Q
Morgan Stanley Dean 9.803540 6.919419 -29.42% 18,313 1998
Witter Universal Funds, 10.000000 9.803540 -1.96% 9,814 1997(1)
Inc., Emerging Markets
Debt Portfolio - NQ
NSAT- Capital 15.772381 20.201552 28.08% 622,770 1998
Appreciation Fund-Q 11.889746 15.772381 32.66% 122,279 1997
10.000000 11.889746 19.00% 89,481 1996
NSAT- Capital 15.772381 20.201552 28.08% 843,858 1998
Appreciation Fund-NQ 11.889746 15.772381 32.66% 168,800 1997
10.000000 11.889746 19.00% 71,846 1996
NSAT- Government 10.968839 11.772852 7.33% 463,915 1998
Bond Fund-Q 10.149155 10.968893 8.08% 112,607 1997
10.000000 10.149155 1.49% 30,956 1996
NSAT- Government 10.968893 11.772852 7.33% 816,488 1998
Bond Fund-NQ 10.149155 10.968893 8.08% 244,780 1997
10.000000 10.149155 1.49% 97,767 1996
NSAT- Money Market 10.711730 11.112968 3.75% 1,007,530 1998
Fund-Q* 10.326243 10.711730 3.73% 638,508 1997
10.000000 10.326243 3.26% 283,411 1996
NSAT- Money Market 10.711730 11.112968 3.75% 3,595,023 1998
Fund-NQ* 10.326243 10.711730 3.73% 2,073,349 1997
10.000000 10.326243 3.26% 628,692 1996
NSAT - Nationwide Small 10.000000 8.520115 -14.80% 17,530 1998(2)
Cap Value Fund - Q
NSAT - Nationwide Small 10.000000 8.520115 -14.80% 40,753 1998(2)
Cap Value Fund - NQ
NSAT- Nationwide Small 14.053920 13.989917 -0.46% 207,507 1998
Company Fund-Q 12.152247 14.053920 15.65% 140,739 1997
10.000000 12.152247 21.52% 49,485 1996
</TABLE>
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<PAGE> 18
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
PERCENT CHANGE NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT IN ACCUMULATION
UNDERLYING MUTUAL FUND VALUE AT END OF VALUE AT END OF ACCUMULATION UNIT UNITS AT END YEAR
PERIOD PERIOD VALUE OF PERIOD
<S> <C> <C> <C> <C> <C>
NSAT- Nationwide Small 14.053920 13.989917 -0.46% 419,008 1998
Company Fund-NQ 12.152247 14.053920 15.65% 283,747 1997
10.000000 12.152247 21.52% 69,854 1996
NSAT- Total 14.846819 17.276235 16.36% 285,960 1998
Return Fund-Q 11.639579 14.846819 27.55% 157,002 1997
10.000000 11.639579 16.40% 32,415 1996
NSAT- Total 14.846819 17.276235 16.36% 477,772 1998
Return Fund-NQ 11.639579 14.846819 27.55% 229,416 1997
10.000000 11.639579 16.40% 57,403 1996
Neuberger Berman 13.311087 15.154915 13.85% 54,978 1998
AMT- Growth 10.469935 13.311087 27.14% 39,613 1997
Portfolio-Q 10.000000 10.469935 4.70% 7,597 1996
Neuberger Berman 13.311087 15.154915 13.85% 160,168 1998
AMT- Growth 10.469935 13.311087 27.14% 67,289 1997
Portfolio-NQ 10.000000 10.469935 4.70% 50,629 1996
Neuberger Berman AMT 10.000000 9.272982 -7.27% 20.062 1998(2)
Guardian Portfolio - Q
Neuberger Berman AMT 10.000000 9.272982 -7.27% 54,518 1998(2)
Guardian Portfolio - NQ
Neuberger Berman 10.739513 11.048525 2.88% 250,457 1998
AMT- Limited Maturity 10.209208 10.739513 5.19% 232,553 1997
Bond Portfolio-Q 10.000000 10.209208 2.09% 123,635 1996
Neuberger Berman 10.739513 11.048585 2.88% 555,854 1998
AMT- Limited Maturity 10.209208 10.739513 5.19% 369,140 1997
Bond Portfolio-NQ 10.000000 10.209208 2.09% 274,872 1996
Neuberger Berman 15.843430 16.270918 2.70% 613,192 1998
AMT- Partners 12.248582 15.843430 29.35% 551,365 1997
Portfolio-Q 10.000000 12.248582 22.49% 177,265 1996
Neuberger Berman 15.843430 16.270918 2.70% 898,907 1998
AMT- Partners 12.248582 15.843430 29.35% 607,558 1997
Portfolio-NQ 10.000000 12.248582 22.49% 214,292 1996
Oppenheimer VAF- 11.077843 11.659886 5.25% 212,964 1998
Oppenheimer Bond 10.288722 11.077843 7.67% 102,577 1997
Fund/VA-Q 10.000000 10.288722 2.89% 55,343 1996
Oppenheimer VAF- 11.077843 11.659886 5.25% 706,823 1998
Oppenheimer Bond 10.288722 11.077843 7.67% 281,567 1997
Fund/VA -NQ 10.000000 10.288722 2.89% 152,075 1996
Oppenheimer VAF- 13.545830 15.232440 12.45% 273,864 1998
Oppenheimer Global 11.201956 13.545830 20.92% 96,027 1997
Securities Fund/VA -Q 10.000000 11.201956 12.02% 40,161 1996
Oppenheimer VAF- 13.545830 15.232440 12.45% 378,435 1998
Oppenheimer Global 11.201956 13.545830 20.92% 226,937 1997
Securities Fund/VA -NQ 10.000000 11.201956 12.02% 75,124 1996
Oppenheimer 10.420499 12.734164 22.20% 42,851 1998
VAF-Oppenheimer Capital
Appreciation Fund/VA
(formerly Oppenheimer
Growth Fund) -Q 10.000000 10.420499 4.20% 7,039 1997(1)
Oppenheimer VAF- 10.420499 12.734164 22.20% 67,557 1998
Oppenheimer Capital
Appreciation Fund/VA
(formerly
Oppenheimer Growth 10.000000 10.420499 4.20% 6,625 1997(1)
Fund) -NQ
</TABLE>
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<PAGE> 19
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
PERCENT NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT CHANGE IN ACCUMULATION
UNDERLYING MUTUAL FUND VALUE AT END OF VALUE AT END OF ACCUMULATION UNIT UNITS AT END YEAR
PERIOD PERIOD VALUE OF PERIOD
<S> <C> <C> <C> <C> <C>
Oppenheimer VAF- 12.513276 13.513276 5.11% 92,773 1998
Oppenheimer 11.129020 12.856596 15.52% 56,867 1997
Multiple Strategies 10.000000 11.129020 11.29% 6,127 1996
Fund/VA -Q
Oppenheimer VAF- 12.856596 13.513276 5.11% 273,564 1998
Oppenheimer 11.129020 12.856596 15.52% 193,943 1997
Multiple Strategies 10.000000 11.129020 11.29% 34,052 1996
Fund/VA -NQ
Strong Variable 10.870948 11.491081 5.70% 26,911 1998
Insurance Funds, 9.903046 10.870948 9.77% 27,509 1997
Inc.- Discovery 10.000000 9.903046 -0.97% 27,130 1996
Fund II, Inc.-Q
Strong Variable 10.870948 11.491081 5.70% 72,179 1998
Insurance Funds, 9.903046 10.870948 9.77% 73,785 1997
Inc.- Discovery 10.000000 9.903046 -0.97% 55,312 1996
Fund II, Inc.-NQ
Strong Variable 8.916485 8.367348 -6.16% 45,767 1998
Insurance Funds, 10.462103 8.916485 -14.77% 88,170 1997
Inc.- International 10.000000 10.462103 4.62% 61,841 1996
Stock Fund II-Q
Strong Variable 8.916485 8.367348 -6.16% 118,596 1998
Insurance Funds, 10.462103 8.916485 -14.77% 236,119 1997
Inc.- International 10.000000 10.462103 4.62% 154,841 1996
Stock Fund II-NQ
Strong Opportunity 13.995266 15.660253 11.90% 160,731 1998
Fund II, Inc.-Q 11.319705 13.995266 23.64% 436,276 1997
10.000000 11.319705 13.20% 312,712 1996
Strong Opportunity 13.995266 15.660253 11.90% 459,632 1998
Fund II, Inc.-NQ 11.319705 13.995266 23.64% 513,631 1997
10.000000 11.319705 13.20% 302,280 1996
Van Eck Worldwide 10.281856 11.425229 11.12% 54,874 1998
Insurance Trust - 10.189870 10.281856 0.90% 52,244 1997
Worldwide Bond 10.000000 10.189870 1.90% 39,599 1996
Fund-Q
Van Eck Worldwide 10.281856 11.425229 11.12% 137,465 1998
Insurance Trust- 10.189870 10.281856 0.90% 135,652 1997
Worldwide Bond 10.000000 10.189870 1.90% 36,398 1996
Fund-NQ
Van Eck Worldwide 8.778805 5.598612 -35.09% 37,152 1998
Insurance Trust- 10.077496 8.778805 -12.89% 65,901 1997
Worldwide Emerging 10.000000 10.077496 0.77% 0 1996(1)
Markets Fund-Q
Van Eck Worldwide 8.778805 5.698612 -35.09% 150,812 1998
Insurance Trust- 10.077496 8.778805 -12.89% 109,850 1997
Worldwide Emerging 10.000000 10.077496 0.77% 750 1996(1)
Markets Fund-NQ
Van Eck Worldwide 9.817789 6.678951 -31.97% 27,382 1998
Insurance Trust- 10.132333 9.817789 -3.10% 36,777 1997
Worldwide Hard Assets 10.000000 10.132333 1.32% 22,227 1996
Fund-Q
</TABLE>
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<PAGE> 20
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
PERCENT NUMBER OF
ACCUMULATION UNIT ACCUMULATION UNIT CHANGE IN ACCUMULATION
UNDERLYING MUTUAL FUND VALUE AT END OF VALUE AT END OF ACCUMULATION UNIT UNITS AT END YEAR
PERIOD PERIOD VALUE OF PERIOD
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 9.817789 6.678951 -31.97% 104.447 1998
Insurance Trust- Worldwide 10.132333 9.817789 -3.10% 110,634 1997
Hard Assets-NQ 10.000000 10.132333 1.32% 48,531 1996
Van Kampen 16.312466 14.207613 -12.90% 126,607 1998
Life Investment 13.626341 16.312466 19.71% 143,467 1997
Trust- Morgan Stanley 10.000000 13.626341 36.26% 63,345 1996
Real Estate Securities
Portfolio-Q
Van Kampen 16.312466 14.207613 -12.90% 335,131 1998
Life Investment 13.626341 16.312466 19.71% 312,287 1997
Trust- Morgan Stanley 10.000000 13.626341 36.26% 65,843 1996
Real Estate Securities
Portfolio-NQ
Warburg Pincus Trust- 10.066530 10.451107 3.82% 190,052 1998
International Equity 10.450529 10.066530 -3.67% 224,358 1997
Portfolio-Q 10.000000 10.450529 4.51% 113,387 1996
Warburg Pincus Trust- 10.066530 10.451107 3.82% 442,442 1998
International Equity 10.450529 10.066530 -3.67% 501,764 1997
Portfolio-NQ 10.000000 10.450529 4.51% 278,224 1996
Warburg Pincus Trust- 11.351955 11.915674 4.97% 20,180 1998
Post-Venture Capital 10.163437 11.351955 11.69% 7,811 1997
Portfolio-Q 10.000000 10.163437 1.63% 0 1996(1)
Warburg Pincus Trust- 11.351955 11.915674 4.97% 54,244 1998
Post-Venture Capital 10.163437 11.351955 11.69% 37,566 1997
Portfolio-NQ 10.000000 10.163437 1.63% 726 1996(1)
Warburg Pincus Trust- 12.800371 12.254943 -4.26% 187,796 1998
Small Company Growth 11.231071 12.800371 13.97% 182,340 1997
Portfolio-Q 10.000000 11.231071 12.31% 104,843 1996
Warburg Pincus Trust- 12.800371 12.254943 -4.26% 707,671 1998
Small Company Growth 11.231071 12.800371 13.97% 496,268 1997
Portfolio-NQ 10.000000 11.231071 12.31% 314,236 1996
</TABLE>
(1) The Dreyfus Variable Investment Fund-Capital Appreciation Portfolio,
Fidelity VIP III Growth Opportunities Portfolio, Morgan Stanley Dean Witter
Universal Funds, Inc.-Emerging Markets Debt Portfolio, and Oppenheimer VAF-
Oppenheimer Capital Appreciation Fund/VA (formerly 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.
(2) The American Century Variable Portfolios, Inc.-American Century VP Income &
Growth, NSAT-Nationwide Small Cap Value Fund and Neuberger Berman
AMT-Guardian Portfolio were added to the variable account on May 1, 1998.
Consequently, the condensed financial information reflects the reporting
period from May 1, 1998 through December 31, 1998.
* The 7-day yield on the Money Market Fund as of December 31, 1998 was 3.37%.
18
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<PAGE> 21
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in
February, 1981, with its home office at One Nationwide Plaza, Columbus, Ohio
43215. Nationwide is a provider of life insurance products, annuities and
retirement products.
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.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
The variable account was established as Financial Horizons VA Separate Account-2
by Nationwide on March 6, 1991 pursuant to Ohio Law. By resolution of the Board
of Directors, the variable account's name was changed to Nationwide VA Separate
Account-B. Although the separate account is registered with the SEC as a unit
investment trust pursuant to the Investment Company Act of 1940 ("1940 Act"),
the SEC does not supervise the management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions. There are two sub-accounts for each underlying mutual fund.
One sub-account contains shares attributable to accumulation units under
Non-Qualified Contracts. The other contains shares attributable to accumulation
units under Qualified Contracts, Individual Retirement Annuities, Roth IRAs, SEP
IRAs, and Tax Sheltered Annuities.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
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The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
STANDARD CHARGES AND DEDUCTIONS
The maximum commissions payable on the sale of a contract described in this
prospectus is 1.5% of purchase payments.
MORTALITY AND EXPENSE RISK CHARGES
Nationwide deducts Mortality and Expense Risk Charges from the variable account.
This amount is computed on a daily basis, and is equal to an annual rate of
1.25% of the daily net assets of the variable account.
The mortality risk charge of 0.80% compensates Nationwide for guaranteeing the
annuity rate of the contracts. This guarantee ensures that the annuity rates
will not change regardless of the death rates of annuity payees or the general
population.
The expense risk charge of 0.45% compensates Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charges are insufficient to cover actual
expenses, the loss is borne by Nationwide.
ADMINISTRATION CHARGE
Nationwide deducts an Administration Charge equal on an annual basis to 0.20% of
the daily net assets of the variable account. This charge is designed to
reimburse Nationwide for administrative expenses related to the issuance and
maintenance of the contracts.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such other date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
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CONTRACT OWNERSHIP
The contract owner has all rights under the contract including the right to
designate and change any designations of the contract owner, contingent owner,
annuitant, contingent annuitant, beneficiary, contingent beneficiary, annuity
payment option, and annuity commencement date. Purchasers who name someone other
than themselves as the contract owner will have no rights under the contract.
Contract owners of Non-Qualified Contracts may name a new contract owner at any
time before the annuitization date. Any change of contract owner automatically
revokes any prior contract owner designation. Changes in contract ownership may
result in federal income taxation and may be subject to state and federal gift
taxes.
A change in contract ownership must be submitted in writing and recorded at
Nationwide's home office. Once recorded, the change will be effective as of the
date signed. However, the change will not affect any payments made or actions
taken by Nationwide before it was recorded.
The contract owner may also request a change in the annuitant, contingent
annuitant, contingent owner, beneficiary, or contingent beneficiary before the
annuitization date. These changes must be:
o on a Nationwide form;
o signed by the contract owner; and
o received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. If the contract owner is
not a natural person and there is a change of the annuitant, distributions will
be made as if the contract owner died at the time of the change.
On the annuitization date, the annuitant will become the contract owner.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
o Joint owners can only be named for Non-Qualified Contracts;
o Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint owners;
o The exercise of any ownership right in the contract will generally
require a written request signed by both joint owners;
o An election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently by either joint owner; and
o Nationwide will not be liable for any loss, liability, cost, or expense
for acting in accordance with the instructions of either joint owner.
CONTINGENT OWNERSHIP
The contingent owner is entitled to certain benefits under the contract, if a
contract owner who is NOT the annuitant dies before the annuitization date, and
there is no surviving joint owner.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not affect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance, unless
Nationwide approves a request for an annuitant of greater age. The annuitant may
be
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changed before the annuitization date with Nationwide's consent.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person(s) who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. Multiple beneficiaries will
share the death benefit equally, unless otherwise specified.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
<S> <C> <C>
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
SEP IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
Qualified $15,000 $1,000
</TABLE>
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
o New Year's Day o Independence Day
o Martin Luther King, Jr. Day o Labor Day
o Presidents' Day o Thanksgiving
o Good Friday o Christmas
o Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when conditions described in
(2) and (3) exist.
If Nationwide is closed on days when the New York Stock Exchange is open,
contract value may be affected since the contract owner will not have access to
their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to underlying mutual funds allocated to
the sub-accounts as instructed by the contract owner. Shares of the sub-accounts
are purchased at net asset value, then converted into accumulation units.
Contract owners can change allocations or make exchanges among the sub-accounts.
However, no change may be made that would result in an amount less than 1% of
the purchase payments being allocated to any sub-account for any contract owner.
Certain transactions may be subject to conditions imposed by the underlying
mutual funds, as well as those set forth in the contract.
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DETERMINING THE CONTRACT VALUE
The contract value is the value of amounts allocated to the sub-accounts of the
variable account. Nationwide will deduct a proportionate amount of any contract
charges from each sub-account based on current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where
(a) is:
(1) the net asset value of the underlying mutual fund as of the end of the
current valuation period; and
(2) the per share amount of any dividend or income distributions made by
the underlying mutual fund (if the ex-dividend date occurs during the
current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of the
end of the preceding valuation period.
(c) is a factor representing the daily variable account. The factor is equal to
an annual rate of 1.45% of the daily net assets of the variable account.
Based on the net investment factor, the value of an accumulation unit may
increase or decrease. Changes in the net investment factor may not be directly
proportional to changes in the net asset value of the underlying mutual fund
shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
TRANSFERS
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Transfer Requests
Nationwide will accept transfer requests in writing or over the telephone.
Nationwide will use reasonable procedures to confirm that telephone instructions
are genuine and will not be liable for following telephone instructions that it
reasonably determined to be genuine. Nationwide may withdraw the telephone
exchange privilege upon 30 days written notice to contract owners.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using market
timing firms. To avoid this, Nationwide may modify transfer and exchange rights
of contract owners who use market timing firms (or other third parties) to
transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
o submitted by any agent acting under a power of attorney on behalf of
more than one contract owner; or
o submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing
firms (or other third parties) on behalf of more than one contract
owner at the same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by law. The refunded contract value will reflect the deduction of any contract
charges unless otherwise required by law. All IRA and Roth IRA refunds will be a
return of purchase payments. State and/or federal law may provide additional
free look privileges.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded to the contract owner will be paid by Nationwide.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
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Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
Partial Surrenders (Partial Redemptions)
Nationwide will surrender accumulation units from the sub-accounts. The amount
withdrawn from each investment option will be in proportion to the value in each
option at the time of the surrender request.
Full Surrenders (Full Redemptions)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account charges, underlying mutual fund charges and the investment performance
of the underlying mutual funds.
SURRENDERS UNDER A QUALIFIED CONTRACT OR TAX SHELTERED ANNUITY
Contract owners of a Qualified Contract or Tax Sheltered Annuity may surrender
part or all of their contract value before the earlier of the annuitization date
or the annuitant's death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account
(described in Section 403(b)(7) of the Internal Revenue Code), may be
surrendered only:
1. when the contract owner reaches age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may
NOT include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year beginning
before January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except that
earnings and employer contributions as of December 31, 1988 in such
Custodial Accounts may be withdrawn in the case of hardship).
C. Any distribution other than the above, including a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate
the restrictions stated above.
When the contract is issued to fund a Qualified Plan, the surrender provisions
may be modified to meet the terms of the plan and applicable tax provisions.
LOAN PRIVILEGE
The loan privilege is ONLY available to owners of Qualified Contracts or Tax
Sheltered Annuities. These contract owners can take loans from the contract
value beginning 30 days after the contract is issued up to the annuitization
date. Loans are subject to the terms of the contract, the plan, and the Internal
Revenue Code. Nationwide may modify the terms of a loan to comply with changes
in applicable law.
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MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
<TABLE>
<CAPTION>
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
<S> <C> <C>
NON-ERISA PLANS up to up to 80% of contract
$20,000 value (not more than
$10,000)
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
</TABLE>
*The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide may charge a Loan Processing Fee at the time each new loan is
processed. If assessed, it compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not allow Nationwide to assess a Loan Processing Fee.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached.
INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. It is guaranteed never to fall
below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
DISTRIBUTIONS & ANNUITY PAYMENTS
Distributions made from the contract while a loan is outstanding will be reduced
by the amount of the outstanding loan plus accrued interest if:
o the contract is surrendered;
o the contract owner/annuitant dies;
o the contract owner who is not the annuitant dies prior to
annuitization; or
o annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD & LOAN DEFAULT
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available (please refer to the terms of the loan agreement).
If a loan payment is not made by the end of the applicable grace period, the
entire loan will be treated as a deemed distribution and will be taxable to the
borrower. This deemed
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distribution may also be subject to an early withdrawal tax penalty by the
Internal Revenue Service.
After default, interest will continue to accrue on the loan. Defaulted amounts,
plus interest, are deducted from the contract value when the participant is
eligible for a distribution of at least that amount. Additional loans are not
available while a previous loan is in default.
ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent. IRAs, SEP IRAs, Roth IRAs, Tax Sheltered
Annuities, and Qualified Contracts may not be assigned, pledged or otherwise
transferred except where allowed by law.
A Non-Qualified Contract owner may assign some or all rights under the contract.
An assignment must occur before annuitization while the annuitant is alive. Once
proper notice of assignment is recorded by Nationwide's home office, the
assignment will become effective as of the date the written request was signed.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Requests for asset rebalancing
must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three-month period falls on a Saturday,
Sunday, recognized holiday, or any other day when the New York Stock Exchange is
closed, asset rebalancing will occur on the next business day.
Asset rebalancing may be subject to employer limitations or restrictions for
contracts issued to a Qualified Plan or Tax Sheltered Annuity plan. Contract
owners should consult a financial adviser to discuss the use of asset
rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from certain sub-accounts into other sub-accounts. Contract
owners may participate in this program if their contract value is $15,000 or
more. Nationwide does not guarantee that this program will result in profit or
protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the following underlying mutual funds: Fidelity VIP High Income Portfolio,
NSAT Government Bond Fund, Neuberger Berman AMT- Limited Maturity Bond
Portfolio, and NSAT Money Market Fund to any other underlying mutual fund. The
minimum monthly transfer is $100.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
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Nationwide reserves the right to stop establishing new Dollar Cost Averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts proportionately unless
Nationwide is instructed otherwise.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the ten-day
free look period (see "Right to Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a
Qualified Plan or Tax Sheltered Annuity plan, annuitization may occur during the
first 2 years subject to Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payment
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
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2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
ASSUMED INVESTMENT RATE
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment.
The assumed investment rate of 3.5% is the percentage rate of return required to
maintain level variable annuity payments. Subsequent variable annuity payments
may be more or less than the first based on whether actual investment
performance is higher or lower than the assumed investment rate of 3.5%.
VALUE OF AN ANNUITY UNIT
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
EXCHANGES AMONG UNDERLYING MUTUAL FUNDS
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
o the amount to be distributed is less than $5,000, in which case
Nationwide may make one lump sum payment of the contract value; or
o an annuity payment would be less than $50, in which case Nationwide can
change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually,
for the lifetime of the annuitant. Payments will end upon the
annuitant's death. For example, if the annuitant dies before the second
annuity payment date, the annuitant will receive only one annuity
payment. The annuitant will only receive two annuity payments if he or
she dies before the third annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but
at least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments
will continue for the lifetime of the survivor. As is the case under
option 1, there is no guaranteed number of payments. Payments end upon
the death of the last surviving party, regardless of the number of
payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant
dies before all of the
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guaranteed payments have been made, payments will continue to the end
of the guaranteed period and will be paid to a designee chosen by the
annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed
as of the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for Non-Qualified Contracts will be made until an annuity
payment option has been elected. Qualified Contracts, IRAs, SEP IRAs, and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the plan, contract, and the Internal Revenue Code.
DEATH BENEFITS
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
If the contract owner who is not the annuitant dies before the annuitization
date, the joint owner becomes the contract owner. If no joint owner is named,
the contingent owner becomes the contract owner. If no contingent owner is
named, the last surviving contract owner's estate becomes the contract owner.
If a contract owner and annuitant or the same, and the contact owner/annuitant
dies before the annuitization date, the contingent owner will not have any
rights in the contract unless the contingent owner is also the beneficiary.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary unless a contingent
annuitant is named. If a contingent annuitant is named, the contingent annuitant
becomes the annuitant and no death benefit is payable.
If no beneficiary(ies) survive the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
Non-Qualified Contracts" provision.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
HOW THE DEATH BENEFIT VALUE IS DETERMINED
The death benefit value is determined as of the date the home office receives:
1) proper proof of the annuitant's death;
2) an election specifying the distribution method; and
3) any state required forms(s).
If the annuitant dies after the annuitization date, payment will be determined
according to the selected annuity payment option.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
DEATH BENEFIT PAYMENT
For all contracts issued on or after the later of May 1, 1998 or the date on
which state insurance
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authorities approved applicable contract modifications:
o If the annuitant dies prior to his or her 86th birthday, the dollar
amount of the death benefit will be the greatest of:
1) the contract value;
2) the sum of all purchase payments, less an adjustment for
amounts surrendered; or
3) the contract value as of the most recent five-year contract
anniversary, less an adjustment for amounts surrendered since
the most recent five-year contract anniversary.
o If the annuitant dies on or after his or her 86th birthday but before
the annuitization date, the dollar amount of the death benefit will be
equal to the contract value.
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 a date prior to the date state
insurance authorities approved applicable contract modifications:
o If the annuitant dies prior to his or her 86th birthday, the dollar
amount of the death benefit will be the greatest of:
1) the contract value;
2) the sum of all purchase payments, less 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.
o If the annuitant dies on or after his or her 86th birthday but before
the annuitization date, the dollar amount of the death benefit will be
equal to the contract value.
REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
1) If any contract owner dies on or after the annuitization date and
before the entire interest in the contract has been distributed, then
the remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
2) If any contract owner dies before the annuitization date, then the
entire interest in the contract (consisting of either the death benefit
or the contract value reduced by charges set forth elsewhere in the
contract) will be distributed within 5 years of the contract owner's
death, provided however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or
over a period not longer than the life expectancy of the
designated beneficiary. Payments must begin within one year of
the contract owner's death unless otherwise permitted by
federal income tax regulations; or
b) if the designated beneficiary is the surviving spouse of the
deceased contract owner, the spouse can choose to become the
contract owner instead of receiving a death benefit. Any
distributions required under these distribution rules will be
made upon that spouse's death.
In the event that the contract owner is not a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a contract
owner;
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b) any change of annuitant will be treated as the death of a contract
owner; and
c) in either case, the appropriate distribution will be made upon the
death or change, as the case may be.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
REQUIRED DISTRIBUTIONS FOR QUALIFIED PLANS AND TAX SHELTERED ANNUITIES
Distributions from Qualified Plans or Tax Sheltered Annuities will be made
according to the Minimum Distribution and Incidental Benefit ("MDIB") provisions
of Section 401(a)(9) of the Internal Revenue Code. Distributions will be made to
the annuitant according to the selected annuity payment option over a period not
longer than
a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
b) a period not longer than the life expectancy of the annuitant or the
joint life expectancies of the annuitant and the annuitant's designated
beneficiary.
For Tax Sheltered Annuities, required distributions do not have to be withdrawn
from this contract if they are being withdrawn from another Tax Sheltered
Annuity of the annuitant.
If the annuitant's entire interest in a Qualified Plan or Tax Sheltered Annuity
will be distributed in equal or substantially equal payments over a period
described in a) or b), the payments will begin on the required beginning date.
The required beginning date is the later of:
a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70 1/2; or
b) the annuitant's retirement date.
Provision b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70 1/2.
Distributions commencing on the required distribution date must satisfy MDIB
provisions set forth in the Internal Revenue Code. Those provisions require that
distribution cannot be less than the amount determined by dividing the
annuitant's interest in the tax sheltered annuity by the end of the previous
calendar year by:
a) the annuitant's life expectancy, or if applicable;
b) the joint and survivor life expectancy of the annuitant and the
annuitant's beneficiary.
The life expectancies and joint life expectancies are determined by reference to
Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the Qualified
Plan or Tax Sheltered Annuity must be distributed by December 31 of the calendar
year in which the fifth anniversary of the annuitant's death occurs unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no later than
December 31 of the year in which the annuitant would have attained age
70 1/2; or
b) the annuitant names a beneficiary other than his or her surviving
spouse and the beneficiary elects to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the annuitant
dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
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If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR IRAS AND SEP IRAS
Distributions from an IRA or SEP IRA must begin no later than April 1 of the
calendar year following the calendar year in which the contract owner reaches
age 70 1/2. Distribution may be paid in a lump sum or in substantially equal
payments over:
a) the contract owner's life or the lives of the contract owner and his or
her spouse or designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the IRA
or SEP IRA must be distributed by December 31 of the calendar year in which the
fifth anniversary of the contract owner's death occurs, unless:
a) the contract owner names his or her surviving spouse as the beneficiary
and such spouse chooses to:
1) treat the contract as an IRA or SEP IRA established for his or
her benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his
or her life expectancy) and beginning no later than December
31 of the year in which the contract owner would have reached
age 70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract owner's
death.
IRA or SEP IRA distributions will not receive the favorable tax treatment of a
lump sum distribution from a Qualified Plan Required distributions do not have
to be withdrawn from this contract if they are being withdrawn from another IRA
or SEP IRA of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a surviving spouse who is the beneficiary under
the annuity payment option may treat the contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior 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 or SEP IRA distributions will not receive the favorable tax treatment of a
lump sum distribution from a Qualified Plan. If the contract owner dies before
the entire interest in the contract has been distributed, the balance will
also be included in his or her gross estate.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
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a) the contract owner names his or her surviving spouse as the beneficiary
and the spouse chooses to:
1) treat the contract as a Roth IRA established for his or her
benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his
or her life expectancy) and beginning no later than December
31 of the year following the year in which the contract owner
would have reached age 70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the contract
owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "non-qualified distributions."
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
Contract owners should consult a financial consultant, legal counsel or tax
advisor to discuss in detail the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Section 72 of the Internal Revenue Code governs federal income taxation of
annuities in general. That section sets forth different rules for: (1)
Individual Retirement Annuities and Individual Retirement Accounts; (2) Roth
IRAs; (3) SEP IRAs; (4) Qualified Contracts; (5) Tax Sheltered Annuities; and
(6) Non-Qualified Contracts. Each type of annuity is discussed below.
IRAs, SEP IRAs, and Individual Retirement Accounts
Distributions from IRAs, SEP IRAs, and contracts owned by Individual Retirement
Accounts are generally taxed when received. The excludable portion of each
payment is based on the ratio between the amount by which non-deductible
purchase payments to all the 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 the IRA, SEP IRA, or the annuitant under
contracts held by Individual Retirement Accounts, must annually report to the
Internal Revenue Service:
o the amount of nondeductible purchase payments;
o the amount of any distributions;
o the amount by which nondeductible purchase payments for all years
exceed non-taxable distributions for all years; and
o the total balance in all IRAs, SEP IRAs and Individual Retirement
Accounts.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
(i) it is made on or after the date on which the contract owner attains age
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 Internal Revenue 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
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distribution is not made within the five year period beginning with the first
contribution to the Roth IRA. If the Roth IRA contains 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 non-qualified 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 non-qualified distribution is not includible in gross income to the
extent that the distribution, when added to all previous distributions, does not
exceed that total amount of contributions made to the Roth IRA. Any
non-qualified distribution in excess of the aggregate amount of contributions
will be included in the contract owner's gross income in the year that is
distributed to the contract owner.
Taxable distributions will not receive the same favorable tax treatment of a
lump sum distribution from a Qualified Plan. If the contract owner dies before
the contract is completely distributed, the balance will also be included in the
contract owner's gross estate for tax purposes.
A change of the annuitant or contingent annuitant may be treated by the Internal
Revenue Service as a taxable transaction.
Qualified Plans and Tax Sheltered Annuities
Distributions from Qualified Plans 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 Internal Revenue Code. The formula excludes
from income the amount invested in the contract divided by the number of
anticipated payments (as determined pursuant to Section 72(d) of the Internal
Revenue Code) until the full investment in the contract is recovered. Thereafter
all distributions are fully taxable.
Non-Qualified Contracts - Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment 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 includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income and no additional payments are due
after his or her death, then he or she may be entitled to a deduction for the
balance of the investment on his or her final income tax return.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, dividends, loans, or any portion of the contract
that 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 before the annuitization date allocable to a 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 earnings from
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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
Internal Revenue 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.
Internal Revenue Code Section 72 also assesses a penalty tax if a distribution
is made before the contract owner reaches age 59 1/2. The amount of the penalty
is 10% of the portion of any distribution that is includible in gross income.
The penalty tax does not apply if the distribution:
1) is the result of a contract owner's death;
2) is the result of a contract owner's disability;
3) is one of a series of substantially equal periodic payments made over
the life or life expectancy of the contract owner (or the joint lives
or joint life expectancies of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner);
4) is for the purchase of an immediate annuity; and
5) is allocable to an investment in the contract before August 14, 1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death. These rules are described in "Required
Distributions for Non-Qualified Contracts."
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code, deemed to be owned)
by individuals. Different rules apply if the contract owner is not a natural
person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities ("non-natural persons") are not treated as annuity contracts under the
Internal Revenue Code. Specifically, they are not treated as annuity contracts
for purposes of Section 72. Therefore, income earned under a Non-Qualified
Contract that is owned by a non-natural person is taxed as ordinary income
during the taxable year that it is earned. Taxation is not deferred, even if the
income is not distributed out of the contract to the contract owner.
This 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 would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred
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compensation arrangement for one or more employees.
The non-natural person rule also does not apply to contracts that are:
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 looking for information on eligibility, limitations on
permissible amounts of purchase payments, and the tax consequences of
distributions from Qualified Plans, IRAs, SEP IRAs, and Tax Sheltered Annuities
should contact a qualified adviser. The terms of each plan may limit the rights
available under the contracts.
Section 403(b)(1)(E) of the Internal Revenue Code requires a contract issued as
a Tax Sheltered Annuity to limit purchase payments for any year to an amount
that does not exceed the limit set forth in Section 402(g) of the Internal
Revenue Code. This limit is increased from time to time to reflect increases in
the cost of living. This limit may be reduced by deposits, contributions or
payments made to another Tax Sheltered Annuity or other plan, contract or
arrangement by or on behalf of the contract owner.
The Internal Revenue Code allows most distributions from Qualified Plans to be
rolled into other Qualified Plans, IRAs or SEP IRAs. Most distributions from Tax
Sheltered Annuities may be rolled into another Tax Sheltered Annuity, Individual
Retirement Annuity, SEP IRA or Individual Retirement Account. Distributions that
may NOT be rolled over are those that are:
a) one of a series of substantially equal annual (or more frequent)
payments made:
1) over the life (or life expectancy) of the contract owner;
2) over the joint lives (or joint life expectancies) of the
contract owner and the contract owner's designated
beneficiary;
3) for a specified period of ten years or more; or
b) a required minimum distribution.
Any distribution that is eligible for rollover will be subject to federal tax
withholding of 20% if the distribution is not rolled into an appropriate plan as
described above.
Individual Retirement Accounts, SEP IRAs and Individual Retirement Annuities may
not provide life insurance benefits. If the death benefit exceeds the greater of
the contract's cash value or the sum of all purchase payments (less any
surrenders), the contract could be considered life insurance. Consequently, the
Internal Revenue Service could determine that the Individual Retirement Account,
SEP IRA or Individual Retirement Annuity does not qualify for the desired tax
treatment.
ROTH IRAS
The contract may be purchased as a Roth IRA. For detailed information on
purchasing and holding this contract as a Roth IRA, the contract owner should
contact a financial adviser.
The Internal Revenue Code allows distributions from Individual Retirement
Accounts and Individual Retirement Annuities to be rolled into Roth IRAs. The
rollovers are subject to federal income tax as distributions from the Individual
Retirement Account or Individual Retirement Annuity.
For rollovers from Individual Retirement Annuities or Individual Retirement
Accounts, the 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 Individual Retirement Annuity.
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A distribution from a Roth IRA that contains the proceeds of a rollover from an
Individual Retirement Account or Individual Retirement Annuity within the
preceding 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 Individual Retirement Annuity 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 result in
the loss of all or a portion the four year spread, subjecting the amount
deferred under the four year election to current taxation.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required) or if it is
an eligible rollover distribution. Mandatory back-up withholding rates are 31%
of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
o a transfer of the contract from one contract owner to another; or
o a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may be subject to
estate taxes, even if all or a portion of the value is also subject to federal
income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
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If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
o who would be required to include the contract, death benefit,
distribution, or other payment in his or her federal gross estate at
his or her death; or
o who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
PUERTO RICO
Under the Puerto Rico tax code, distributions from a Non-Qualified Contract
before 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 in these
situations.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless
o the failure to diversify was accidental;
o the failure is corrected; and
o a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
o statements showing the contract's quarterly activity;
o confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., Dollar Cost Averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
o annual and semi-annual reports containing all applicable information
and financial statements or their equivalent, which must
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be sent to the underlying mutual fund beneficial shareholders as
required by the rules under the Investment Company Act of 1940 for the
variable account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999. Like many
organizations, Nationwide is required to renovate or replace many computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. Conversions of existing
traditional life policies will continue through second quarter, 1999. In
addition, the shareholder services system that supports our mutual fund products
will be fully deployed in the first quarter of 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners including electronic interfaces. Processes
have been put in place and programs initiated to process data irrespective of
the format by converting non-compliant data into a Year 2000 compliant format.
Systems supporting Nationwide's infrastructure such as telecommunications, voice
and networks will be compliant by March 1999. Nationwide's assessment of Year
2000 issues has also included non-information technology systems with embedded
computer chips. Nationwide's building systems such as fire, security, elevators
and escalators supporting facilities in Columbus, Ohio have been tested and are
Year 2000 compliant.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, Nationwide has contacted mutual fund
organizations that provide funds for our variable annuity and life products. The
same action will continue during the first quarter of 1999 with wholesale
producers. Nationwide continues its efforts to identify external risk factors
and is planning to develop contingency plans as part of its ongoing risk
management strategy.
Operating expenses in 1998 and 1997 included approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Nationwide anticipates spending approximately $5 million on Year 2000
activities in 1999. These expenses do not have an effect on the assets of the
variable account and are not charged through to the contract owner.
Management does not anticipate that the completion of Year 2000 renovation and
replacement activities will result in a reduction
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in operating expenses. Rather, personnel and resources currently allocated to
Year 2000 issues will be assigned to other technology-related projects.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
The general distributor, Nationwide Advisory Services, Inc. is not engaged in
any litigation of any material nature.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified compensatory and punitive damages. Nationwide
currently is evaluating this lawsuit, which has not been certified as a class.
Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
o precious metals;
o real estate;
o stocks and bonds;
o closed-end funds;
o bank money market deposit accounts and passbook savings;
o CDs; and
o the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
o S&P 500;
o Shearson/Lehman Intermediate Government/Corporate Bond Index;
o Shearson/Lehman Long-Term Government/Corporate Bond Index;
o Donoghue Money Fund Average;
o U.S. Treasury Note Index;
o Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
o Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
o Lipper Analytical Services, Inc.;
o CDA/Wiesenberger;
o Morningstar;
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o Donoghue's;
o magazines such as:
-- Money;
-- Forbes;
-- Kiplinger's Personal Finance Magazine;
-- Financial World;
-- Consumer Reports;
-- Business Week;
-- Time;
-- Newsweek;
-- National Underwriter; and
-- News and World Report;
o LIMRA;
o Value;
o Best's Agent Guide;
o Western Annuity Guide;
o Comparative Annuity Reports;
o Wall Street Journal;
o Barron's;
o Investor's Daily;
o Standard & Poor's Outlook; and
o Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total return shows the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year periods (or for a period covering the time the underlying mutual fund has
been available in the variable account if it has not been available for one of
the prescribed periods). This calculation reflects the maximum charges that
could be assessed to a contract (1.45%). It does not take into consideration
premium taxes, which may be imposed by certain states.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," shows the percentage rate of return of a hypothetical
initial investment of $25,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been in
existence). For those underlying mutual funds which have not been available for
one of the prescribed periods, the nonstandardized total return illustrations
will show the investment performance the underlying mutual funds would have
achieved (reduced by the same charges) had they been available in the variable
account for one of the periods. An initial investment of $25,000 is assumed
because that amount is closer to the size of a typical contract than $1,000,
which was used in calculating the standardized average annual total return.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1998.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
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SUB-ACCOUNT PERFORMANCE SUMMARY
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 12/31/98 12/31/98 Variable Account to Variable Account
12/31/98
<S> <C> <C> <C> <C>
American Century Variable Portfolios, 14.09% N/A 12.67% 02-01-96
Inc.- American Century VP Balanced
American Century Variable Portfolios, -3.58% N/A -4.99% 02-01-96
Inc.- American Century VP Capital
Appreciation
American Century Variable Portfolios, N/A N/A 12.44% 05-01-98
Inc. - American Century VP Income &
Growth
American Century Variable Portfolios, 17.04% N/A 15.58% 02-01-96
Inc.- American Century VP International
American Century Variable Portfolios, 3.29% N/A 13.94% 12-23-96
Inc.- American Century VP Value
Dreyfus Stock Index Fund, Inc. 26.35% N/A 25.28% 02-01-96
Dreyfus Variable Investment 28.33% N/A 20.06% 07-14-97
Fund-Capital Appreciation Portfolio
Dreyfus Variable Investment Fund - 10.19% N/A 12.13% 12-23-96
Growth & Income Portfolio
The Dreyfus Socially Responsible 27.51% N/A 23.29% 02-01-96
Growth Fund, Inc.
Fidelity VIP Equity-Income Portfolio 10.01% N/A 15.51% 02-01-96
Fidelity VIP Growth Portfolio 37.47% N/A 23.51% 02-01-96
Fidelity VIP High Income Portfolio -5.72% N/A 6.44% 02-01-96
Fidelity VIP Overseas Portfolio 11.12% N/A 10.38% 02-01-96
Fidelity VIP II Asset Manager Portfolio 13.38% N/A 14.59% 02-01-96
Fidelity VIP II Contrafund Portfolio 28.10% N/A 23.55% 02-01-96
Fidelity VIP III Growth Opportunities 22.81% N/A 22.22% 07-14-97
Portfolio
Morgan Stanley Dean Witter Universal -29.42% N/A -22.23% 07-14-97
Fund, Inc.- Emerging Markets Debt
Portfolio
NSAT- Capital Appreciation Fund 28.08% N/A 27.30% 02-01-96
NSAT- Government Bond Fund 7.33% N/A 5.76% 02-01-96
NSAT- Money Market Fund 3.75% N/A 3.69% 01-31-96
NSAT - Small Cap Value Fund N/A N/A -21.32% 05-01-98
NSAT- Nationwide Small Company Fund -0.46 N/A 12.22% 02-01-96
NSAT-Total Return Fund 16.36% N/A 20.65% 02-01-96
Neuberger Berman AMT-Growth Portfolio 13.85% N/A 15.34% 02-01-96
Neuberger Berman AMT Guardian Portfolio N/A N/A -10.68% 05-01-98
Neuberger Berman AMT-Limited Maturity 2.88% N/A 3.48% 02-01-96
Bond Portfolio
Neuberger Berman AMT-Partners Portfolio 2.70% N/A 18.19% 02-01-96
Oppenheimer VAF - Oppenheimer Bond 5.25% N/A 5.41% 02-01-96
Fund/VA
Oppenheimer VAF - Oppenheimer Global 12.45% N/A 15.54% 02-01-96
Securities Fund/VA
Oppenheimer VAF - Oppenheimer Capital 22.20% N/A 17.94% 07-14-97
Appreciation Fund/VA (formerly
Oppenheimer Growth Fund)
</TABLE>
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STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
10 Years or Date
1 Year to 5 Years to Fund Available in Date Fund Added to
Sub-Account Options 12/31/98 12/31/98 Variable Account to Variable Account
12/31/98
<S> <C> <C> <C> <C>
Oppenheimer VAF - Oppenheimer Multiple 5.11% N/A 10.89% 02-01-96
Strategies Fund/VA
Strong Opportunity Fund II, Inc. 11.90% N/A 16.65% 02-01-96
Strong Variable Insurance Funds, Inc.- 5.70% N/A 4.89% 02-01-96
Discovery Fund II, Inc.
Strong Variable Insurance Funds, Inc.- -6.16% N/A -5.94% 02-01-96
International Stock II
Van Eck Worldwide Insurance Trust- 11.12% N/A 4.68% 02-01-96
Worldwide Bond Fund
Van Eck Worldwide Insurance Trust- -35.09% N/A -24.29% 12-23-96
Worldwide Emerging Markets Fund
Van Eck Worldwide Insurance Trust- -31.97% N/A -12.94% 02-01-96
Worldwide Hard Assets Fund
Van Kampen Life Investment Trust- -12.90% N/A 12.81% 02-01-96
Morgan Stanley Real Estate Securities
Portfolio
Warburg Pincus Trust- International 3.82% N/A 1.53% 02-01-96
Equity Portfolio
Warburg Pincus Trust -Post-Venture 4.97% N/A 9.06% 12-23-96
Capital Portfolio
Warburg Pincus Trust-Small Company -4.26% N/A 7.23% 02-01-96
Growth Portfolio
</TABLE>
NON-STANDARDIZED TOTAL RETURN
<TABLE>
<CAPTION>
10 Years to
1 Year to 5 Years to 12/31/98 or Date Fund
Sub-Account Options 12/31/98 12/31/98 Life of Fund Effective
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.- 14.09% 11.26% 10.04% 05-01-91
American Century VP Balanced
American Century Variable Portfolios, Inc.- -3.58% 1.76% 6.69% 11-20-87
American Century VP Capital Appreciation
American Century Variable Portfolios, Inc. - 25.05% N/A 28.84% 10-30-97
American Century VP Income & Growth
American Century Variable Portfolios, Inc.- 17.04% N/A 10.68% 05-01-94
American Century VP International
American Century Variable Portfolios, Inc.- 3.29% N/A 14.27% 05-01-96
American Century VP Value
Dreyfus Stock Index Fund, Inc. 26.35% 21.80% 15.45% 09-29-89
Dreyfus Variable Investment Fund-Capital 28.33% 21.79% 19.87% 04-05-93
Appreciation Portfolio
Dreyfus Variable Investment 10.19% N/A 19.58% 05-02-94
Fund - Growth & Income Portfolio
The Dreyfus Socially Responsible Growth Fund, 27.51% 20.67% 21.21% 10-06-93
Inc.
Fidelity VIP Equity-Income Portfolio 10.01% 16.94% 12.72% 10-09-86
Fidelity VIP Growth Portfolio 37.47% 19.98% 15.67% 10-09-86
Fidelity VIP High Income Portfolio -5.72% 7.22% 9.48% 09-19-85
Fidelity VIP Overseas Portfolio 11.12% 8.11% 7.03% 01-28-87
Fidelity VIP II Asset Manager Portfolio 13.38% 10.19% 11.35% 09-06-89
</TABLE>
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NON-STANDARDIZED TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
10 Years to
1 Year to 5 Years to 12/31/98 or Date Fund
Sub-Account Options 12/31/98 12/31/98 Life of Fund Effective
<S> <C> <C> <C> <C>
Fidelity VIP II Contrafund Portfolio 28.10% N/A 26.79% 01-03-95
Fidelity VIP III Growth Opportunities Portfolio 22.81% N/A 24.47% 01-03-95
Morgan Stanley Dean Witter Universal Fund, -29.42% N/A -20.24% 06-16-97
Inc.- Emerging Markets Debt Portfolio
NSAT- Capital Appreciation Fund 28.08% 21.32% 17.63% 04-15-92
NSAT- Government Bond Fund 7.33% 5.72% 7.95% 11-08-82
NSAT- Money Market Fund 3.75% 3.51% 5.39% 11-10-81
NSAT Small Cap Value Fund -4.45% N/A -5.35% 10-31-97
NSAT- Nationwide Small Company Fund -0.46% N/A 15.64% 10-23-95
NSAT-Total Return Fund 16.36% 17.70% 14.68% 11-08-82
Neuberger Berman AMT- 13.85% 13.61% 12.44% 09-10-84
Growth Portfolio
Neuberger Berman AMT - Guardian Portfolio 29.78% N/A 30.60% 11-03-97
Neuberger Berman AMT- 2.88% 3.66% 6.36% 09-10-84
Limited Maturity Bond Portfolio
Neuberger Berman AMT- 2.70% N/A 17.99% 03-22-94
Partners Portfolio
Oppenheimer VAF - Oppenheimer Bond Fund/VA 5.25% 5.46% 7.96% 04-30-85
Oppenheimer VAF - Oppenheimer Global Securities 12.45% 8.07% 10.87% 11-12-90
Fund/VA
Oppenheimer VAF - Oppenheimer Capital 22.20% 20.35% 14.37% 04-30-85
Appreciation Fund/VA (formerly Oppenheimer
Growth Fund)
Oppenheimer VAF - Oppenheimer Multiple 5.11% 9.82% 9.97% 02-09-87
Strategies Fund/VA
Strong Opportunity Fund II, Inc. 11.90% 15.32% 17.35% 05-08-92
Strong Variable Insurance Funds, Inc.- 5.70% 7.46% 9.78% 05-08-92
Discovery Fund II, Inc.
Strong Variable Insurance Funds, Inc.- -6.16% N/A -3.57% 10-20-95
International Stock II
Van Eck Worldwide Insurance Trust- Worldwide 11.12% 4.95% 5.30% 09-01-89
Bond Fund
Van Eck Worldwide Insurance Trust- Worldwide -35.09% N/A -11.18% 12-27-95
Emerging Markets Fund
Van Eck Worldwide Insurance Trust- Worldwide -31.97% -4.67% 0.62% 09-01-89
Hard Assets Fund
Van Kampen Life Investment Trust- Morgan -12.90% N/A 13.14% 07-03-95
Stanley Real Estate Securities Portfolio
Warburg Pincus Trust- International Equity 3.82% N/A 3.97% 06-30-95
Portfolio
Warburg Pincus Trust - 4.97% N/A 6.08% 09-30-96
Post-Venture Capital Portfolio
Warburg Pincus Trust-Small Company Growth -4.26% N/A 12.72% 06-30-95
Portfolio
</TABLE>
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History...................................................................................1
Services..........................................................................................................1
Purchase of Securities Being Offered..............................................................................1
Underwriters......................................................................................................2
Calculations of Performance.......................................................................................2
Annuity Payments..................................................................................................3
Financial Statements..............................................................................................4
</TABLE>
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY 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.
o 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.
o 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.
o 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.
o 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),
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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.
o 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.
o 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.
o 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
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have predominantly speculative characteristics with respect to capacity to
pay interest and repay principal and are considered to be of poor standing.
See "Investment Considerations and Risks-Lower Rated Securities" in the
Portfolio's prospectuses.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation serves as the Fund's investment
adviser. NCM Capital Management Group, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment standards, but which also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of
life in America. Current income is secondary to the primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
o 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.
o 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.
o VIP HIGH INCOME PORTFOLIO
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
o at least 65% in income-producing debt securities and preferred
stocks, including convertible securities;
o up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities.
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's Investor Services, Inc. ("Moody's"); BB or lower by Standard &
Poor's and may be deemed to be of a speculative nature. The Portfolio may
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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.
o 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.
o 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.
o 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.
o 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 DEAN WITTER UNIVERSAL FUNDS, INC.
Morgan Stanley Dean Witter 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 Dean Witter Investment Management,
Inc.
o 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.
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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.
o NSAT - CAPITAL APPRECIATION FUND Investment
Objective: The Capital Appreciation Fund seeks long-term capital
appreciation.
o NSAT - GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is consistent
with capital preservation through investing primarily in bonds and
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
o NSAT - MONEY MARKET FUND
Investment Objective: The Fund seeks as high a level of current income as
is consistent with the preservation of capital and maintenance of
liquidity.
o NSAT - NATIONWIDE SMALL CAP VALUE FUND
Subadviser:The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. The Fund intends to
pursue its investment objective by investing, under normal market
conditions, at least 75% of the Fund's total assets in equity securities of
companies whose equity market capitalizations at the time of investment are
similar to the market capitalizations of companies in the Russell 2000
Small Stock Index. The Fund will invest in equity securities of domestic
and foreign issuers characterized as "value" companies according to
criteria established by The Dreyfus Corporation, the Fund's subadviser.
o NSAT - NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC, Lazard Asset
Management, Strong Capital Management, Inc. and Warburg Pincus Asset
Management, Inc.
Investment Objective Under normal market conditions, the Fund will invest
at least 65% of its total assets in equity securities of investment are
similar to the market capitalizations of companies in the Russell 2000
Small Stock Index. NAS, the Fund's adviser, has contracted with a group of
sub-advisers, each of which will manage a portion of the Fund's portfolio.
These sub-advisers are Dreyfus, Neuberger Berman, LLC, Lazard Asset
Management, Strong Capital Management, Inc. and Warburg Pincus Asset
Management, Inc. The sub-advisers were chosen because they utilize a number
of different investment styles when investing in small company stocks. By
utilizing a number of investment styles, NAS hopes to increase prospects
for investment return and to reduce market risk and volatility.
o NSAT - TOTAL RETURN FUND
Investment Objective: The investment objective of the Fund is to obtain a
reasonable, long-term total return on invested capital.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger and Berman Advisers Management Trust ("Neuberger Berman AMT") is an
open-end, diversified management investment company consisting of several
series. Shares of the series of Neuberger Berman AMT are offered in connection
with certain variable annuity contracts and variable life insurance policies
issued through life insurance company separate accounts and are also offered
directly to qualified pension and retirement plans outside of the separate
account context.
The Guardian and Partners Portfolios of Neuberger Berman AMT invest all of their
investable assets in a corresponding series of Advisers Managers Trust managed
by Neuberger Berman Management Incorporated
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("Neuberger Berman Management"). Each series then invests in securities in
accordance with an investment objective, policies and limitations identical to
those of the Portfolio. This "master/feeder fund" structure is different from
that of many other investment companies which directly acquire and manage their
own portfolios of securities. (For more information regarding "master/feeder
fund" structure, see "Special Information Regarding Organization, Capitalization
and Other Matters" in the underlying mutual fund prospectus.) The investment
advisor for all the portfolios is Neuberger Berman Management.
o 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.
o 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
securities, looking for low price-to-earnings ratios, strong balance
sheets, solid management, and consistent earnings.
o 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.
o 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.
o OPPENHEIMER BOND FUND/VA
Investment Objective: Primarily seeks a high level of current income by
investing at least 65% of its total assets in investment grade debt
securities, U.S. government securities and money market instruments.
Investment grade debt securities would include those rated in one of the
four highest ranking categories by any nationally recognized rating
organization or if unrated or split-rated (rated investment grade and below
investment grade by different rating organizations), determined by
OppenheimerFunds, Inc. to be of comparable quality. The Fund may invest up
to 35% of its total assets in debt securities rated less than investment
grade when consistent with the Fund's investment objectives. The Fund seeks
capital growth as a secondary objective when consistent with its primary
objective.
o OPPENHEIMER GLOBAL SECURITIES FUND/VA
Investment Objective: To seek long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not an
objective. These securities may be considered to be speculative.
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o OPPENHEIMER CAPITAL APPRECIATION FUND/VA (FORMERLY OPPENHEIMER GROWTH
FUND)
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history
of earnings and dividends and are issued by seasoned companies (companies
which have an operating history of at least five years including
predecessors). Current income is a secondary consideration in the selection
of the Fund's portfolio securities.
o OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUND II, INC.")
Strong Opportunity Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. Strong Opportunity Fund II, Inc. was incorporated
in Wisconsin and may only be purchased by the separate accounts of insurance
companies for the purpose of funding variable annuity contracts and variable
life insurance policies. Strong Capital Management Inc. is the investment
advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in a
diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
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.
o 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.
o 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.
o WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities.
o 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.
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o WORLDWIDE HARD ASSETS FUND
Investment Description: Seeks long-term capital appreciation by investing,
primarily in "Hard Assets Securities." For the Fund's purpose, "Hard
Assets" are real estate, energy, timber, and industrial and precious
metals. Income is a secondary consideration.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares are offered in
separate portfolios which are sold only to insurance companies to provide
funding for variable life insurance policies and variable annuity contracts. Van
Kampen Asset Management, Inc. serves as the Portfolio's investment adviser.
o MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in
a diversified portfolio of securities of companies operating in the real
estate industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, including
common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies. A
"real estate industry company" is a company that derives at least 50% of
its assets (marked to market), gross income or net profits from the
ownership, construction, management or sale of residential, commercial or
industrial real estate. Under normal market conditions, at least 65% of the
Portfolio's total assets will be invested in Real Estate Securities,
primarily equity securities of real estate investment trusts. The Portfolio
may invest up to 25% of its total assets in securities issued by foreign
issuers, some or all of which may also be Real Estate Securities.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. The Portfolios are managed by Warburg Pincus Asset Management,
Inc. ("Warburg").
o 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.
o 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.
o 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
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$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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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
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, 1999. 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
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.......................................................................................1
Services..............................................................................................................1
Purchase of Securities Being Offered..................................................................................1
Underwriters..........................................................................................................2
Calculations of Performance...........................................................................................2
Annuity Payments......................................................................................................3
Financial Statements..................................................................................................4
</TABLE>
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 ("Nationwide ") (formerly Financial Horizons Life Insurance
Company). All of Nationwide'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 (95.24%) and Nationwide Mutual Fire Insurance Company (4.76%), 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 $98.28 billion as of
December 31, 1998.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each contract owner and records
with respect to the contract value of each contract.
Nationwide is the custodian of the assets of the variable account. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds. Nationwide, or subsidiaries of Nationwide may have
entered into agreements with either the investment adviser or distributor for
several of the underlying mutual funds. The agreements relate to administrative
services furnished by Nationwide or an affiliate of Nationwide and provide for
an annual fee based on the average aggregate net assets of the variable account
(and other separate accounts of Nationwide or life insurance company
subsidiaries of Nationwide) invested in particular underlying mutual funds.
These fees in no way affect the net asset value of the underlying mutual funds
or fees paid by the contract owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
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PURCHASE OF SECURITIES BEING OFFERED
The contracts are sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Agents are registered representatives of
broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43215, an
affiliate of Nationwide. No underwriting commissions have been paid by
Nationwide 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 a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1998, the
NSAT- Money Market Fund's seven-day current unit value yield was 3.37% 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, 1998 the NSAT-
Money Market Fund's seven-day effective yield was 3.42%.
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. Yields of other money market funds may not be
comparable if a different base period or another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual 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 and Expense Risk Charge
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.
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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 the original
cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the Prospectus.
3
60 of 123
<PAGE> 61
<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,
1998, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, 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, 1998, and the results of its operations and its
changes in contract owners' equity for each of the years in the two year period
then ended in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
================================================================================
<PAGE> 2
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Balanced (ACVPBal)
477,539 shares (cost $3,775,070) ................................................................ $ 3,982,676
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
172,002 shares (cost $1,470,154) ................................................................ 1,551,459
American Century VP - American Century VP Income & Growth (ACVPIncGr)
365,805 shares (cost $2,304,831) ................................................................ 2,480,156
American Century VP - American Century VP International (ACVPInt)
1,792,850 shares (cost $12,805,392) ............................................................. 13,661,514
American Century VP - American Century VP Value (ACVPValue)
487,250 shares (cost $3,237,726) ................................................................ 3,279,192
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
175,374 shares (cost $5,038,308) ................................................................ 5,450,615
Dreyfus Stock Index Fund (DryStkIx)
1,663,418 shares (cost $48,502,031) ............................................................. 54,094,350
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
135,139 shares (cost $4,364,796) ................................................................ 4,879,867
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
152,633 shares (cost $3,211,720) ................................................................ 3,454,084
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
1,929,188 shares (cost $46,479,811) ............................................................. 49,039,964
Fidelity VIP - Growth Portfolio (FidVIPGr)
692,084 shares (cost $26,780,369) ............................................................... 31,053,812
Fidelity VIP - High Income Portfolio (FidVIPHI)
2,771,740 shares (cost $32,949,014) ............................................................. 31,958,161
Fidelity VIP - Overseas Portfolio (FidVIPOv)
283,588 shares (cost $5,514,054) ................................................................ 5,685,938
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
529,881 shares (cost $8,982,275) ................................................................ 9,622,631
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
1,559,973 shares (cost $32,816,811) ............................................................. 38,125,751
</TABLE>
(Continued)
<PAGE> 3
<TABLE>
<S> <C>
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
940,163 shares (cost $18,680,207) ............................................................... 21,510,931
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
55,433 shares (cost $357,063) ................................................................... 338,139
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
1,114,253 shares (cost $27,767,193) ............................................................. 29,627,984
Nationwide SAT - Government Bond Fund (NSATGvtBd)
1,289,475 shares (cost $15,364,944) ............................................................. 15,073,960
Nationwide SAT - Money Market Fund (NSATMyMkt)
50,069,223 shares (cost $50,069,223) ............................................................ 50,069,223
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
52,327 shares (cost $479,709) ................................................................... 496,579
Nationwide SAT - Small Company Fund (NSATSmCo)
547,930 shares (cost $7,784,774) ................................................................ 8,772,363
Nationwide SAT - Total Return Fund (NSATTotRe)
717,083 shares (cost $12,579,450) ............................................................... 13,194,329
Neuberger &Berman AMT - Growth Portfolio (NBAMTGro)
124,021 shares (cost $2,923,736) ................................................................ 3,260,513
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
49,970 shares (cost $619,318) ................................................................... 691,584
Neuberger &Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
644,612 shares (cost $8,880,370) ................................................................ 8,908,532
Neuberger &Berman AMT - Partners Portfolio (NBAMTPart)
1,300,066 shares (cost $23,290,016) ............................................................. 24,610,253
Oppenheimer VAF - Bond Fund (OppBdFd)
870,502 shares (cost $10,443,019) ............................................................... 10,724,588
Oppenheimer VAF - Global Securities Fund (OppGlSec)
450,692 shares (cost $9,332,374) ................................................................ 9,946,777
Oppenheimer VAF - Growth Fund (OppGro)
38,340 shares (cost $1,234,988) ................................................................. 1,405,944
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
290,347 shares (cost $4,912,367) ................................................................ 4,950,408
Strong Opportunity Fund II, Inc. (StOpp2)
447,282 shares (cost $9,418,706) ................................................................ 9,714,968
Strong VIF - Strong Discovery Fund II (StDisc2)
89,517 shares (cost $1,131,940) ................................................................. 1,138,662
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Strong VIF - Strong International Stock Fund II (StIntStk2)
156,637 shares (cost $1,500,406) ................................................................ 1,375,272
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
178,948 shares (cost $2,120,463) ................................................................ 2,197,486
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
150,411 shares (cost $1,022,807) ................................................................ 1,070,924
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
95,807 shares (cost $903,718) ................................................................... 881,425
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
476,765 shares (cost $7,332,885) ................................................................ 6,560,292
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
601,475 shares (cost $6,406,447) ................................................................ 6,610,206
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
75,281 shares (cost $794,482) ................................................................... 886,811
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
685,443 shares (cost $10,740,233) ............................................................... 10,973,937
------------
Total investments ............................................................................ 503,312,260
Accounts receivable ................................................................................... 1,074,827
------------
Total assets ................................................................................. 504,387,087
ACCOUNTS PAYABLE ......................................................................................... --
------------
CONTRACT OWNERS' EQUITY (NOTE 4) ......................................................................... $504,387,087
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
<PAGE> 5
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL ACVPBAL
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 7,818,099 3,264,187 33,348 6,748
Mortality, expense and administration
charges (note 2)............................. (5,643,109) (2,625,203) (39,181) (14,031)
------------ ------------ ------------ ------------
Net investment activity...................... 2,174,990 638,984 (5,833) (7,283)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 724,145,392 223,236,625 1,370,465 432,187
Cost of mutual fund shares sold................ (716,278,224) (214,504,322) (1,340,497) (400,447)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 7,867,168 8,732,303 29,968 31,740
Change in unrealized gain (loss) on investments 16,445,711 10,048,773 124,972 65,584
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 24,312,879 18,781,076 154,940 97,324
------------ ------------ ------------ ------------
Reinvested capital gains....................... 13,663,741 4,937,879 206,788 28,016
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 40,151,610 24,357,939 355,895 118,057
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 241,794,992 169,332,709 1,611,751 762,078
Transfers between funds........................ -- -- 866,011 262,407
Redemptions.................................... (49,104,065) (18,867,088) (417,463) (99,821)
Annuity benefits .............................. (3,683) -- -- --
Adjustments to maintain reserves............... (13,743) (2,565) 169 (2,476)
------------ ------------ ------------ ------------
Net equity transactions.................... 192,673,501 150,463,056 2,060,468 922,188
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 232,825,111 174,820,995 2,416,363 1,040,245
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 271,561,976 96,740,981 1,566,336 526,091
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $504,387,087 271,561,976 3,982,699 1,566,336
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ACVPCAPAP ACVPINCGR
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- -- 13,971 --
Mortality, expense and administration
charges (note 2)............................. (23,230) (19,639) (9,285) --
------------ ------------ ------------ ------------
Net investment activity...................... (23,230) (19,639) 4,686 --
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 1,861,327 1,970,507 3,462,801 --
Cost of mutual fund shares sold................ (2,002,979) (2,131,768) (3,421,020) --
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (141,652) (161,261) 41,781 --
Change in unrealized gain (loss) on investments 125,669 18,432 175,325 --
------------ ------------ ------------ ------------
Net gain (loss) on investments............... (15,983) (142,829) 217,106 --
------------ ------------ ------------ ------------
Reinvested capital gains....................... 77,047 17,313 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 37,834 (145,155) 221,792 --
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 538,949 604,929 586,130 --
Transfers between funds........................ (186,436) 3,613 1,836,457 --
Redemptions.................................... (172,970) (344,351) (164,220) --
Annuity benefits .............................. -- -- -- --
Adjustments to maintain reserves............... 10 (179) (1,953) --
------------ ------------ ------------ ------------
Net equity transactions.................... 179,553 264,012 2,256,414 --
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 217,387 118,857 2,478,206 --
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 1,334,061 1,215,204 -- --
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 1,551,448 1,334,061 2,478,206 --
============ ============ ============ ============
</TABLE>
<PAGE> 6
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ACVPINT ACVPVALUE
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 39,772 22,729 12,481 1,292
Mortality, expense and administration
charges (note 2)............................. (159,363) (46,316) (39,441) (14,045)
------------ ------------ ------------ ------------
Net investment activity...................... (119,591) (23,587) (26,960) (12,753)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 31,356,628 1,572,496 3,069,812 2,171,228
Cost of mutual fund shares sold................ (31,185,304) (1,357,421) (3,124,822) (2,031,644)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 171,324 215,075 (55,010) 139,584
Change in unrealized gain (loss) on investments 719,921 78,372 27,951 13,515
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 891,245 293,447 (27,059) 153,099
------------ ------------ ------------ ------------
Reinvested capital gains....................... 408,286 43,835 149,013 2,414
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 1,179,940 313,695 94,994 142,760
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 4,813,488 2,980,677 1,438,016 1,137,286
Transfers between funds........................ 3,543,125 638,549 333,167 437,858
Redemptions.................................... (803,970) (167,142) (278,803) (25,736)
Annuity benefits .............................. (542) -- (354) --
Adjustments to maintain reserves............... (221) 32 (438) 13
------------ ------------ ------------ ------------
Net equity transactions.................... 7,551,880 3,452,116 1,491,588 1,549,421
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 8,731,820 3,765,811 1,586,582 1,692,181
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 4,929,570 1,163,759 1,692,181 --
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 13,661,390 4,929,570 3,278,763 1,692,181
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DRYSRGRO DRYSTKIX
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 8,472 12,102 522,901 167,679
Mortality, expense and administration
charges (note 2)............................. (63,111) (25,947) (485,796) (139,726)
------------ ------------ ------------ ------------
Net investment activity...................... (54,639) (13,845) 37,105 27,953
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 6,586,671 3,430,773 39,332,503 6,868,998
Cost of mutual fund shares sold................ (6,462,288) (3,098,404) (36,715,362) (5,807,826)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 124,383 332,369 2,617,141 1,061,172
Change in unrealized gain (loss) on investments 442,083 (19,478) 5,058,856 492,395
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 566,466 312,891 7,675,997 1,553,567
------------ ------------ ------------ ------------
Reinvested capital gains....................... 196,095 94,837 95,170 413,260
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 707,922 393,883 7,808,272 1,994,780
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 1,619,005 1,210,701 17,316,091 9,290,153
Transfers between funds........................ 95,845 1,685,435 15,572,652 2,880,855
Redemptions.................................... (326,063) (387,613) (2,773,953) (947,321)
Annuity benefits .............................. -- -- -- --
Adjustments to maintain reserves............... 28 16 (560) 273
------------ ------------ ------------ ------------
Net equity transactions.................... 1,388,815 2,508,539 30,114,230 11,223,960
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 2,096,737 2,902,422 37,922,502 13,218,740
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 3,353,933 451,511 16,172,340 2,953,600
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 5,450,670 3,353,933 54,094,842 16,172,340
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 7
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
DRYCAPAP DRYGRINC
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 22,474 2,624 24,522 6,248
Mortality, expense and administration
charges (note 2)............................. (34,717) (1,353) (33,541) (6,686)
------------ ------------ ------------ ------------
Net investment activity...................... (12,243) 1,271 (9,019) (438)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 5,604,652 35,302 2,360,951 477,409
Cost of mutual fund shares sold................ (5,779,706) (34,746) (2,425,101) (459,619)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (175,054) 556 (64,150) 17,790
Change in unrealized gain (loss) on investments 516,519 (1,448) 289,005 (46,641)
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 341,465 (892) 224,855 (28,851)
------------ ------------ ------------ ------------
Reinvested capital gains....................... 574 220 33,632 68,534
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 329,796 599 249,468 39,245
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 1,296,381 188,858 1,731,959 489,118
Transfers between funds........................ 3,114,305 193,079 456,443 720,972
Redemptions.................................... (237,901) (4,447) (219,063) (13,558)
Annuity benefits .............................. -- -- -- --
Adjustments to maintain reserves............... (757) (7) (522) 5
------------ ------------ ------------ ------------
Net equity transactions.................... 4,172,028 377,483 1,968,817 1,196,537
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 4,501,824 378,082 2,218,285 1,235,782
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 378,082 -- 1,235,782 --
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 4,879,906 378,082 3,454,067 1,235,782
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIDVIPEI FIDVIPGR
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 438,197 204,640 96,650 94,039
Mortality, expense and administration
charges (note 2)............................. (540,327) (288,383) (299,659) (276,160)
------------ ------------ ------------ ------------
Net investment activity...................... (102,130) (83,743) (203,009) (182,121)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 34,659,555 4,034,511 49,056,647 12,400,367
Cost of mutual fund shares sold................ (31,406,671) (3,594,772) (46,848,717) (11,364,418)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 3,252,884 439,739 2,207,930 1,035,949
Change in unrealized gain (loss) on investments (1,043,501) 2,894,709 2,012,302 2,154,124
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 2,209,383 3,334,448 4,220,232 3,190,073
------------ ------------ ------------ ------------
Reinvested capital gains....................... 1,559,466 1,028,884 2,528,165 420,937
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 3,666,719 4,279,589 6,545,388 3,428,889
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 17,187,231 13,782,024 6,866,625 6,128,449
Transfers between funds........................ 2,340,278 1,770,973 (4,825,633) 3,513,641
Redemptions.................................... (3,613,020) (1,367,993) (2,061,683) (1,163,627)
Annuity benefits .............................. (711) -- (783) --
Adjustments to maintain reserves............... 551 2,091 (188) 129
------------ ------------ ------------ ------------
Net equity transactions.................... 15,914,329 14,187,095 (21,662) 8,478,592
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 19,581,048 18,466,684 6,523,726 11,907,481
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 29,458,165 10,991,481 24,529,865 12,622,384
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 49,039,213 29,458,165 31,053,591 24,529,865
============ ============ ============ ============
</TABLE>
<PAGE> 8
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
FIDVIPHI FIDVIPOV
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 1,651,369 337,770 82,111 27,355
Mortality, expense and administration
charges (note 2)............................. (411,908) (144,268) (77,315) (41,098)
------------ ------------ ------------ ------------
Net investment activity...................... 1,239,461 193,502 4,796 (13,743)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 34,216,558 4,973,688 29,186,608 3,062,464
Cost of mutual fund shares sold................ (36,081,568) (4,894,377) (28,928,508) (2,836,711)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (1,865,010) 79,311 258,100 225,753
Change in unrealized gain (loss) on investments (2,094,999) 975,597 253,115 (150,814)
------------ ------------ ------------ ------------
Net gain (loss) on investments............... (3,960,009) 1,054,908 511,215 74,939
------------ ------------ ------------ ------------
Reinvested capital gains....................... 1,049,307 41,747 242,012 108,590
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... (1,671,241) 1,290,157 758,023 169,786
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 17,519,558 12,510,478 2,071,208 2,013,073
Transfers between funds........................ (1,398,748) 1,193,107 (270,743) 191,729
Redemptions.................................... (2,706,795) (678,694) (491,688) (195,586)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... (64) (65) 44 80
------------ ------------ ------------ ------------
Net equity transactions.................... 13,413,951 13,024,826 1,308,821 2,009,296
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 11,742,710 14,314,983 2,066,844 2,179,082
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 20,215,332 5,900,349 3,619,156 1,440,074
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 31,958,042 20,215,332 5,686,000 3,619,156
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIDVIPAM FIDVIPCON
--------------------------- --------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 169,515 46,047 111,354 79,097
Mortality, expense and administration
charges (note 2)............................. (111,292) (42,376) (355,761) (206,479)
------------ ------------ ------------ ------------
Net investment activity...................... 58,223 3,671 (244,407) (127,382)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 2,252,969 485,808 29,737,118 13,315,382
Cost of mutual fund shares sold................ (2,135,006) (441,012) (27,128,669) (12,210,990)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 117,963 44,796 2,608,449 1,104,392
Change in unrealized gain (loss) on investments 249,950 326,514 3,503,323 1,439,401
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 367,913 371,310 6,111,772 2,543,793
------------ ------------ ------------ ------------
Reinvested capital gains....................... 508,545 115,507 819,250 209,041
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 934,681 490,488 6,686,615 2,625,452
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 3,941,991 2,679,138 8,215,815 7,590,781
Transfers between funds........................ 359,310 755,845 3,891,022 4,579,042
Redemptions.................................... (460,173) (203,214) (2,172,888) (1,044,227)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... 63 (46) 427 167
------------ ------------ ------------ ------------
Net equity transactions.................... 3,841,191 3,231,723 9,934,376 11,125,763
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 4,775,872 3,722,211 16,620,991 13,751,215
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 4,846,817 1,124,606 21,505,171 7,753,956
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 9,622,689 4,846,817 38,126,162 21,505,171
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 9
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
FIDVIPGROP MSEMMKT
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 44,124 -- 24,096 2,855
Mortality, expense and administration
charges (note 2)............................. (213,834) (9,973) (3,100) (826)
------------ ------------ ------------ ------------
Net investment activity...................... (169,710) (9,973) 20,996 2,029
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 5,537,239 726,030 975,706 163,852
Cost of mutual fund shares sold................ (5,154,732) (716,514) (1,073,479) (173,412)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 382,507 9,516 (97,773) (9,560)
Change in unrealized gain (loss) on investments 2,707,877 122,846 (10,716) (8,208)
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 3,090,384 132,362 (108,489) (17,768)
------------ ------------ ------------ ------------
Reinvested capital gains....................... 153,385 -- -- 1,239
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 3,074,059 122,389 (87,493) (14,500)
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 5,943,854 1,745,119 140,519 10,146
Transfers between funds........................ 10,961,989 1,150,039 220,119 115,222
Redemptions.................................... (1,426,662) (59,495) (41,788) (4,078)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... (49) (184) (16) --
------------ ------------ ------------ ------------
Net equity transactions.................... 15,479,132 2,835,479 318,834 121,290
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 18,553,191 2,957,868 231,341 106,790
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 2,957,868 -- 106,790 --
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 21,511,059 2,957,868 338,131 106,790
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NSATCAPAP NSATGVTBD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 121,205 28,299 530,836 137,812
Mortality, expense and administration
charges (note 2)............................. (194,651) (36,484) (129,786) (29,398)
------------ ------------ ------------ ------------
Net investment activity...................... (73,446) (8,185) 401,050 108,414
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 8,182,493 2,917,900 14,587,330 1,955,059
Cost of mutual fund shares sold................ (7,321,337) (2,600,662) (14,190,888) (1,883,110)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 861,156 317,238 396,442 71,949
Change in unrealized gain (loss) on investments 1,616,515 246,705 (294,787) (11,975)
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 2,477,671 563,943 101,655 59,974
------------ ------------ ------------ ------------
Reinvested capital gains....................... 824,866 97,097 72,331 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 3,229,091 652,855 575,036 168,388
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 10,137,216 2,518,104 6,945,212 1,694,494
Transfers between funds........................ 12,658,826 57,514 4,673,391 1,216,393
Redemptions.................................... (987,832) (557,273) (1,039,812) (465,572)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... (148) 59 28 8
------------ ------------ ------------ ------------
Net equity transactions.................... 21,808,062 2,018,404 10,578,819 2,445,323
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 25,037,153 2,671,259 11,153,855 2,613,711
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 4,591,009 1,919,750 3,920,140 1,306,429
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 29,628,162 4,591,009 15,073,995 3,920,140
============ ============ ============ ============
</TABLE>
<PAGE> 10
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NSATMYMKT NSATSMCAPV
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 2,938,981 1,083,859 -- --
Mortality, expense and administration
charges (note 2)............................. (833,529) (307,636) (3,866) --
------------ ------------ ------------ ------------
Net investment activity...................... 2,105,452 776,223 (3,866) --
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 295,687,265 98,322,127 3,943,236 --
Cost of mutual fund shares sold................ (295,687,265) (98,322,127) (3,883,376) --
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... -- -- 59,860 --
Change in unrealized gain (loss) on investments -- -- 16,870 --
------------ ------------ ------------ ------------
Net gain (loss) on investments............... -- -- 76,730 --
------------ ------------ ------------ ------------
Reinvested capital gains....................... -- -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 2,105,452 776,223 72,864 --
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 82,240,994 57,123,968 38,202 --
Transfers between funds........................ (44,327,285) (33,482,476) 418,553 --
Redemptions.................................... (17,913,246) (4,787,228) (33,044) --
Annuity benefits .............................. -- -- -- --
Adjustments to maintain reserves............... (6,570) (404) 3 --
------------ ------------ ------------ ------------
Net equity transactions.................... 19,993,893 18,853,860 423,714 --
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 22,099,345 19,630,083 496,578 --
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 29,048,680 9,418,597 -- --
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 51,148,025 29,048,680 496,578 --
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NSATSMCO NSATTOTRE
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- -- 106,763 51,421
Mortality, expense and administration
charges (note 2)............................. (113,941) (51,451) (140,429) (46,011)
------------ ------------ ------------ ------------
Net investment activity...................... (113,941) (51,451) (33,666) 5,410
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 12,581,286 2,809,142 3,147,742 639,641
Cost of mutual fund shares sold................ (13,368,773) (2,497,219) (2,495,533) (521,320)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (787,487) 311,923 652,209 118,321
Change in unrealized gain (loss) on investments 965,697 5,784 250,851 329,844
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 178,210 317,707 903,060 448,165
------------ ------------ ------------ ------------
Reinvested capital gains....................... -- 163,972 507,144 180,642
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 64,269 430,228 1,376,538 634,217
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 3,669,854 2,904,246 5,926,331 2,504,724
Transfers between funds........................ (266,510) 1,438,504 1,236,248 1,827,273
Redemptions.................................... (660,591) (257,483) (1,081,832) (274,662)
Annuity benefits .............................. (369) -- -- --
Adjustments to maintain reserves............... (484) (39) 50 82
------------ ------------ ------------ ------------
Net equity transactions.................... 2,741,900 4,085,228 6,080,797 4,057,417
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 2,806,169 4,515,456 7,457,335 4,691,634
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 5,965,693 1,450,237 5,737,078 1,045,444
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 8,771,862 5,965,693 13,194,413 5,737,078
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 11
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NBAMTGRO NBAMTGUARD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- -- --
Mortality, expense and administration
charges (note 2)............................. (24,594) (20,908) (4,269) --
------------ ------------ ------------ ------------
Net investment activity...................... (24,594) (20,908) (4,269) --
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 2,684,965 6,321,736 1,888,089 --
Cost of mutual fund shares sold................ (2,990,491) (6,182,637) (2,041,785) --
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (305,526) 139,099 (153,696) --
Change in unrealized gain (loss) on investments 218,132 103,035 72,266 --
------------ ------------ ------------ ------------
Net gain (loss) on investments............... (87,394) 242,134 (81,430) --
------------ ------------ ------------ ------------
Reinvested capital gains....................... 353,652 65,376 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 241,664 286,602 (85,699) --
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 955,194 557,548 357,425 --
Transfers between funds........................ 862,118 130,489 438,620 --
Redemptions.................................... (221,438) (161,294) (18,761) --
Annuity benefits .............................. -- -- -- --
Adjustments to maintain reserves............... (1) 15 (6) --
------------ ------------ ------------ ------------
Net equity transactions.................... 1,595,873 526,758 777,278 --
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 1,837,537 813,360 691,579 --
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 1,422,982 609,622 -- --
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 3,260,519 1,422,982 691,579 --
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NBAMTLMAT NBAMTPART
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 383,662 258,163 51,137 20,903
Mortality, expense and administration
charges (note 2)............................. (100,735) (71,942) (292,955) (164,270)
------------ ------------ ------------ ------------
Net investment activity...................... 282,927 186,221 (241,818) (143,367)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 4,392,774 4,094,715 31,975,759 13,279,727
Cost of mutual fund shares sold................ (4,372,745) (4,068,427) (33,531,240) (11,966,396)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 20,029 26,288 (1,555,481) 1,313,331
Change in unrealized gain (loss) on investments (115,698) 34,840 125,336 1,003,571
------------ ------------ ------------ ------------
Net gain (loss) on investments............... (95,669) 61,128 (1,430,145) 2,316,902
------------ ------------ ------------ ------------
Reinvested capital gains....................... -- -- 1,610,813 321,907
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 187,258 247,349 (61,150) 2,495,442
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 5,590,575 5,079,839 8,523,714 5,824,372
Transfers between funds........................ (2,604,986) (1,711,098) (492,756) 5,978,753
Redemptions.................................... (726,206) (1,222,649) (1,718,726) (733,276)
Annuity benefits .............................. -- -- (369) --
Adjustments to maintain reserves............... 16 9 (2,241) 7
------------ ------------ ------------ ------------
Net equity transactions.................... 2,259,399 2,146,101 6,309,622 11,069,856
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 2,446,657 2,393,450 6,248,472 13,565,298
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 6,461,890 4,068,440 18,361,316 4,796,018
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 8,908,547 6,461,890 24,609,788 18,361,316
============ ============ ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
OPPBDFD OPPGLSEC
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 95,707 197,133 117,153 22,759
Mortality, expense and administration
charges (note 2)............................. (113,685) (44,787) (101,065) (43,231)
------------ ------------ ------------ ------------
Net investment activity...................... (17,978) 152,346 16,088 (20,472)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 2,568,684 2,061,340 3,307,812 744,294
Cost of mutual fund shares sold................ (2,486,541) (2,018,985) (2,953,078) (568,436)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 82,143 42,355 354,734 175,858
Change in unrealized gain (loss) on investments 229,678 48,032 225,573 309,552
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 311,821 90,387 580,307 485,410
------------ ------------ ------------ ------------
Reinvested capital gains....................... 86,615 8,144 440,985 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 380,458 250,877 1,037,380 464,938
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 4,816,861 1,887,783 4,409,750 2,335,737
Transfers between funds........................ 2,107,953 493,944 722,373 519,017
Redemptions.................................... (836,169) (511,176) (597,013) (236,334)
Annuity benefits .............................. -- -- (555) --
Adjustments to maintain reserves............... 22 (7) (259) 39
------------ ------------ ------------ ------------
Net equity transactions.................... 6,088,667 1,870,544 4,534,296 2,618,459
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 6,469,125 2,121,421 5,571,676 3,083,397
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 4,255,487 2,134,066 4,374,815 1,291,418
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 10,724,612 4,255,487 9,946,491 4,374,815
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OPPGRO OPPMULT
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 1,770 -- 32,207 75,849
Mortality, expense and administration
charges (note 2)............................. (9,900) (429) (63,381) (26,768)
------------ ------------ ------------ ------------
Net investment activity...................... (8,130) (429) (31,174) 49,081
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 327,310 84,498 1,047,503 1,002,267
Cost of mutual fund shares sold................ (334,321) (87,993) (1,009,629) (911,071)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (7,011) (3,495) 37,874 91,196
Change in unrealized gain (loss) on investments 172,182 (1,226) (44,041) 70,280
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 165,171 (4,721) (6,167) 161,476
------------ ------------ ------------ ------------
Reinvested capital gains....................... 21,359 -- 186,801 26,880
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 178,400 (5,150) 149,460 237,437
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 677,648 83,147 1,721,887 2,187,072
Transfers between funds........................ 449,508 64,419 355,122 413,253
Redemptions.................................... (41,990) (37) (500,624) (60,166)
Annuity benefits .............................. -- -- -- --
Adjustments to maintain reserves............... 2 7 5 (186)
------------ ------------ ------------ ------------
Net equity transactions.................... 1,085,168 147,536 1,576,390 2,539,973
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 1,263,568 142,386 1,725,850 2,777,410
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 142,386 -- 3,224,563 447,153
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 1,405,954 142,386 4,950,413 3,224,563
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 13
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
STOPP2 STDISC2
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 22,334 33,272 -- --
Mortality, expense and administration
charges (note 2)............................. (131,492) (130,868) (17,066) (19,756)
------------ ------------ ------------ ------------
Net investment activity...................... (109,158) (97,596) (17,066) (19,756)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 11,862,831 13,162,912 1,375,858 4,012,306
Cost of mutual fund shares sold................ (10,831,437) (12,494,689) (1,352,631) (3,727,265)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... 1,031,394 668,223 23,227 285,041
Change in unrealized gain (loss) on investments (689,209) 827,058 43,397 (56,510)
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 342,185 1,495,281 66,624 228,531
------------ ------------ ------------ ------------
Reinvested capital gains....................... 1,068,077 355,754 17,503 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 1,301,104 1,753,439 67,061 208,775
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 4,070,443 3,964,068 408,343 791,629
Transfers between funds........................ (7,922,848) 1,274,003 (332,842) (471,966)
Redemptions.................................... (1,027,921) (658,713) (105,073) (243,741)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... 62 (124) -- 38
------------ ------------ ------------ ------------
Net equity transactions.................... (4,880,264) 4,579,234 (29,572) 75,960
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ (3,579,160) 6,332,673 37,489 284,735
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 13,294,201 6,961,528 1,101,162 816,427
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 9,715,041 13,294,201 1,138,651 1,101,162
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
STINTSTK2 VEWRLDBD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 30,032 47,896 17,723 30,017
Mortality, expense and administration
charges (note 2)............................. (32,452) (43,210) (34,838) (19,604)
------------ ------------ ------------ ------------
Net investment activity...................... (2,420) 4,686 (17,115) 10,413
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 3,587,363 1,174,862 3,158,808 475,287
Cost of mutual fund shares sold................ (3,904,675) (1,210,804) (2,907,439) (481,377)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (317,312) (35,942) 251,369 (6,090)
Change in unrealized gain (loss) on investments 414,317 (542,090) 32,925 27,767
------------ ------------ ------------ ------------
Net gain (loss) on investments............... 97,005 (578,032) 284,294 21,677
------------ ------------ ------------ ------------
Reinvested capital gains....................... -- 69,509 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... 94,585 (503,837) 267,179 32,090
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 728,870 1,870,857 514,516 1,130,555
Transfers between funds........................ (2,029,890) (427,717) (16,366) 48,037
Redemptions.................................... (309,814) (313,725) (499,763) (53,183)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... 13 (1,009) 32 20
------------ ------------ ------------ ------------
Net equity transactions.................... (1,610,821) 1,128,406 (1,581) 1,125,429
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ (1,516,236) 624,569 265,598 1,157,519
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 2,891,518 2,266,949 1,931,919 774,400
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 1,375,282 2,891,518 2,197,517 1,931,919
============ ============ ============ ============
</TABLE>
<PAGE> 14
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
VEWRLDEMKT VEWRLDHAS
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 11,626 3,520 12,719 14,354
Mortality, expense and administration
charges (note 2)............................. (17,849) (15,983) (17,337) (18,473)
------------ ------------ ------------ ------------
Net investment activity...................... (6,223) (12,463) (4,618) (4,119)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 2,802,893 2,611,677 4,026,414 1,170,448
Cost of mutual fund shares sold................ (3,745,736) (2,534,542) (4,792,158) (1,170,355)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (942,843) 77,135 (765,744) 93
Change in unrealized gain (loss) on investments 435,520 (387,463) 52,953 (94,132)
------------ ------------ ------------ ------------
Net gain (loss) on investments............... (507,323) (310,328) (712,791) (94,039)
------------ ------------ ------------ ------------
Reinvested capital gains....................... 10,334 -- 312,331 19,447
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... (503,212) (322,791) (405,078) (78,711)
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 424,278 1,226,712 107,275 751,547
Transfers between funds........................ (249,999) 882,679 (196,342) 106,718
Redemptions.................................... (143,026) (251,274) (71,688) (49,249)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... 209 -- (938) 2
------------ ------------ ------------ ------------
Net equity transactions.................... 31,462 1,858,117 (161,693) 809,018
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ (471,750) 1,535,326 (566,771) 730,307
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 1,542,884 7,558 1,447,250 716,943
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 1,071,134 1,542,884 880,479 1,447,250
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MSRESEC WPINTEQ
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 12,621 189,133 36,266 58,498
Mortality, expense and administration
charges (note 2)............................. (107,856) (62,959) (109,346) (93,063)
------------ ------------ ------------ ------------
Net investment activity...................... (95,235) 126,174 (73,080) (34,565)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 4,004,520 1,455,763 19,997,179 998,275
Cost of mutual fund shares sold................ (4,232,713) (1,231,322) (20,633,499) (933,450)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (228,193) 224,441 (636,320) 64,825
Change in unrealized gain (loss) on investments (858,233) (95,680) 1,103,564 (915,087)
------------ ------------ ------------ ------------
Net gain (loss) on investments............... (1,086,426) 128,761 467,244 (850,262)
------------ ------------ ------------ ------------
Reinvested capital gains....................... 124,195 629,933 -- 404,844
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... (1,057,466) 884,868 394,164 (479,983)
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 2,531,387 4,083,002 1,577,242 3,807,280
Transfers between funds........................ (1,647,687) 892,778 (2,035,796) 490,876
Redemptions.................................... (700,428) (186,537) (634,936) (600,892)
Annuity benefits .............................. ------------ ------------ ------------ ------------
Adjustments to maintain reserves............... (83) 1 60 (294)
------------ ------------ ------------ ------------
Net equity transactions.................... 183,189 4,789,244 (1,093,430) 3,696,970
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ (874,277) 5,674,112 (699,266) 3,216,987
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 7,434,472 1,760,360 7,309,529 4,092,542
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ 6,560,195 7,434,472 6,610,263 7,309,529
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 15
NATIONWIDE VA SEPARATE ACCOUNT-B
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
WPPVENCAP WPSMCOGR
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- 74 -- --
Mortality, expense and administration
charges (note 2)............................. (10,924) (4,887) (136,302) (95,779)
------------ ------------ ------------ ------------
Net investment activity...................... (10,924) (4,813) (136,302) (95,779)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold.......... 2,171,632 2,232,029 4,207,436 5,589,618
Cost of mutual fund shares sold................ (2,299,785) (2,262,483) (3,696,720) (5,275,571)
------------ ------------ ------------ ------------
Realized gain (loss) on investments.......... (128,153) (30,454) 510,716 314,047
Change in unrealized gain (loss) on investments 98,230 (5,984) (683,979) 797,552
------------ ------------ ------------ ------------
Net gain (loss) on investments............... (29,923) (36,438) (173,263) 1,111,599
------------ ------------ ------------ ------------
Reinvested capital gains....................... -- -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations......... (40,847) (41,251) (309,565) 1,015,820
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 201,805 380,854 2,381,399 3,502,163
Transfers between funds........................ 275,542 181,949 1,015,890 (15,708)
Redemptions.................................... (64,812) (13,836) (800,217) (521,885)
Annuity benefits .............................. -- -- -- --
Adjustments to maintain reserves............... 6 23 (45) (661)
------------ ------------ ------------ ------------
Net equity transactions.................... 412,541 548,990 2,597,027 2,963,909
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY............ 371,694 507,739 2,287,462 3,979,729
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD...... 515,118 7,379 8,686,435 4,706,706
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD............ $ 886,812 515,118 10,973,897 8,686,435
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 16
NATIONWIDE VA SEPARATE ACCOUNT-B
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(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)
American Century VP - American Century VP Balanced (ACVPBal)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp)
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value (ACVPValue)
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> 17
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Limited Maturity Bond Portfolio
(NBAMTLMat)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Bond Fund (OppBdFd)
Oppenheimer VAF - Global Securities Fund (OppGlSec)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
Strong Opportunity Fund II, Inc. (StOpp2)
Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF);
Strong VIF - Strong Discovery Fund II (StDisc2)
Strong VIF - Strong International Stock Fund II (StIntStk2)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (MSRESec)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio
(WPPVenCap)
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1998, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2).
The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their
contracts and exclude any purchase payments for fixed dollar benefits,
the latter being included in the accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
<PAGE> 18
(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, 1998. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(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> 19
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1998.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(b)
-------- ---------- ---------
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Balanced:
Tax qualified ............................ 88,999 $ 14.156329 $ 1,259,899 14%
Non-tax qualified ........................ 192,338 14.156329 2,722,800 14%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ............................ 53,093 8.614847 457,388 (4)%
Non-tax qualified ........................ 126,997 8.614847 1,094,060 (4)%
American Century VP -
American Century VP Income & Growth:
Tax qualified ............................ 48,895 10.814821 528,791 8%(a)
Non-tax qualified ........................ 180,254 10.814821 1,949,415 8%(a)
American Century VP -
American Century VP International:
Tax qualified ............................ 263,771 15.247438 4,021,832 17%
Non-tax qualified ........................ 631,540 15.247438 9,629,367 17%
American Century VP -
American Century VP Value:
Tax qualified ............................ 62,022 13.017145 807,349 3%
Non-tax qualified ........................ 189,388 13.017145 2,465,291 3%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ............................ 131,385 18.402864 2,417,860 28%
Non-tax qualified ........................ 164,801 18.402864 3,032,810 28%
Dreyfus Stock Index Fund:
Tax qualified ............................ 1,097,971 19.279341 21,168,157 26%
Non-tax qualified ........................ 1,707,874 19.279341 32,926,685 26%
Dreyfus VIF - Capital Appreciation Portfolio:
Tax qualified ............................ 129,414 13.070279 1,691,477 28%
Non-tax qualified ........................ 243,945 13.070279 3,188,429 28%
Dreyfus VIF - Growth and Income Portfolio:
Tax qualified ............................ 122,527 12.603139 1,544,225 10%
Non-tax qualified ........................ 151,537 12.603139 1,909,842 10%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ............................ 1,277,079 15.220240 19,437,449 10%
Non-tax qualified ........................ 1,944,054 15.220240 29,588,968 10%
Fidelity VIP - Growth Portfolio:
Tax qualified ............................ 670,173 18.497774 12,396,709 37%
Non-tax qualified ........................ 1,007,812 18.497774 18,642,279 37%
Fidelity VIP - High Income Portfolio:
Tax qualified ............................ 946,162 11.993921 11,348,192 (6)%
Non-tax qualified ........................ 1,718,358 11.993921 20,609,850 (6)%
Fidelity VIP - Overseas Portfolio:
Tax qualified ............................ 148,300 13.334585 1,977,519 11%
Non-tax qualified ........................ 278,110 13.334585 3,708,481 11%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ............................ 192,670 14.869310 2,864,870 13%
Non-tax qualified ........................ 454,481 14.869310 6,757,819 13%
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified .......................... 770,623 18.517428 14,269,956 28%
Non-tax qualified ...................... 1,288,311 18.517428 23,856,206 28%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified .......................... 292,587 13.416112 3,925,380 23%
Non-tax qualified ...................... 1,310,788 13.416112 17,585,679 23%
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified .......................... 30,554 6.919419 211,416 (29)%
Non-tax qualified ...................... 18,313 6.919419 126,715 (29)%
Nationwide SAT - Capital Appreciation Fund:
Tax qualified .......................... 622,770 20.201552 12,580,921 28%
Non-tax qualified ...................... 843,858 20.201552 17,047,241 28%
Nationwide SAT - Government Bond Fund:
Tax qualified .......................... 463,915 11.772852 5,461,603 7%
Non-tax qualified ...................... 816,488 11.772852 9,612,392 7%
Nationwide SAT - Money Market Fund:
Tax qualified .......................... 1,007,530 11.112968 11,196,649 4%
Non-tax qualified ...................... 3,595,023 11.112968 39,951,376 4%
Nationwide SAT - Small Cap Value Fund:
Tax qualified .......................... 17,530 8.520115 149,358 (15)%(a)
Non-tax qualified ...................... 40,753 8.520115 347,220 (15)%(a)
Nationwide SAT - Small Company Fund:
Tax qualified .......................... 207,507 13.989917 2,903,006 0%
Non-tax qualified ...................... 419,008 13.989917 5,861,887 0%
Nationwide SAT - Total Return Fund:
Tax qualified .......................... 285,960 17.276235 4,940,312 16%
Non-tax qualified ...................... 477,772 17.276235 8,254,101 16%
Neuberger &Berman AMT - Growth Portfolio:
Tax qualified .......................... 54,978 15.154915 833,187 14%
Non-tax qualified ...................... 160,168 15.154915 2,427,332 14%
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified .......................... 20,062 9.272982 186,035 (7)%(a)
Non-tax qualified ...................... 54,518 9.272982 505,544 (7)%(a)
Neuberger &Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified .......................... 250,457 11.048525 2,767,180 3%
Non-tax qualified ...................... 555,854 11.048525 6,141,367 3%
Neuberger &Berman AMT Partners Portfolio:
Tax qualified .......................... 613,192 16.270918 9,977,197 3%
Non-tax qualified ...................... 898,907 16.270918 14,626,042 3%
Oppenheimer VAF - Bond Fund:
Tax qualified .......................... 212,964 11.659886 2,483,136 5%
Non-tax qualified ...................... 706,823 11.659886 8,241,476 5%
Oppenheimer VAF - Global Securities Fund:
Tax qualified .......................... 273,864 15.232440 4,171,617 12%
Non-tax qualified ...................... 378,435 15.232440 5,764,488 12%
</TABLE>
(Continued)
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C>
Oppenheimer VAF - Growth Fund:
Tax qualified ............................... 42,851 12.734164 545,672 22%
Non-tax qualified ........................... 67,557 12.734164 860,282 22%
Oppenheimer VAF - Multiple Strategies Fund:
Tax qualified ............................... 92,773 13.513276 1,253,667 5%
Non-tax qualified ........................... 273,564 13.513276 3,696,746 5%
Strong Opportunity Fund II, Inc.:
Tax qualified ............................... 160,731 15.660253 2,517,088 12%
Non-tax qualified ........................... 459,632 15.660253 7,197,953 12%
Strong VIF - Strong Discovery Fund II:
Tax qualified ............................... 26,911 11.491081 309,236 6%
Non-tax qualified ........................... 72,179 11.491081 829,415 6%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ............................... 45,767 8.367348 382,948 (6)%
Non-tax qualified ........................... 118,596 8.367348 992,334 (6)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ............................... 54,874 11.425229 626,948 11%
Non-tax qualified ........................... 137,465 11.425229 1,570,569 11%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ............................... 37,152 5.698612 211,715 (35)%
Non-tax qualified ........................... 150,812 5.698612 859,419 (35)%
Van Eck WIT - Worldwide Hard Assets Fund:
Tax qualified ............................... 27,382 6.678951 182,883 (32)%
Non-tax qualified ........................... 104,447 6.678951 697,596 (32)%
Van Kampen American Capital LIT-
Morgan Stanley Real Estate Securities Portfolio:
Tax qualified ............................... 126,607 14.207613 1,798,783 (13)%
Non-tax qualified ........................... 335,131 14.207613 4,761,412 (13)%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ............................... 190,052 10.451107 1,986,254 4%
Non-tax qualified ........................... 442,442 10.451107 4,624,009 4%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ............................... 20,180 11.915674 240,458 5%
Non-tax qualified ........................... 54,244 11.915674 646,354 5%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ............................... 187,796 12.254943 2,301,429 (4)%
Non-tax qualified ........................... 707,671 12.254943 8,672,468 (4)%
================ ================
Reserve for annuity contracts in payout phase:
Tax qualified ............................... 67,617
----------------
$ 504,387,087
================
</TABLE>
(a) This investment option was not being utilized for the entire period.
Accordingly, the annual return was computed for such period as the
investment option was utilized.
(b) The annual return does not include contract charges satisfied by
surrendering units.
================================================================================
<PAGE> 62
<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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
($000's omitted, except per share amounts)
<TABLE>
<CAPTION>
December 31,
Assets 1998 1997
---- ----
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $ 904,946 $ 796,919
Equity securities 20,853 14,767
Mortgage loans on real estate, net 268,894 218,852
Real estate, net 2,250 2,824
Policy loans 332 215
Short-term investments 2,277 18,968
---------- ----------
1,199,552 1,052,545
---------- ----------
Cash 2 5,163
Accrued investment income 11,645 10,778
Deferred policy acquisition costs 53,007 30,087
Other assets 41,542 15,624
Assets held in separate accounts 1,533,690 891,101
---------- ----------
$2,839,438 $2,005,298
========== ==========
Liabilities and Shareholder's Equity
Future policy benefits and claims $1,163,829 $ 986,191
Other liabilities 25,933 29,426
Liabilities related to separate accounts 1,533,690 891,101
---------- ----------
2,723,452 1,906,718
---------- ----------
Commitments and contingencies (note 7 and 11)
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 50,331 35,812
Accumulated other comprehensive income 10,055 7,168
---------- ----------
115,986 98,580
---------- ----------
$2,839,438 $2,005,298
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
($000's omitted)
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Policy charges $ 28,549 $ 11,244 $ 6,656
Life insurance premiums 63 363 246
Net investment income 11,314 11,577 51,045
Realized gains (losses) on investments 696 (246) (3)
Other income 1,165 1,057 --
-------- -------- --------
41,787 23,995 57,944
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 4,881 3,948 34,711
Other benefits and claims 1,586 433 813
Amortization of deferred policy acquisition costs 4,348 1,402 7,380
Other operating expenses 8,952 1,860 7,247
-------- -------- --------
19,767 7,643 50,151
-------- -------- --------
Income before federal income tax expense 22,020 16,352 7,793
Federal income tax expense 7,501 5,749 2,707
-------- -------- --------
Net income $ 14,519 $ 10,603 $ 5,086
======== ======== ========
</TABLE>
See accompanying notes to financial 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, 1998, 1997 and 1996
($000's omitted)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 2,640 $ 52,960 $ 20,123 $ 4,454 $ 80,177
Comprehensive income:
Net income -- -- 5,086 -- 5,086
Net unrealized losses on securities
available-for-sale arising during the -- -- -- (1,226) (1,226)
year
---------
Total comprehensive income 3,860
--------- --------- --------- --------- ---------
December 31, 1996 2,640 52,960 25,209 3,228 84,037
Comprehensive income:
Net income -- -- 10,603 -- 10,603
Net unrealized gains on securities
available-for-sale arising during the -- -- -- 3,940 3,940
year
---------
Total comprehensive income 14,543
--------- --------- --------- --------- ---------
December 31, 1997 2,640 52,960 35,812 7,168 98,580
Comprehensive income:
Net income -- -- 14,519 -- 14,519
Net unrealized gains on securities
available-for-sale arising during the -- -- -- 2,887 2,887
year
---------
Total comprehensive income 17,406
--------- --------- --------- --------- ---------
December 31, 1998 $ 2,640 $ 52,960 $ 50,331 $ 10,055 $ 115,986
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
($000's omitted)
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,519 $ 10,603 $ 5,086
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to policyholder account balances 4,881 3,948 34,711
Capitalization of deferred policy acquisition costs (29,216) (20,099) (19,987)
Amortization of deferred policy acquisition costs 4,348 1,402 7,380
Commission and expense allowances under coinsurance
agreement with affiliate -- -- 26,473
Amortization and depreciation (479) 250 1,721
Realized (gains) losses on invested assets, net (696) 246 3
Increase in accrued investment income (867) (1,589) (725)
(Increase) decrease in other assets (25,919) 21,858 (32,539)
Increase (decrease) in policy liabilities and funds withheld
on coinsurance agreement with affiliate 139,991 228,898 (7,101)
(Decrease) increase in other liabilities (3,883) (7,488) 23,198
--------- --------- ---------
Net cash provided by operating activities 102,679 238,029 38,220
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 117,228 95,366 73,966
Proceeds from sale of securities available-for-sale 17,403 30,431 2,480
Proceeds from repayments of mortgage loans on real estate 28,180 15,199 10,975
Proceeds from sale of real estate 707 -- --
Proceeds from repayments of policy loans 99 67 23
Cost of securities available-for-sale acquired (242,516) (267,899) (179,671)
Cost of mortgage loans on real estate acquired (78,180) (84,736) (57,395)
Cost of real estate acquired (3) (13) --
Policy loans issued (216) (155) (55)
Short-term investments, net 16,691 (18,476) 4,352
--------- --------- ---------
Net cash used in investing activities (140,607) (230,216) (145,325)
--------- --------- ---------
Cash flows from financing activities:
Increase in investment product and universal life insurance
product account balances 74,828 6,952 200,575
Decrease in investment product and universal life insurance
product account balances (42,061) (13,898) (89,174)
--------- --------- ---------
Net cash provided by (used in) financing activities 32,767 (6,946) 111,401
--------- --------- ---------
Net (decrease) increase in cash (5,161) 867 4,296
Cash, beginning of year 5,163 4,296 --
--------- --------- ---------
Cash, end of year $ 2 $ 5,163 $ 4,296
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1998, 1997 and 1996
($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 provides long-term savings and retirement products,
including variable annuities, fixed annuities and life insurance.
(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, 1998 or 1997.
<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 deferred annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of 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. The average interest rate credited on investment product
policy reserves was 5.1%, 5.1% and 5.6% for the years ended
December 31, 1998, 1997 and 1996, respectively.
(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 10. As such, the Company had no cash balance as of
December 31, 1995.
(i) Recently Issued Accounting Pronouncements
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 12.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits. SFAS
132 revises employers' disclosures about pension and other
postretirement benefit plans. The Statement does not change the
measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(j) Reclassification
Certain items in the 1997 and 1996 financial statements have been
reclassified to conform to the 1998 presentation.
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1998 and
1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 15,577 $ 232 $ (11) $ 15,798
Obligations of states and political subdivisions 332 1 -- 333
Debt securities issued by foreign governments 4,015 23 -- 4,038
Corporate securities 602,925 15,446 (358) 618,013
Mortgage-backed securities 261,225 5,605 (66) 266,764
--------- --------- --------- ---------
Total fixed maturity securities 884,074 21,307 (435) 904,946
Equity securities 15,323 5,530 -- 20,853
--------- --------- --------- ---------
$ 899,397 $ 26,837 $ (435) $ 925,799
========= ========= ========= =========
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
========= ========= ========= =========
</TABLE>
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $121,769 $122,931
Due after one year through five years 606,626 621,349
Due after five years through ten years 126,215 130,402
Due after ten years 29,464 30,264
-------- --------
$884,074 $904,946
======== ========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 26,402 $ 20,013
Adjustment to deferred policy acquisition costs (10,933) (8,985)
Deferred federal income tax (5,414) (3,860)
-------- --------
$ 10,055 $ 7,168
======== ========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3,922 $ 9,177 $ (8,764)
Equity securities 2,467 1,663 249
-------- -------- --------
$ 6,389 $ 10,840 $ (8,515)
======== ======== ========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $17,403, $30,431 and $2,480, respectively. During
1998, gross gains of $509 ($825 and $181 in 1997 and 1996,
respectively) and gross losses of $0 ($1,124 and none in 1997 and 1996,
respectively) were realized on those sales. See note 10.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $890 (none as of December 31,
1997). No valuation allowance has been recorded for these loans as of
December 31, 1998. During 1998, the average recorded investment in
impaired mortgage loans on real estate was approximately $178 ($386 in
1997) and interest income recognized on those loans was $15 (none in
1997), 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>
1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $ 750 $ 934
Reductions credited to operations -- (53)
Direct write-downs charged against the allowance -- (131)
----- -----
Allowance, end of year $ 750 $ 750
===== =====
</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 $105
as of December 31, 1998 ($153 as of December 31, 1997). There was a
valuation allowance of $229 as of December 31, 1997.
The Company has no investments which were non-income producing for the
twelve month periods preceding December 31, 1998 and 1997.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $56,398 $53,491 $40,552
Equity securities -- 375 598
Mortgage loans on real estate 21,124 14,862 9,991
Real estate 379 318 214
Short-term investments 1,361 899 507
Other 178 90 57
------- ------- -------
Total investment income 79,440 70,035 51,919
Less:
Investment expenses 1,773 1,386 874
Net investment income ceded (note 9) 66,353 57,072 --
------- ------- -------
Net investment income $11,314 $11,577 $51,045
======= ======= =======
</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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $ 509 $(299) $ 181
Mortgage loans on real estate -- 53 (184)
Real estate and other 187 -- --
----- ----- -----
$ 696 $(246) $ (3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $3,562 and $3,383
as of December 31, 1998 and 1997, respectively, were on deposit with
various regulatory agencies as required by law.
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(4) Federal Income Tax
The Company's current federal income tax liability was $1,522 and $806
as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 16,670 $ 13,168
Liabilities in Separate Accounts 12,477 8,080
Mortgage loans on real estate and real estate 263 336
Other assets and other liabilities -- 48
-------- --------
Total gross deferred tax assets 29,410 21,632
-------- --------
Deferred tax liabilities:
Fixed maturity securities 8,669 7,186
Deferred policy acquisition costs 8,103 6,159
Equity securities 1,935 1,072
Other 10,422 7,892
-------- --------
Total gross deferred tax liabilities 29,129 22,309
-------- --------
$ 281 $ (677)
======== ========
</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, 1998, 1997 and 1996 based on its analysis of future
deductible amounts.
Federal income tax expense for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $ 10,014 $ 2,458 $ 9,612
Deferred tax (benefit) expense (2,513) 3,291 (6,905)
-------- -------- --------
$ 7,501 $ 5,749 $ 2,707
======== ======== ========
</TABLE>
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 7,707 35.0 $ 5,723 35.0 $ 2,728 35.0
Tax exempt interest and dividends
received deduction (223) (1.0) -- (0.0) (175) (2.3)
Other, net 17 0.1 26 (0.2) 154 2.0
------- ------ ------- ------ ------- ------
Total (effective rate of each year) $ 7,501 34.1 $ 5,749 35.2 $ 2,707 34.7
======= ====== ======= ====== ======= ======
</TABLE>
Total federal income tax paid was $9,298, $9,566 and $2,335 during the
years ended December 31, 1998, 1997 and 1996, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(5) Comprehensive Income
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-
for-sale arising during the period:
Gross $ 6,898 $ 10,541 $ (8,334)
Adjustment to deferred policy acquisition costs (1,947) (4,778) 6,628
Related federal income tax (expense) benefit (1,733) (2,017) 362
-------- -------- --------
Net 3,218 3,746 (1,344)
-------- -------- --------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross (509) 299 (181)
Related federal income tax expense (benefit) 178 (105) 63
-------- -------- --------
Net (331) 194 118
-------- -------- --------
Total Other Comprehensive Income $ 2,887 $ 3,940 $ (1,226)
======== ======== ========
</TABLE>
(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.
<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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 is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
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>
1998 1997
------------------------- --------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $ 904,946 $ 904,946 $ 796,919 $ 796,919
Equity securities 20,853 20,853 14,767 14,767
Mortgage loans on real estate, net 268,894 276,387 218,852 229,881
Policy loans 332 332 215 215
Short-term investments 2,277 2,277 18,968 18,968
Cash 2 2 5,163 5,163
Assets held in separate accounts 1,533,690 1,533,690 891,101 891,101
Liabilities:
Investment contracts 1,153,930 1,113,584 980,263 950,105
Policy reserves on life insurance contracts 9,899 10,517 5,928 6,076
Liabilities related to separate accounts 1,533,690 1,501,255 891,101 868,056
</TABLE>
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(7) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties 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.
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by 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.
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 $9,500 extending into
1999 were outstanding as of December 31, 1998.
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 33% (29% in 1997) in any geographic area and no more than 6% (3%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998 36% (37% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed apartment
building properties.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(8) Pension Plan and Postretirement Benefits Other Than Pensions
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $235, $257 and $189,
respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1998 and 1997 was $1,008 and $891, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1998, 1997 and 1996 was $130,
$94 and $78, respectively.
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 2,033,800 $ 1,847,800 $ 237,900 $ 200,700
Service cost 87,600 77,300 9,800 7,000
Interest cost 123,400 118,600 15,400 14,000
Actuarial loss 123,200 60,000 15,600 24,400
Plan curtailment in 1998/merger in 1997 (107,200) 1,500 -- --
Benefits paid (75,800) (71,400) (8,600) (8,200)
----------- ----------- ----------- -----------
Benefit obligation at end of year 2,185,000 2,033,800 270,100 237,900
----------- ----------- ----------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212,900 1,947,900 69,200 63,000
Actual return on plan assets 300,700 328,100 5,000 3,600
Employer contribution 104,100 7,200 12,100 10,600
Plan merger -- 1,100 -- --
Benefits paid (75,800) (71,400) (8,400) (8,000)
----------- ----------- ----------- -----------
Fair value of plan assets at end of year 2,541,900 2,212,900 77,900 69,200
----------- ----------- ----------- -----------
Funded status 356,900 179,100 (192,200) (168,700)
Unrecognized prior service cost 31,500 34,700 -- --
Unrecognized net (gains) losses (345,700) (330,700) 16,000 1,600
Unrecognized net (asset) obligation at transition (11,000) 33,300 1,300 1,500
----------- ----------- ----------- -----------
Prepaid (accrued) benefit cost $ 31,700 $ (83,600) $ (174,900) $ (165,600)
=========== =========== =========== ===========
</TABLE>
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 87,600 $ 77,300 $ 75,500
Interest cost on projected benefit obligation 123,400 118,600 105,500
Expected return on plan assets (159,000) (139,000) (116,100)
Recognized gains (3,800) -- --
Amortization of prior service cost 3,200 3,200 3,200
Amortization of unrecognized transition obligation 4,200 4,200 4,100
--------- --------- ---------
$ 55,600 $ 64,300 $ 72,200
========= ========= =========
</TABLE>
<PAGE> 18
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67,100
resulted (consisting of a $107,200 reduction in the projected benefit
obligation, net of the write-off of the $40,100 remaining unamortized
transition obligation related to WSC). The Company anticipates that the
plan will settle the obligation related to WSC employees with a
transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the
pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service
during the year) $ 9,800 $ 7,000 $ 6,500
Interest cost on accumulated postretirement benefit obligation 15,400 14,000 13,700
Actual return on plan assets (5,000) (3,600) (4,300)
Amortization of unrecognized transition obligation of affiliates 200 200 200
Net amortization and deferral 1,200 (500) 1,800
-------- -------- --------
$21,600 $ 17,100 $ 17,900
======== ======== ========
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
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
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
certain levels, each of which requires specified corrective action. The
Company exceeds the minimum risk-based capital requirements.
The statutory capital and surplus of the Company as reported to
regulatory authorities as of December 31, 1998, 1997 and 1996 was
$70,135, $74,820 and $71,390, respectively. The statutory net (loss)
income of the Company as reported to regulatory authorities for the
years ended December 31, 1998, 1997 and 1996 was $(3,371), $7,446 and
$670, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $7,013.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(10) Transactions With Affiliates
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $430, $703
and $410, 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 $2,933, $2,564 and $2,682 in 1998, 1997
and 1996, 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 $2,750 and $4,981 as of December 31, 1998 and 1997,
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 1998 are included in
NLIC's results of operations for 1998 and include premiums of $241,503,
net investment income of $66,353 and benefits, claims and other
expenses of $296,659. 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.
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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 $2,277 and $18,968 as of December 31,
1998 and 1997, respectively, and are included in short-term investments
on the accompanying balance sheets.
(11) Contingencies
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(12) Segment Information
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
The Variable Annuities segment consists of annuity contracts that
provide the customer with the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for a
prescribed period, with returns accumulating on a tax-deferred basis.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
and all realized gains and losses on investments in a Corporate and
Other segment.
<PAGE> 21
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
Annuities Annuities Insurance and Other Total
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (1,417) $ 6,792 $ 4098 $ 5,531 $ 11,314
Other operating revenue 18,209 3,182 8,386 -- 29,777
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 16,792 9,974 8,794 5,531 41,091
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 4,660 221 -- 4,881
Amortization of deferred policy
acquisition costs 3,466 508 374 -- 4,348
Other benefits and expenses 4,442 2,087 4,009 -- 10,538
----------- ----------- ----------- ----------- -----------
Total expenses 7,908 7,255 4,604 -- 19,767
----------- ----------- ----------- ----------- -----------
Operating income (loss) before
federal income tax 8,884 2,719 4,190 5,531 21,324
Realized gains on investments -- -- -- 696 696
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 8,884 $ 2,719 $ 4,190 $ 6,227 $ 22,020
=========== =========== =========== =========== ===========
Assets as of year end $ 1,502,829 $ 1,162,040 $ 92,482 $ 82,087 $ 2,839,438
=========== =========== =========== =========== ===========
1997:
Net investment income (1) $ (873) $ 5,927 $ 166 $ 6,357 $ 11,577
Other operating revenue 10,823 1,825 16 -- 12,664
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 9,950 7,752 182 6,357 24,241
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 3,856 92 -- 3,948
Amortization of deferred policy
acquisition costs 1,035 347 20 -- 1,402
Other benefits and expenses 1,648 347 298 -- 2,293
----------- ----------- ----------- ----------- -----------
Total expenses 2,683 4,550 410 -- 7,643
----------- ----------- ----------- ----------- -----------
Operating income before federal
income tax 7,267 3,202 (228) 6,357 16,598
Realized losses on investments -- -- -- (246) (246)
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 7,267 $ 3,202 $ (228) $ 6,111 $ 16,352
=========== =========== =========== =========== ===========
Assets as of year end $ 925,021 $ 989,116 $ 2,228 $ 88,933 $ 2,005,298
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
Annuities Annuities Insurance and Other Total
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (849) $ 50,197 $ 149 $ 1,548 $ 51,045
Other operating revenue 5,440 1,445 16 1 6,902
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 4,591 51,642 165 1,549 57,947
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 34,711 -- -- 34,711
Amortization of deferred policy
acquisition costs 1,473 5,888 19 -- 7,380
Benefits and expenses 2,024 5,889 147 -- 8,060
----------- ----------- ----------- ----------- -----------
Total expenses 3,497 46,488 166 -- 50,151
----------- ----------- ----------- ----------- -----------
Operating income before federal
income tax 1,094 5,154 (1) 1,549 7,796
Realized losses on investments -- -- -- (3) (3)
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 1,094 $ 5,154 $ (1) $ 1,546 $ 7,793
=========== =========== =========== =========== ===========
Assets as of year end $ 503,111 $ 787,682 $ 2,597 $ 73,031 $ 1,366,421
=========== =========== =========== =========== ===========
</TABLE>
(1) The Company's method of allocating net investment income
results in a charge (negative net investment income) to the
Variable Annuities segment which is recognized in the
Corporate and Other segment. The charge relates to
non-invested assets which support this segment on a statutory
basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 63
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE
<S> <C> <C>
(a) Financial Statements:
(1) Financial statements included
in Prospectus
(Part A):
Condensed Financial Information 15
(2) Financial statements included
in Part B as required: 61
Nationwide VA Separate Account-B:
Independent Auditors' Report. 61
Statement of Assets, Liabilities and Contract 58 Owners' 62
Equity as of December 31, 1998.
Statements of Operations and Changes in 65
Contract Owners' Equity for the year ended
December 31, 1998 and 1997.
Notes to Financial Statements. 76
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report. 82
Balance Sheets as of December 83
31, 1998 and 1997.
Statements of Income for the 84
years ended December 31, 1998, 1997 and
1996.
Statements of Shareholder's 85
Equity for the years ended December 31,
1998, 1997 and 1996.
Statements of Cash Flows for 86
the years ended December 31, 1998, 1997
and 1996.
Notes to Financial Statements. 87
</TABLE>
104 of 123
<PAGE> 64
Item 24. (b) Exhibits
<TABLE>
<S> <C> <C>
(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.
</TABLE>
* Filed previously in connection with this registration statement (SEC File No.
33-86408) on November 14, 1994, and hereby incorporated by reference.
105 of 123
<PAGE> 65
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
Ralph M. Paige, Executive Director Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
</TABLE>
106 of 123
<PAGE> 66
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1733A Westwood Avenue
Alliance, OH 44601
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Phillip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary
Columbus, OH 43215
Richard D. Headley Senior Vice President - Chief
One Nationwide Plaza Information Technology
Columbus, OH 43215
Donna A. James Senior Vice President -
One Nationwide Plaza Human Resources
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Douglas C. Robinette Senior Vice President-
One Nationwide Plaza Marketing and Product
Columbus, OH 43215 Management
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Bruce C. Barnes Vice President - Technology
One Nationwide Plaza Strategy and Planning
Columbus, OH 43215
</TABLE>
107 of 123
<PAGE> 67
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Vice President - Enterprise
One Nationwide Plaza Controller of Nationwide
Columbus, OH 43215 Financial Services
Matthew S. Easley Vice President -
One Nationwide Plaza Investment Life Actuarial
Columbus, OH 43215
R. Dennis Noice Vice President - Systems
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President - Office of Product
Columbus, OH 43215 and Market Compliance
Mark R. Thresher Vice President - Finance and Treasurer
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
108 of 123
<PAGE> 68
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
The 401K Companies, Inc. Texas Holding Company
The 401(K) Company Texas Third-party administrator for
401(k) plans
401K Investment Advisors, Inc. Texas Investment Advisor registered
with the SEC
401K Investments Services, Inc. Texas NASD registered Broker-Dealer
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
AID Finance Services, Inc. Iowa Holding Company
ALLIED General Agency Company Iowa Managing General Agent and
Surplus Lines Broker (P&C)
ALLIED Group, Inc. Iowa Holding Company
ALLIED Group Insurance Marketing Iowa Direct Marketer (P&C)
Company
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
ALLIED Group Mortgage Company Iowa Mortgage Lender
ALLIED Life Brokerage Agency, Inc. Iowa Insurance Broker
ALLIED Life Financial Corporation Iowa Holding Company
ALLIED Life Insurance Company Iowa Insurance Company
ALLIED Property and Casualty Insurance Iowa Underwrites General P&C
Company Insurance
Allnations, Inc. Ohio Promotes international
cooperative insurance
organizations
AMCO Insurance Company Iowa Underwrites General P&C
Insurance
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
CalFarm Insurance Company California Stock Corporation
Caliber Funding Corporation Delaware Stock Corporation
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GmbH
Cooperative Service Company Nebraska Insurance Agency
Depositors Insurance Company Iowa Underwrites P&C insurance
*Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
Excaliber Funding Corporation Delaware Limited purpose corporation
F&B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Agency of Alabama Insurance Agency
Alabama, Inc.
</TABLE>
109 of 123
<PAGE> 69
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Financial Horizons Distributors Agency of Ohio Insurance Agency
Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma Insurance Agency
Oklahoma, Inc.
Financial Horizons Distributors Agency of Texas Insurance Agency
Texas, Inc.
*Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Corporation Oklahoma Broker-Dealer
GatesMcDonald Health Plus, Inc. Ohio Managed Care Organization
Gates, McDonald & Company Ohio Cost Control
Gates, McDonald & Company of Nevada Nevada Self-insurance administration,
claims examinations and data
processing services
Gates, McDonald & Company of New New York Workers' compensation claims
York, Inc. administration
MedPro Solutions, Inc. Massachusetts Third-party administration
services for workers'
compensation, automobile injury
and disability claims
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance
Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
Midwest Printing Services, Inc. Iowa General Printing Services
Morley & Associates Oregon Insurance Broker
Morley Capital Management, Inc. Oregon Investment Adviser and stable
value money management
Morley Financial Services, Inc. Oregon Holding Company
Morley Research Associates, Ltd. Delaware Credit research consulting
**MRM Investments, Inc. Ohio Owns and operates a
recreational ski facility
**National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
National Deferred Compensation, Inc. Ohio Administers deferred
compensation plans for public
employees
**National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Nationwide Advisory Services, Inc. Ohio Investment Management and
Administrative Services
</TABLE>
110 of 123
<PAGE> 70
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
**Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Special purpose real estate
Redevelopment Corporation corporation
Nationwide Corporation Ohio Holding Company
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services (Bermuda) Bermuda Life Insurance Company
Ltd.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust II
Nationwide Financial Services, Inc. Delaware Holding Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for
International Operations
Nationwide Global Funds Caymen Islands Investment Company
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
*Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Company of California Underwriter
America
Nationwide Insurance Company of Florida Ohio Insurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Services Company, LCC Ohio Shared services functions
Nationwide Insurance Golf Charities, Inc. Ohio Membership Non-Profit
Corporation
Nationwide International Underwriters California Underwriting Manager
Nationwide Investing Foundation Michigan Provide investors with
continuous source of investment
*Nationwide Investing Foundation II Massachusetts Common Law Trust
Nationwide Investment Services Oklahoma Registered Broker-Dealer in
Corporation deferred 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 Property Insurance
</TABLE>
111 of 123
<PAGE> 71
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Management Systems, Inc. Ohio Preferred provider
organization, products and
related services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Funds Ohio Investment Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develop, own and operate real
estate and real estate
investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real
estate and real estate
investments
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public
employees
Nationwide Retirement Solutions, Inc. of Alabama Market and administer deferred
Alabama compensation plans for public
employees
Nationwide Retirement Solutions, Inc. of Arizona Market and administer deferred
Arizona compensation plans for public
employees
Nationwide Retirement Solutions, Inc. of Arkansas Market and administer deferred
Arkansas compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Montana Market and administer deferred
of Montana compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Nevada Market and administer deferred
of Nevada compensation plans for public
employees
Nationwide Retirement Solutions, Inc. New Mexico Market and administer deferred
of New Mexico compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Ohio Market variable annuity
of Ohio contracts to members of the
National Education Association
in the state of Ohio
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity
of Oklahoma contracts to members of the
National Education Association
in the state of Oklahoma
Nationwide Retirement Solutions, Inc. South Dakota Market and administer deferred
of South Dakota compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Texas Market and administer deferred
of Texas compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Wyoming Market variable annuity
of Wyoming contracts to members of the
National Education Association
in the state of Wyoming
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public
employees
</TABLE>
112 of 123
<PAGE> 72
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
*Nationwide Separate Account Trust Massachusetts Investment Company
Nationwide Trust Company, FSB United States of Federal Savings Bank
America
Neckura Holding Company Germany Administrative services for
Neckura Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Nevada Independent Companies- Nevada Workers' compensation
Construction administrative services
Nevada Independent Companies-Health Nevada Workers' compensation
and Nonprofit administrative services
Nevada Independent Companies- Nevada Workers' compensation
Hospitality and Entertainment administrative services
Nevada Independent Companies- Nevada Workers' compensation
Manufacturing administrative services
NFS Distributors, Inc. Delaware Holding Company
NWE, Inc. Ohio Special Investments
PanEuroLife Luxembourg Life Insurance
Pension Associates, Inc. Wisconsin Pension plan administration
Portland Investment Services, Inc. Oregon NASD Registered Broker-Dealer
Premier Agency, Inc. Iowa Insurance Agency
Riverview Agency, Inc. Texas Stock Corporation
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines
Company Insurance Company
SVM Sales GmbH, Neckura Germany Sales support for Neckura
Insurance Group Insurance Group
Union Bond and Trust Company Oregon Oregon state bank with trust
powers
Villanova Capital, Inc. Delaware Holding Company
Villanova Mutual Fund Capital Trust Delaware Business Trust
Villanova SA Capital Trust Delaware Business Trust
**Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
Western Heritage Insurance Company Arizona Excess and Surplus Lines
Insurance Company
</TABLE>
113 of 123
<PAGE> 73
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE/COUNTRY (SEE ATTACHED CHART) UNLESS
OF ORGANIZATION OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<C> <S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide 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 Variable Account -10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account - B Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-A Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-B Separate Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-C Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
114 of 123
<PAGE> 74
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE/COUNTRY (SEE ATTACHED CHART) UNLESS
OF ORGANIZATION OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<C> <S> <C> <C> <C>
* 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 Policies
Account
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
115 of 123
<PAGE> 75
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ----------------------------
| ALLIED LIFE | | ALLIED | | AID FINANCE |
| FINANCIAL | | GROUP, INC. | | SERVICES, INC. |
| CORPORATION | | (AGI) | | (AID FINANCE) |
| (ALFC) | | | | |
|Common Stock: 850 | |Common Stock: 850 Shares | |Common Stock: 10,000 |
|------------ Shares | |------------ | |------------ Shares |
| |---| | |---| | |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
|Casualty- | | |Casualty- | | |Casualty- |
|100% $47,286,429 | | |100% $1,049,237,226| | |100% $19,545,634 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| ALLIED GROUP | | | AMCO | | | ALLIED |
| MERCHANT BANKING | | | INSURANCE COMPANY | | | GROUP INSURANCE |
| CORPORATION | | | (AMCO) | | | MARKETING COMPANY |
|Common Stock: 10,000 | | |Common Stock: 155,991 | | |Common Stock: 20,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| |----| |---| | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
| | | | | | | |Aid Finance- |
|AFLC-100% $100,000 | | | |AGI-100% $95,925,450| | |100% $16,059,469 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | WESTERN | | | DEPOSITORS |
| BROKERAGE | | | | HERITAGE INSURANCE | | | INSURANCE COMPANY |
| AGENCY, INC. | | | | COMPANY | | | (DEPOSITORS) |
|Common Stock: 500,000 | | | |Common Stock: 4,776,076 | | |Common Stock: 199,991 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|AFLC-100% $442,695 | | | |AMCO-100% $11,686,037| | |AGI-100% $15,251,842 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | ALLIED | | | ALLIED PROPERTY |
| INSURANCE | | | | GENERAL AGENCY | | | AND CASUALTY |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 250,000 | | | |Common Stock: 5,000 | | |Common Stock: 156,822 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AFLC-100% $41,732,343| |AMCO-100% $135,342 | | |AGI-100% $33,018,634 |
- --------------------------- --------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| PREMIER | | | ALLIED |
| AGENCY, | | | GROUP MORTGAGE |
| INC. | | | COMPANY |
|Common Stock: 100,000 | | |Common Stock: 9,500 |
|------------ Shares | | |------------ Shares |
| |---|---| |
| Cost | | | Cost |
| ---- | | | ---- |
|AGI-100% $100,000 | | |AGI-100% $213,976 |
--------------------------- | ----------------------------
|
| ----------------------------
| | MIDWEST |
| | PRINTING SERVICES |
| | LTD. |
| |Common Stock: 10,000 |
| |------------ Shares |
|---| |
| Cost |
| ---- |
|AFLC-100% $610,000 |
----------------------------
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |============================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
| || |--------------------------------------------------------------------| |--------------------------
- --| || |
|| |--------------------------------------------------------------|----------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| | NATIONWIDE LLOYDS | | | | | |
|| | | | |Common Stock: 20,000 | |Common Stock: 10,000 |
||==| | |---|------------ Shares | |--|------------ Shares |
|| | A TEXAS LLOYDS | | | | | | |
|| | | | | Cost | | | Cost |
|| | | | | ---- | | | ---- |
|| | | | |Casualty-100% $5,944,422 | | |Casualty-100% $87,943,140 |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | 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 WISCONSIN | | | 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: 10,000 | | | |Common Stock: 1 Share |
| |--------| | ------------ Shares | ---| |--|------------ |
| Cost | | | | | | | |
|Casualty-99.9% ---- | | | Cost | | | | Cost |
|Other Capital: $26,714,335 | | | ---- | | | | ---- |
|------------- | | | SIC-100% $6,000,000 | | | |Neckura-100% DM 51,639 |
|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: 1500 Shares |
| | |------------ |------------|------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- -----------------------------------------------------------------------|
|
- --------------- --------------------------------------------------
| |
- -----------------------------------------------------------------------------------------|----------------------- |
| | | | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | | CORPORATION |
| | | | | REDEVELOPMENT | | | |
| | | | | CORPORATION | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | Cost | | | 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 | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. | | |Common Stock: 10,330 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 | |--------| ---- |
| |------------ Shares | | |------------ Shares | | |Casualty-18.6% $88,320 |
| | Cost | | | Cost | | |Fire-18.6% $88,463 |
| | ---- | | | ---- | | |Preferred Stock 1466 Shares |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 | | |--------------- Cost |
| | | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | LONE STAR | | | NATIONWIDE CASH | | | PENSION ASSOCIATES |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY | | | OF WAUSAU, INC. |
| | | | |Common Stock: 100 Shares | | |Common Stock: 1,000 Shares |
------|Common Stock: 1,000 | |----|------------ | |--------|------------- |
| |------------ Shares | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-90% $9,000 | | | |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 | | |Casualty-100% $2,839,392 |
| -------------------------------- | -------------------------------- | ----------------------------------
| || | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | COLONIAL COUNTY MUTUAL | | | NATIONWIDE INSURANCE | | | AMERCIAN MARINE |
| | INSURANCE COMPANY | | | COMPANY OF FLORIDA | | | UNDERWRITERS, INC. |
| | | | |Common Stock: 10,000 | | |Common Stock: 20 Shares |
| |Surplus Debentures | | |------------- Shares | | |------------- |
| |------------------ | |----| | |--------| Cost |
| | Cost | | | Cost | | ---- |
| | ---- | | | ---- | | |
| |Colonial $500,000 | | |Casualty-100% $300,000,000 | |Casualty-100% $5,020 |
| |Lone Star 150,000 | | | | | |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | WAUSAU INTERNATIONAL |
| | INSURANCE COMPANY | | | UNDERWRITERS |
| |Common Stock 12,000 | | | |
| |------------ Shares | | |Common Stock: 1,000 Shares |
|-----| | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $10,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE |
| | ENTERPRISE SERVICES, LTD. | | | ARENA LLC |
| | | | | |
| |Single Member Limited | | | |
|.....|Liability Company | |....| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
</TABLE>
Page 1
<PAGE> 78
<TABLE>
<CAPTION>
(Left Side)
<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. | || | |
| INVESTORS, 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 | || | NATIONWIDE |
| PROPERTIES, LTD. | | | INVESTING | || | INVESTING |
| | | | FOUNDATION II | || | FOUNDATION III |
| Units: |..| | | || | |
| ------ | | |==||==| |
| | | | || | |
| | | | || | | ----------------------
| NW Life -97.6% | | | || | | | MORLEY RESEARCH |
| NW Mutual -2.4% | | COMMON LAW TRUST | || | OHIO BUSINESS TRUST | | ASSOCIATES, LTD. |
- ----------------------------- ----------------------------- || ----------------------------- | |
|| |Common Stock: 1,000 |
----------------------------- || ----------------------------- |------------- Shares|------
| NATIONWIDE | || | NATIONWIDE | | Cost |
| SEPARATE ACCOUNT | || | ASSET ALLOCATION TRUST | | ---- |
| TRUST | || | | |Morley-100% $1,000|
| | || | | ----------------------
| |==||==| |
| | | |
| | | |
| | | MASSACHUSETTS |
| COMMON LAW TRUST | | BUSINESS TRUST |
----------------------------- -----------------------------
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $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% |
---------------|-------------
|
- -----------------|-------------------------------|-------------------|--------------------------------|-----------------------------
| | | |
-------------|--------------- --------------|-------------- | ---------------|-------------
| MORLEY FINANCIAL | | THE 401(k) COMPANIES, INC.| | | NATIONWIDE RETIREMENT |
| SERVICES, INC. (MORLEY) | | (401(k)) | | | SOLUTIONS, INC. |
|Common Stock: 82,343 | |Common Stock: Control: | | |Common Stock: 236,494 |
|---|------------- Shares | |------------- ------- |--| | |------------- Shares |
| | | |Class A Other-100% | | | | |
| |NFS-100% | |Class B NFS -100% | | | |NRS-100% |
| ----------------------------- ----------------------------- | | ---------------|-------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY & | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | ASSOCIATES, INC. | | SERVICES, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF NEW |
| | | | | | | | ALABAMA | | | MEXICO |
| |Common Stock: 3,500 | | Common Stock: 1,000,000 | | | | Common Stock: 10,000 | | | Common Stock: 1,000 |
|---|------------- Shares | | ------------- Shares |--| | | ------------- Shares |--|--| ------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $1,000 | |401(k)-100% $7,800 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY CAPITAL | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | MANAGEMENT | | ADVISORS, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARIZONA | | | SO. DAKOTA |
| |Common Stock: 500 | |Common Stock: 1,000 | | | |Common Stock: 1,000 | | |Common Stock: 1,000 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $5,000 | |401(k)-100% $1,000 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | UNION BOND | | 401(k) ICOMPANY | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | & TRUST COMPANY | | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARKANSAS | | | WYOMING |
| |Common Stock: 2,000 | |Common Stock: 855,000 | | | |Common Stock: 50,000 | | |Common Stock: 500 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | Cost | | | Cost |
| | ---- | | ---- | | | ---- | | | ---- |
| |Morley-100% $50,000 | |401(k)-100% $1,000 | | |NRS-100% $500 | | |NRS-100% $500 |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | PORTLAND INVESTMENT | | NATIONWIDE TRUST | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | SERVICES, INC. | | COMPANY, FSB | | | SOLUTIONS, INS. AGENCY, | | | SOLUTIONS, INC. OF |
| | | | | | | INC. | | | OHIO |
| |Common Stock: 1,000 | |Common Stock: 2,800,000 | | |Common Stock: 1,000 | | | |
|---|------------- Shares | |------------- Shares |-----| |------------- Shares |--|==| |
| | Cost | | Cost | | | Cost | | | |
| | ---- | | ---- | | | ---- | | | |
| |Morley-100% $25,000 | |NFS-100% $3,500,000 | | |NRS -100% $1,000 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ---------------------------- | ---------------------------
| | EXCALIBER FUNDING | | NATIONWIDE FINANCIAL | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | SERVICES CAPITAL TRUST II | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | MONTANA | | | OKLAHOMA |
| |Common Stock: 1,000 | | | | |Common Stock: 500 | | | |
|---|------------- Shares | | |-----| |------------- Shares |--|==| |
| | Cost | | | | | Cost | | | |
| | ---- | | | | | ---- | | | |
| |Morley-100% $1,000 | |NFS-100% | | |NRS-100% $500 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | CALIBER FUNDING | | NFS DISTRIBUTORS INC. | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | NEVADA | | | TEXAS |
| | | | | | | Common Stock: 1,000 | | | |
|---| | | |-----| | ------------- Shares |--|==| |
| | | | | Cost | | |
| | | | | ---- | | |
|Morley-100% | |NFS-100% | | NRS-100% $1,000 | | |
----------------------------- ----------------------------- ----------------------------- ---------------------------
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------|--------------------|---------------------------------------|
| | |
| ---------------|---------------- --------------|----------------
| | EMPLOYERS LIFE INSURANCE CO. | | GATES MCDONALD |
| | OF WAUSAU (ELIOW) | | & COMPANY (GATES) |
| | | | |
| |Common Stock: 250,000 | |Common Stock: 254 |
| |--|------------- Shares | |--|------------- Shares |
| | | | | | |
| | | Cost | | | Cost |
| | | ---- | | | ---- |
| | |NW CORP. -100% $126,509,480 | | |NW CORP. -100% $25,683,532 |
| | -------------------------------- | -------------------------------
- ------------ | | |
| -------------------------------- | | -------------------------------- | --------------------------------
| | NATIONWIDE TRUST | | | | WAUSAU PREFERRED | | | HEALTHCARE |
| | COMPANY | | | | HEALTH INSURANCE CO. | | | FIRST, INC. |
| | | | | | | | | |
| |Common Stock: 2,800,000 | | | |Common Stock: 200 | | | |
|--|------------- Shares | | |--|------------- Shares | |--| |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |ELIOW -100% $57,413,193 | | |Gates-100% $6,700,000 |
| -------------------------------- | -------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE FINANCIAL | | | NATIONWIDE GLOBAL | | | GATES MCDONALD & COMPANY |
| | SERVICES (BERMUDA) INC. | | | HOLDINGS, INC. (NGH) | | | OF NEW YORK, INC. |
| | | | | | | | |
| |Common Stock: 250,000 | | |Common Stock: 1 | | |Common Stock: 3 |
|--|------------- Shares | |-----|------------- Share | |--|------------- Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |NW CORP.-100% $7,000,000 | | |Gates-100% $106,947 |
| -------------------------------- | -------------------------------- | -------------------------------
| | | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE DEFERRED | | | NATIONWIDE GLOBAL HOLDINGS | | | GATES MCDONALD & COMPANY |
| | COMPENSATION, INC. | | | -HONG KONG, LIMITED | | | OF NEVADA |
| | | | | | | | |
| | | | |Common Stock: 2 | | |Common Stock: 40 |
|--| | | |------------- Shares | |--|------------- Shares |
| | | | | | | | |
| | | | | | | | Cost |
| | | | | | | | ---- |
| |NFS-100% | | |NGH-100% | | |Gates-100% $93,750 |
| -------------------------------- | -------------------------------- | -------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | IRVIN L. SCHWARTZ | | | NATIONWIDE | | | GATES McDONALD |
| | AND ASSOCIATES, INC. | | | HEALTH PLANS, INC. (NHP) | | | HEALTH PLUS, INC. |
| | | | | | | | |
| |Common Stock: Control | | |Common Stock: 100 | | |Common Stock: 200 |
|--|------------- ------- | |-----|------------- Shares |--| |--|------------- Shares |
| | | | | | | |
| | | | Cost | | | Cost |
|Class A Other-100% | | | ---- | | | ---- |
|Class B NFS -100% | | |NW CORP.-100% $14,603,732 | | |Gates-100% $2,000,000 |
-------------------------------- | -------------------------------- | -------------------------------
| |
-------------------------------- | -------------------------------- |
| MRM INVESTMENTS, INC. | | | NATIONWIDE MANAGEMENT | |
| | | | SYSTEMS, INC. | |
| | | | | |
|Common Stock: 1 | | |Common Stock: 100 | |
|------------- Share |--| |------------- Shares |--|
| | | | |
| Cost | | Cost | |
| ---- | | ---- | |
|NW CORP.-100% $7,000,000 | |NHP Inc.-100% $25,149 | |
-------------------------------- -------------------------------- |
|
-------------------------------- |
| NATIONWIDE | |
| AGENCY, INC. | |
| | |
|Common Stock: 100 | |
|------------ Shares |--|
| |
| Cost |
| ---- |
|NHP Inc.-99% $116,077 |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
Page 2
</TABLE>
<PAGE> 81
Item 27. NUMBER OF CONTRACT OWNERS
The number of Contract Owners of Qualified and Non-Qualified
Contracts as of January 31, 1999 was 2,309 and 3,825,
respectively.
Item 28. INDEMNIFICATION
Provision is made in Nationwide's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by Nationwide of any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of Nationwide, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling Nationwide pursuant to the
foregoing provisions, Nationwide has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide Variable Account-10,
Nationwide VA Separate Account - B, Nationwide VA Separate
Account-A, Nationwide VA Separate Account-B, Nationwide VA
Separate Account-C, Nationwide VL Separate Account-A,
Nationwide VL Separate Account-B, Nationwide VL Separate
Account-C, Nationwide VL Separate Account-D, Nationwide VLI
Separate Account-2, Nationwide VLI Separate Account-3,
Nationwide VLI Separate Account-4, Nationwide VLI Separate
Account-5, and the Nationwide Variable Account, all of which
are separate investment accounts of Nationwide or its
affiliates.
NAS also acts as principal underwriter for Nationwide
Separate Account Trust, Nationwide Asset Allocation Trust
and Nationwide Mutual Funds which are open-end management
investment companies.
118 of 123
<PAGE> 82
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
NAME AND POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman and
One Nationwide Plaza Chief Executive Officer and Director
Columbus, OH 43215
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Paul J. Hondros Director
One Nationwide Plaza
Columbus, OH 43215
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
Edwin P. Mc Causland, Jr. Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
Charles S. Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Joseph P. Rath Vice President - Office of Product and
One Nationwide Plaza Market Compliance
Columbus, OH 43215
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
119 of 123
<PAGE> 83
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
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 Internal Revenue is
issued by Nationwide through the Registrant in reliance upon, and
in compliance with, a no-action letter issued by the Staff of the
Securities and Exchange Commission to the American Council of Life
Insurance (publicly available November 28, 1988) permitting
withdrawal restrictions to the extent necessary to comply with
Section 403(b)(11) of the Internal Revenue Code.
Nationwide represents that the fees and charges deducted under the
contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred and risks
assumed by Nationwide.
120 of 123
<PAGE> 84
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, 1999
121 of 123
<PAGE> 85
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of the Nationwide Variable Account-B:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG LLP
Columbus, Ohio
April 29, 1999
122 of 123
<PAGE> 86
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 29th day of
April, 1999.
NATIONWIDE VA SEPARATE ACCOUNT-B
------------------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
------------------------------------------------------
(Depositor)
By /s/JOSEPH P. RATH
------------------------------------------------------
Joseph P. Rath
Vice President-Office of 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 29th day of
April, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
- -------------------------------------------------
Lewis J. Alphin
A. I. BELL Director
- -------------------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- -------------------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- -------------------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -------------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief
- ------------------------------------------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ------------------------------------------------- and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------------------------- Chief Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
- -------------------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
- -------------------------------------------------
James F. Patterson
ARDEN L. SHISLER Director
- -------------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------------------------
Nancy C. Thomas
By /s/JOSEPH P. RATH
-----------------------------------
Joseph P. Rath
Attorney-in-Fact
</TABLE>
123 of 123
