<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 333-44485
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 3 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
NATIONWIDE VA SEPARATE ACCOUNT- C
(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)
Approximate date of proposed public offering: (Upon the effective date of this
Registration Statement. August 1, 1998 requested).
The Registrant hereby agrees to amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall therefore become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such a date as the Commission, acting pursuant to Section 8(a), may
determine.
================================================================================
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NATIONWIDE VA SEPARATE ACCOUNT-C
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page....................................................................................3
Item 2. Definitions...................................................................................5
Item 3. Synopsis or Highlights.......................................................................11
Item 4. Condensed Financial Information.............................................................N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies........................11
Item 6. Deductions and Expenses......................................................................13
Item 7. General Description of Variable Annuity Contracts............................................14
Item 8. Annuity Period...............................................................................20
Item 9. Death Benefit and Distributions..............................................................20
Item 10. Purchases and Contract Value................................................................14
Item 11. Redemptions.................................................................................17
Item 12. Taxes.......................................................................................26
Item 13. Legal Proceedings...........................................................................34
Item 14. Table of Contents of the Statement of Additional Information................................34
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page..................................................................................37
Item 16. Table of Contents...........................................................................37
Item 17. General Information and History.............................................................37
Item 18. Services....................................................................................37
Item 19. Purchase of Securities Being Offered........................................................37
Item 20. Underwriters................................................................................38
Item 21. Calculation of Performance Information......................................................38
Item 22. Annuity Payments............................................................................38
Item 23. Financial Statements........................................................................39
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits...........................................................67
Item 25. Directors and Officers of the Depositor.....................................................69
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant..............71
Item 27. Number of Contract Owners...................................................................81
Item 28. Indemnification.............................................................................81
Item 29. Principal Underwriter.......................................................................81
Item 30. Location of Accounts and Records............................................................83
Item 31. Management Services.........................................................................83
Item 32. Undertakings................................................................................83
</TABLE>
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Home Office
P.O. Box 182008
Columbus, Ohio 43218-2008, 1-800-860-3946
TDD 1-800-238-3035
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS NATIONWIDE VA VARIABLE ACCOUNT-C
The Contracts described in this prospectus are Modified Single Purchase Payment
Contracts (collectively referred to as the "Contracts"). Reference throughout
the prospectus to such Contracts will mean individual Contracts as well as
Certificates issued under Group Modified Single Premium Retirement Contracts.
For such Group Contracts, references to "Contract Owner" will mean the
"Participant" unless the Plan otherwise permits or requires the Contract Owner
to exercise contractual rights under the authority of the plan terms. The
Contracts are sold for use in retirement plans which may qualify for special
federal tax treatment under the Internal Revenue Code (the "Code"). The
Contracts are sold as: Non-Qualified; IRAs; Tax Sheltered Annuities; SEP IRAs;
Roth IRAs; and Qualified. Annuity payments are deferred until a selected later
date.
Purchase Payments are allocated to the Nationwide VA Separate Account-C
("Variable Account"), a separate account of Nationwide Life and Annuity
Insurance Company (the "Company"). Shares of the Underlying Mutual Fund options
are issued only for the purpose of funding benefits of variable annuity
contracts and variable life insurance policies issued by life insurance
companies or, in some cases, through participation in certain qualified pension
or retirement plans. The Variable Account uses its assets to purchase shares at
Net Asset Value in one or more of the following Underlying Mutual Fund options:
AVAILABLE FOR ALL CONTRACTS
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. High Yield Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
NSAT-Money Market Fund
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Developing Markets Fund: Class 2
International Fund: Class 2
THE ONE GROUP(R) INVESTMENT TRUST
Government Bond Fund
Growth Opportunities Fund
Equity Index Fund
This prospectus provides you with the basic information you should know about
the Contracts issued by the Variable Account before investing. You should read
it and keep it for future reference. A Statement of Additional Information dated
________, 1998, containing further information about the Contracts and the
Variable Account has been filed with the Securities and Exchange Commission
("SEC"). You can obtain a copy without charge from Nationwide Life and Annuity
Insurance Company by calling 1-800-860-3946, TDD 1-800-238-3035, or writing P.O.
Box 182008, Columbus, Ohio 43218-2008.
THE BENEFITS DESCRIBED IN THIS PROSPECTUS MAY NOT BE AVAILABLE IN EVERY
JURISDICTION. PLEASE REFER TO YOUR CONTRACT FOR SPECIFIC BENEFIT INFORMATION.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, ANY ADVISER OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED
ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
1
<PAGE> 4
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT
INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SEC MAINTAINS A WEB SITE, WWW.SEC.GOV, THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION AS WELL AS ANY MATERIAL INCORPORATED BY REFERENCE
RELATING TO THIS PROSPECTUS.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED ________, 1998, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 32 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS ________, 1998.
2
<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT - The person designated to receive annuity payments during
Annuitization and upon whose continuation of life any annuity payment involving
life contingencies depends. This person must be below age 86 at the time of
Contract issuance, unless the Company has approved a request for an Annuitant of
greater age. The Annuitant may be changed prior to the Annuitization Date with
the consent of the Company.
ANNUITIZATION - The period during which annuity payments are actually received.
ANNUITIZATION DATE - The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE - The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the data page of the
Contract. The Annuity Commencement Date may be changed by the Contract Owner
with the consent of the Company.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
payments under a Variable Payment Annuity.
BENEFICIARY- The person designated to receive certain benefits under the
Contract when the Annuitant dies prior to the Annuitization Date. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life and Annuity Insurance Company.
CONTINGENT ANNUITANT- The person who may be the recipient of certain rights or
benefits under the Contract when the Annuitant dies before the Annuitization
Date. If a Contingent Annuitant is designated and the Annuitant dies before the
Annuitization Date, the Contingent Annuitant becomes the Annuitant. A Contingent
Annuitant may be named for Non-Qualified Contracts only.
CONTINGENT BENEFICIARY- The person designated to be the Beneficiary if the named
Beneficiary is not living at the time of the death of the Annuitant.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. For Contracts issued
in the state of New York, references throughout this prospectus to "Contingent
Owner" will mean "Owner's Beneficiary." A Contingent Owner may not be named for
Contracts issued as Qualified Contracts, IRAs, SEP IRAs or Tax Sheltered
Annuities.
CONTRACT- The Deferred Variable Annuity Contract described in this prospectus.
CONTRACT ANNIVERSARY - An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER - The person who possesses all rights under the Contract,
including the right to designate and change any designations of the Contract
Owner, Contingent Owner, Annuitant, Contingent Annuitant, Beneficiary,
Contingent Beneficiary, Annuity Payment Option, and the Annuity Commencement
Date. The Contract Owner is the person named as owner on the application, unless
changed.
CONTRACT VALUE- The sum of the value of all Accumulation Units attributable to
the Contract.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the data page of the
Contract.
DEATH BENEFIT- The benefit which is payable upon the death of the Annuitant or
the Contingent Annuitant, if applicable. This benefit does not apply upon the
death of the Contract Owner when the Contract Owner and Annuitant are not the
same person. If the Annuitant dies after the Annuitization Date, any benefit
that may be payable will be as specified in the Annuity Payment Option elected.
DISTRIBUTION- Any payment of part or all of the Contract Value.
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ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED PAYMENT ANNUITY- An annuity providing for payments which are guaranteed by
the Company as to dollar amount during Annuitization.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA) - An annuity contract which qualifies for
favorable tax treatment under Section 408 of the Code.
JOINT OWNER- The Joint Owner possesses an undivided interest in the entire
Contract in conjunction with the Contract Owner. If a Joint Owner is named,
references to "Contract Owner" or "Joint Owner" will apply to both the Contract
Owner and Joint Owner or either of them. Joint Owners must be spouses at the
time joint ownership is requested unless otherwise allowed by state law. Joint
ownership may be selected only for Non-Qualified Contracts.
NET ASSET VALUE - The value of one share of an Underlying Mutual Fund at the end
of a market day or at the close of the New York Stock Exchange. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment under Section 401 or 403(a) (Qualified Plans), 408 (IRAs) or 403(b)
(Tax Sheltered Annuities) of the Code.
PLAN PARTICIPANT-The person for whom contributions are being made to a Qualified
Contract or Tax Sheltered Annuity either through employer contributions or
employee salary reduction contributions.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers among the Sub-Accounts.
QUALIFIED CONTRACT- A contract issued to fund a Qualified Plan.
QUALIFIED PLAN- A retirement plan which receives favorable tax treatment under
Section 401 or 403(a) of the Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Code.
SEP IRA- A retirement plan which receives favorable tax treatment under Section
408(k) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
UNDERLYING MUTUAL FUND - A registered open-end management investment company in
which the assets of the Sub-Accounts will be invested.
VALUATION DATE- Each day the New York Stock Exchange and the Home Office are
open for business or any other day during which there is a sufficient degree of
trading of the Underlying Mutual Fund shares that the current Variable Account
Contract Value might be materially affected.
VALUATION PERIOD- The period of time commencing at the close of a Valuation Date
and ending at the close of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT- The Nationwide VA Separate Account-C, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in the shares of a separate Underlying Mutual Fund.
VARIABLE PAYMENT ANNUITY- An annuity providing for payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GLOSSARY OF SPECIAL TERMS...........................................................................................3
SUMMARY OF CONTRACT EXPENSES........................................................................................7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..............................................................................7
EXAMPLE.............................................................................................................8
SYNOPSIS............................................................................................................9
CONDENSED FINANCIAL INFORMATION...................................................................................N/A
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY.......................................................................9
NATIONWIDE ADVISORY SERVICES, INC...................................................................................9
THE VARIABLE ACCOUNT...............................................................................................10
Underlying Mutual Fund Options..........................................................................10
Voting Rights...........................................................................................10
Substitution of Securities..............................................................................10
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS......................................................................11
Expenses of the Variable Account........................................................................11
Mortality Risk Charge...................................................................................11
Expense Risk Charge.....................................................................................11
Premium Taxes...........................................................................................11
OPERATION OF THE CONTRACT..........................................................................................12
Investments of the Variable Account.....................................................................12
Allocation of Purchase Payments and Contract Value......................................................12
Value of an Accumulation Unit...........................................................................12
Net Investment Factor...................................................................................12
Determining the Contract Value..........................................................................13
Right to Revoke.........................................................................................13
Transfers...............................................................................................13
Contract Ownership......................................................................................14
Joint Ownership.........................................................................................14
Contingent Ownership....................................................................................14
Beneficiary.............................................................................................15
Surrender (Redemption)..................................................................................15
Surrenders Under a Qualified Contract or Tax Sheltered Annuity Contract.................................15
Loan Privilege..........................................................................................16
Assignment..............................................................................................17
CONTRACT OWNER SERVICES............................................................................................18
Asset Rebalancing.......................................................................................18
Dollar Cost Averaging...................................................................................18
Systematic Withdrawals..................................................................................18
ANNUITY PAYMENT PERIOD, DEATH BENEFIT, AND OTHER DISTRIBUTIONS.....................................................18
Annuity Commencement Date...............................................................................18
Annuitization...........................................................................................18
Fixed Payment Annuity - First and Subsequent Payments...................................................19
Variable Payment Annuity - First and Subsequent Payments................................................19
Variable Payment Annuity - Assumed Investment Rate......................................................19
Variable Payment Annuity - Value of an Annuity Unit.....................................................19
Variable Payment Annuity - Exchanges Among Underlying Mutual Fund Options...............................19
Frequency and Amount of Annuity Payments................................................................19
Annuity Payment Options.................................................................................20
Death of Contract Owner - Non-Qualified Contracts.......................................................20
Death of Annuitant - Non-Qualified Contracts............................................................20
Death of the Contract Owner/Annuitant...................................................................21
Death Benefit Payment...................................................................................21
Required Distributions for Non-Qualified Contracts......................................................21
</TABLE>
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<TABLE>
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Required Distributions for Qualified Plans and Tax Sheltered Annuities..................................22
Required Distributions for IRAs and SEP IRAs............................................................23
Required Distributions for Roth IRAs....................................................................24
FEDERAL TAX CONSIDERATIONS.........................................................................................24
Federal Income Taxes....................................................................................24
Puerto Rico.............................................................................................25
Non-Qualified Contracts - Natural Persons as Contract Owners............................................25
Non-Qualified Contracts - Non-Natural Persons as Contract Owners........................................26
Qualified Plans, IRAs, SEP IRAs and Tax Sheltered Annuities.............................................27
Roth IRAs...............................................................................................27
Withholding.............................................................................................27
Non-Resident Aliens.....................................................................................28
Federal Estate, Gift, and Generation Skipping Transfer Taxes............................................28
Charge for Tax..........................................................................................28
Diversification.........................................................................................29
Tax Changes.............................................................................................29
GENERAL INFORMATION................................................................................................29
Contract Owner Inquiries................................................................................29
Statements and Reports..................................................................................30
Advertising.............................................................................................30
YEAR 2000 COMPLIANCE ISSUES........................................................................................32
LEGAL PROCEEDINGS..................................................................................................32
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...........................................................32
APPENDIX ..........................................................................................................33
</TABLE>
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SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES....................................... $0
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE................................ $0
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges.................................1.20%
Administration Charge..............................................0.00%
Total Variable Account Annual Expenses..................1.20%
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(1)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses 12-b1 Fees Fund Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 0.65% 0.10% 0.00% 0.75%
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund 0.63% 0.48% 0.00% 1.11%
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 0.75% 0.40% 0.00% 1.15%
- -----------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.62% 0.08% 0.00% 0.70%
- -----------------------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 0.48% 0.03% 0.00% 0.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund - 1.25% 0.33% 0.25% 1.83%
Developing Markets Fund: Class 2
- -----------------------------------------------------------------------------------------------------------------------------------
Templeton Variable Products Series Fund - 0.69% 0.19% 0.25% 1.13%
International Fund: Class 2
- -----------------------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Equity 0.20% 0.35% 0.00% 0.55%
Index Fund
- -----------------------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Government 0.45% 0.30% 0.00% 0.75%
Bond Fund (2)
- -----------------------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Growth 0.65% 0.45% 0.00% 1.10%
Opportunities Fund (2)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Mutual Fund expenses shown above are assessed at the Underlying Mutual
Fund level and are not direct charges against Variable Account assets or
reductions from Contract Values. These Underlying Mutual Fund expenses are
taken into consideration in computing each Underlying Mutual Fund's Net
Asset Value, which is the share price used to calculate the unit values of
the Variable Account. The management fees and other expenses are more fully
described in the prospectus for each individual Underlying Mutual Fund. The
information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the
Company. Except as otherwise noted, the Management Fees and Other Expenses
are not currently subject to fee waivers or expense reimbursements.
(2) The investment advisers for the indicated Mutual Funds have voluntarily
agreed to reimburse a portion of the management fees and/or operating
expenses resulting in a reduction of the total expenses. Absent any such
reimbursements, the Management Fees, Other Expenses, 12-b1 Fees and Total
Mutual Fund Expenses would have been 0.45%, 0.43%, 0.00% and 0.88% for The
One Group(R) Investment Trust - Government Bond Fund and 0.65%, 0.46%,
0.00% and 1.11% for The One Group(R) Investment Trust - Growth
Opportunities Fund.
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EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender If you annuitize your Contract
Contract at the end of your Contract at the end of at the end of the applicable
the applicable time period the applicable time period time period
- ----------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital 20 63 109 234 20 63 109 234 * 63 109 234
Appreciation Fund
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund 24 75 128 273 24 75 128 273 * 75 128 273
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. International 25 76 130 277 25 76 130 277 * 76 130 277
Equity Fund
- ----------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 20 62 106 229 20 62 106 229 * 62 106 229
- ----------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 18 56 96 208 18 56 96 208 * 56 96 208
- ----------------------------------------------------------------------------------------------------------------------
Templeton Variable 29 89 152 321 29 89 152 321 * 89 152 321
Products Series Fund -
Developing Markets Fund:
Class 2
- ----------------------------------------------------------------------------------------------------------------------
Templeton Variable 22 67 116 248 22 67 116 248 * 67 116 248
Products Series Fund -
International Fund: Class 2
- ----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 18 57 98 212 18 57 98 212 * 57 98 212
Trust - Equity Index Fund
- ----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 20 63 109 234 20 63 109 234 * 63 109 234
Trust - Government Bond
Fund
- ----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 24 74 127 272 24 74 127 272 * 74 127 272
Trust - Growth
Opportunities Fund
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Contracts sold under this prospectus do not permit Annuitization during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that will be
borne directly or indirectly when investing in the Contract. The expenses of the
Variable Account as well as those of the Underlying Mutual Fund options are
reflected in the Example. For more complete descriptions of the expenses of the
Variable Account, see "Variable Account Charges and Other Deductions." For more
complete information regarding expenses paid out of the assets of the Underlying
Mutual Fund options, see the prospectus for each Underlying Mutual Fund.
Deductions for premium taxes may also apply but are not reflected in the Example
shown above (see "Premium Taxes").
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SYNOPSIS
The Contracts described in this prospectus can be categorized as follows: (1)
Non-Qualified; (2) IRAs; (3) Tax Sheltered Annuities; (4) SEP IRAs; (5) Roth
IRAs; and (6) Qualified.
The initial first year Purchase Payment must be at least $15,000 and subsequent
Purchase Payments at least $1,000. The cumulative total of all purchase payments
under contracts issued by the Company on the life of any one designated
Annuitant may not exceed $1,000,000 without the prior consent of the Company
(see "Allocation of Purchase Payments and Contract Value").
The Company does not deduct a sales charge from Purchase Payments made for these
Contracts, nor is any sales charge deducted upon the surrender of the Contract.
The Company deducts a Mortality Risk Charge equal to an annual rate of 0.80% of
the daily net assets of the Variable Account for mortality risks assumed by the
Company (see "Mortality Risk Charge"). The Company deducts an Expense Risk
Charge equal to an annual rate of 0.40% of the daily net assets of the Variable
Account as compensation for the Company's risk by undertaking not to increase
administrative charges on the Contracts regardless of the actual administrative
costs (see "Expense Risk Charge").
Upon Annuitization, the selected Annuity Payment Option will begin (see "Annuity
Payment Options"). However, if the net amount to be applied to any Annuity
Payment Option at the Annuitization Date is less than $5,000, the Contract Value
may be distributed in one lump sum in lieu of annuity payments. If any annuity
payment would be less than $50, the Company will have the right to change the
frequency of payments to such intervals as will result in payments of at least
$50. In no event, however, will annuity payments be made less frequently than
annually (see "Frequency and Amount of Annuity Payments").
Taxation of the Contracts will depend on the type of Contract issued (see
"Federal Tax Considerations"). The Company will charge against the Purchase
Payments or the Contract Value the amount of any premium taxes levied by a state
or any other governmental entity (see "Premium Taxes").
The Contract Owner has a ten day free look to examine the Contract. Within ten
days of the date the Contract is received, it may be returned for any reason to
the Home Office at the address shown on page 1 of this prospectus. If the
Contract is returned to the Company in a timely manner, the Company will void
the Contract and refund the Contract Value in full unless otherwise required by
law. State and/or federal law may provide additional free look privileges. All
IRA, Roth IRA and SEP IRA refunds will be return of Purchase Payments (see
"Right to Revoke").
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide Life and Annuity Insurance Company is a stock life insurance company
organized under the laws of the State of Ohio and was established in February
1981. The Company is a member of the "Nationwide Insurance Enterprise" with its
Home Office at One Nationwide Plaza, Columbus, Ohio 43215.
NATIONWIDE ADVISORY SERVICES, INC.
The Contracts are distributed by the General Distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS and
Nationwide Life and Annuity Insurance Company are wholly owned subsidiaries of
Nationwide Life Insurance Company.
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THE VARIABLE ACCOUNT
The Variable Account was established by the Company on July 24, 1991 pursuant to
Ohio law. The Company has caused the Variable Account to be registered with the
SEC as a unit investment trust pursuant to the Investment Company Act of 1940
("1940 Act"). Such registration does not involve supervision of the management
of the Variable Account or the Company by the SEC.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with liabilities arising out of any other business the
Company may conduct. The Company does not guarantee the investment performance
of the Variable Account. Obligations under the Contracts, however, are
obligations of the Company. Income, gains and losses of the Variable Account,
whether or not realized, are credited to or charged against the Variable Account
without regard to other income, gains, or losses of the Company.
Purchase Payments are allocated among one or more Sub-Accounts corresponding to
one or more of the Underlying Mutual Funds designated by the Contract Owner.
There are two Sub-Accounts within the Variable Account for each of the
Underlying Mutual Fund options which may be designated by the Contract Owner.
One such Sub-Account contains the Underlying Mutual Fund shares attributable to
Accumulation Units under Qualified Contracts, IRAs, Roth IRAs, SEP IRAs, and Tax
Sheltered Annuities and one such Sub-Account contains the Underlying Mutual Fund
shares attributable to Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
A Contract Owner may choose from among a number of different Underlying Mutual
Fund options. See the Appendix which contains a summary of investment objectives
for each Underlying Mutual Fund. More detailed information may be found in the
current prospectus for each Underlying Mutual Fund. Prospectuses for the
Underlying Mutual Funds should be read in conjunction with this prospectus. A
copy of each prospectus may be obtained without charge from the Company by
calling 1-800-860-3946, TDD 1-800-238-3035, or writing P.O. Box 182008,
Columbus, Ohio 43218-2008.
The Underlying Mutual Fund options are NOT available to the general public
directly. The Underlying Mutual Funds are available as investment options in
variable life insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in certain
qualified pension or retirement plans.
Some of the Underlying Mutual Funds have been established by investment advisers
which manage publicly traded mutual funds having similar names and investment
objectives. While some of the Underlying Mutual Funds may be similar to, and may
in fact be modeled after publicly traded mutual funds, Contract purchasers
should understand that the Underlying Mutual Funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any corresponding Underlying
Mutual Funds may differ substantially.
The Underlying Mutual Funds may also be available to registered separate
accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts in which the Underlying Mutual Funds participate. A conflict
may occur due to a number of reasons including a change in law affecting the
operations of variable life insurance policies and variable annuity contracts or
differences in the voting instructions of the Contract Owners and those of other
companies. In the event of conflict, the Company will take any steps necessary
to protect the Contract Owners and variable annuity payees, including withdrawal
of the Variable Account from participation in the Underlying Mutual Fund(s)
involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to amounts allocated
to the Sub-Accounts.
In accordance with its view of applicable law, the Company will vote the shares
of the Underlying Mutual Funds at regular and special meetings of the
shareholders. These shares will be voted in accordance with instructions
received from Contract Owners. If the 1940 Act or any regulation thereunder
should be amended or if the present interpretation changes permitting the
Company to vote the shares of the Underlying Mutual Funds in its own right, it
may elect to do so.
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The Contract Owner is the person who has the voting interest under the Contract.
The number of Underlying Mutual Fund shares attributable to each Contract Owner
is determined by dividing the Contract Owner's interest in each respective
Sub-Account by the Net Asset Value of the Underlying Mutual Fund corresponding
to the Sub-Account. The number of shares which may be voted will be determined
as of the date to be chosen by the Company not more than 90 days prior to the
meeting of the Underlying Mutual Fund. Each person having a voting interest will
receive periodic reports relating to the Underlying Mutual Fund, proxy material
and a form with which to give such voting instructions.
Voting instructions will be solicited by written communication at least 21 days
prior to such meeting. Underlying Mutual Fund shares to which no timely
instructions are received will be voted by the Company in the same proportion as
the voting instructions which are received with respect to all contracts
participating in the Variable Account.
SUBSTITUTION OF SECURITIES
If shares of the Underlying Mutual Fund options are no longer available for
investment by the Variable Account or if, in the judgment of the Company's
management, further investment in such Underlying Mutual Fund shares is
inappropriate, the Company may eliminate Sub-Accounts, combine two or more
Sub-Accounts, or substitute shares of another underlying mutual fund for
Underlying Mutual Fund shares already purchased or to be purchased in the future
with Purchase Payments under the Contract. No substitution of securities in the
Variable Account may take place without prior approval of the SEC.
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
EXPENSES OF THE VARIABLE ACCOUNT
The Variable Account is responsible for the following types of expenses: (1)
mortality risk charge associated with guaranteeing the annuity purchase rates at
issue for the life of the Contracts; and (2) expense risk charges associated
with guaranteeing that the Mortality Risk and Expense Risk Charges described in
this prospectus will not change regardless of actual expenses. If these charges
are insufficient to cover these expenses, the loss will be borne by the Company.
MORTALITY RISK CHARGE
The Company deducts a Mortality Risk Charge from the Variable Account. This
amount is computed on a daily basis and is equal to an annual rate of 0.80% of
the daily net assets of the Variable Account. By guaranteeing the Contract's
annuity rate, the Company assumes the mortality risk. These guarantees cannot
change regardless of the death rates of persons receiving annuity payments or of
the general population. The Company expects to generate a profit from this
charge.
EXPENSE RISK CHARGE
The Company deducts and Expense Risk Charge from the Variable Account. This
amount is computed on a daily basis and is equal to an annual rate of 0.40% of
the daily net assets of the Variable Account. The Company will not increase
charges for administration of the Contracts regardless of its actual expenses.
The Company expects to generate a profit from this charge.
PREMIUM TAXES
The Company will charge against the Contract Value any premium taxes levied by a
state or any other government entity upon Purchase Payments received by the
Company. Premium tax rates currently range from 0% to 3.5%. This range is
subject to change. The method used to recoup premium tax will be determined by
the Company at its sole discretion in compliance with state law. The Company
currently deducts such charges from the Contract Value either at: (1) the time
the Contract is surrendered; (2) Annuitization; or (3) such earlier date as the
Company may become subject to such taxes.
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OPERATION OF THE CONTRACT
INVESTMENTS OF THE VARIABLE ACCOUNT
The Contract Owner may have Purchase Payments allocated among one or more of the
Sub-Accounts. Shares of the Underlying Mutual Fund options specified by the
Contract Owner are purchased at Net Asset Value for the respective
Sub-Account(s) and converted into Accumulation Units. The Contract Owner may
change the allocation of Purchase Payments or may exchange amounts among the
Sub-Accounts. Such transactions may be subject to conditions imposed by the
Underlying Mutual Funds, as well as those set forth in the Contract.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts in accordance with
the designation of the Underlying Mutual Funds by the Contract Owner and
converted into Accumulation Units.
The initial first year Purchase Payment must be at least $15,000 and additional
payments, if any, must be at least $1,000. The Contract Owner may increase or
decrease Purchase Payments or change the frequency of payment. The Contract
Owner is not obligated to continue Purchase Payments in the amount or at the
frequency elected. There are no penalties for failure to continue Purchase
Payments. The cumulative total of all purchase payments under contracts issued
by the Company on the life of any one Annuitant may not exceed $1,000,000
without prior consent of the Company.
THE PURCHASER IS CAUTIONED THAT INVESTMENT RETURN ON SMALL INITIAL AND
SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE COMPANY.
The initial Purchase Payment allocated to designated Sub-Accounts will be priced
no later than 2 business days after receipt of an order to purchase if the
application and all information necessary for processing the purchase order are
complete. The Company may, however, retain the Purchase Payment for up to 5
business days while attempting to complete an incomplete application. If the
application cannot be made complete within 5 business days, the prospective
purchaser will be informed of the reasons for the delay and the Purchase Payment
will be returned immediately unless the prospective purchaser specifically
consents to the Company retaining the Purchase Payment until the application is
complete. Thereafter, subsequent Purchase Payments will be priced on the basis
of the Accumulation Unit value next computed for the appropriate Sub-Account
after the additional Purchase Payment is received.
Purchase Payments will not be priced on the following nationally recognized
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF AN ACCUMULATION UNIT
The Accumulation Unit value for any Valuation Period is determined by
multiplying the Accumulation Unit value for each Sub-Account for the immediately
preceding Valuation Period by the net investment factor for the Sub-Account
during the subsequent Valuation Period. Though the number of Accumulation Units
will not change as a result of investment experience, the value of an
Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period.
NET INVESTMENT FACTOR
The net investment factor for any Valuation Period is determined by dividing (a)
by (b) and then subtracting (c) where:
(a) is the net of:
(1) the Net Asset value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the current
Valuation Period; and
(2) the per share amount of any dividend or income distributions
made by the Underlying Mutual Fund held in the Sub-Account if
the ex-dividend date occurs during the current Valuation Period.
(b) is the Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately preceding
Valuation Period.
(c) is a factor representing the daily Mortality Risk Charge and Expense
Risk Charge. Such factor is equal to an annual rate of 1.20% of the
daily net assets of the Variable Account.
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The net investment factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the net investment factor may not be directly proportional to changes
in the Net Asset Value of Underlying Mutual Fund shares, because of the
deduction for the Mortality Risk Charge and Expense Risk Charge.
DETERMINING THE CONTRACT VALUE
The Contract Value is the sum of the value of all Accumulation Units. The number
of Accumulation Units credited to each Sub-Account is determined by dividing the
net amount allocated to the Sub-Account by the Accumulation Unit value for the
Sub-Account for the Valuation Period during which the Purchase Payment is
received by the Company. If part or all of the Contract Value is surrendered, or
charges or deductions are made against the Contract Value, an appropriate number
of Accumulation Units will be deducted in the same proportion that the Contract
Owner's interest in the Variable Account bears to the total Contract Value.
RIGHT TO REVOKE
The Contract Owner has a ten day free look to examine the Contract. Within ten
days of the date the Contract is received, it may be returned for any reason to
the Home Office at the address shown on page 1 of this prospectus. If the
Contract is returned to the Company in a timely manner, the Company will void
the Contract and refund the Contract Value in full, unless otherwise required by
law. State and/or federal law may provide additional free look privileges.
All IRA, Roth IRA and SEP IRA refunds will be return of Purchase Payments.
The liability of the Variable Account under this provision is limited to the
Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
Transfers among the Sub-Accounts are subject to the terms and conditions of the
Underlying Mutual Funds. The Contract Owner's value in each Sub-Account will be
determined as of the date the transfer request is received in good order in the
Home Office. Once the Contract has been annuitized, transfers may only be made
on each anniversary of the Annuitization Date.
Transfers may be made either in writing or, in states allowing such transfers,
by telephone. This telephone exchange privilege is made available to Contract
Owners automatically without the Contract Owner's election. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include the following: requesting
identifying information, such as name, Contract number, Social Security Number,
and/or personal identification number; tape recording all telephone
transactions; or providing written confirmation thereof to both the Contract
Owner and any agent of record, at the last address of record; or such other
procedures as the Company may deem reasonable. Although the Company's failure to
follow reasonable procedures may result in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers, the Company will
not be liable for following instructions communicated by telephone which it
reasonably believes to be genuine. Any losses incurred pursuant to actions taken
by the Company in reliance on telephone instructions reasonably believed to be
genuine will be borne by the Contract Owner.
Contracts described in this prospectus may be sold to individuals who
independently utilize the services of a firm or individual engaged in market
timing. Generally, such firms or individuals obtain authorization from multiple
Contract Owners to make transfers and exchanges among the Sub-Accounts (the
Underlying Mutual Funds) on the basis of perceived market trends. Because of the
unusually large transfers of funds associated with some of these transactions,
the ability of the Company or Underlying Mutual Funds to process such
transactions may be compromised, and the execution of such transactions may
possibly disadvantage or work to the detriment of other Contract Owners not
utilizing market timing services.
Accordingly, the right to exchange Contract Values among the Sub-Accounts may be
subject to modification if such rights are exercised by a market timing firm or
any other third party authorized to initiate transfer or exchange transactions
on behalf of multiple Contract Owners. THE RIGHTS OF INDIVIDUAL CONTRACT OWNERS
TO EXCHANGE CONTRACT VALUES, WHEN INSTRUCTIONS ARE SUBMITTED DIRECTLY BY THE
CONTRACT OWNER, OR BY THE CONTRACT OWNER'S REPRESENTATIVE OF RECORD AS
AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF ATTORNEY
FORM,
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WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the Company may,
among other things, not accept:
(1) the transfer or exchange instructions of any agent acting under a power
of attorney on behalf or more than one Contract Owner; or
(2) the transfer or exchange instructions of individual Contract Owners who
have executed preauthorized transfer or exchange forms which are
submitted by market timing firms or other third parties on behalf of
more than one Contract Owner at the same time.
The Company will not impose any such restrictions or otherwise modify exchange
rights unless such action is reasonably intended to prevent the use of such
rights in a manner that will disadvantage or potentially impair the contract
rights of other Contract Owners.
CONTRACT OWNERSHIP
Unless the Contract otherwise provides, the Contract Owner has all rights under
the Contract. PURCHASERS NAMING SOMEONE OTHER THAN THEMSELVES AS OWNER WILL HAVE
NO RIGHTS UNDER THE CONTRACT. Prior to the Annuitization Date, the Contract
Owner may name a new Contract Owner in Non-Qualified Contracts. Such change may
be subject to state and federal gift taxes and may also result in federal income
taxation. Any change of Contract Owner designation will automatically revoke any
prior Contract Owner designation. Once proper notice of the change is recorded
by the Home Office, the change will become effective as of the date the written
request was signed. A change of Contract Owner will not apply and will not be
effective with respect to any payment made or action taken by the Company prior
to the time that the change was recorded by the Home Office.
Prior to the Annuitization Date, the Contract Owner may request a change in the
Annuitant, the Contingent Annuitant, Contingent Owner, Beneficiary, or
Contingent Beneficiary. Such a request must be made in writing on a form
acceptable to the Company and must be signed by the Contract Owner. Such request
must be received at the Home Office prior to the Annuitization Date. Any change
is subject to review and approval by the Company. If the Contract Owner is not a
natural person and there is a change of the Annuitant, Distributions will be
made as if the Contract Owner died at the time of the change.
On the Annuitization Date, the Annuitant will become the Contract Owner.
JOINT OWNERSHIP
Joint Owners must be spouses at the time joint ownership is requested, unless
otherwise required by law. If a Joint Owner is named, the Joint Owner will
possess an undivided interest in the Contract. The exercise of any ownership
right in the Contract will require a written request signed by both Joint
Owners. The Company will not be liable for any loss, liability, cost, or expense
for acting in accordance with the instructions of either Joint Owner.
CONTINGENT OWNERSHIP
The Contingent Owner is the person who may receive certain benefits under the
Contract if a Contract Owner, who is not the Annuitant, dies prior to the
Annuitization Date and there is no surviving Joint Owner. If no Contingent Owner
survives a Contract Owner and there is no surviving Joint Owner, all rights and
interest in the Contract will vest in the Contract Owner's estate. If a Contract
Owner, who is also the Annuitant, dies before the Annuitization Date and there
is no surviving Joint Owner, the Contingent Owner will not have any rights in
the Contract unless the Contingent Owner is also the named Beneficiary.
Subject to the terms of any existing assignment, the Contract Owner may change
the Contingent Owner prior to the Annuitization Date by written notice to the
Company. Once proper notice of the change is recorded by the Home Office, the
change will become effective as of the date the written request was signed,
whether or not the Contract Owner is living at the time of recording, but
without further liability as to any payment or settlement made by the Company
before receipt of the change.
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BENEFICIARY
The Beneficiary is the person(s) who may receive certain benefits under the
Contract in the event the Annuitant dies prior to the Annuitization Date. If
more than one Beneficiary survives the Annuitant, each will share equally unless
otherwise specified in the Beneficiary designation. If no Beneficiary survives
the Annuitant, all rights and interest of the Beneficiary will vest in the
Contingent Beneficiary. If more than one Contingent Beneficiary survives, each
will share equally unless otherwise specified in the Contingent Beneficiary
designation. If no Contingent Beneficiaries survive the Annuitant, all rights
and interest of the Contingent Beneficiary will vest with the Contract Owner or
the estate of the last surviving Contract Owner.
Subject to the terms of any existing assignment, the Contract Owner may change
the Beneficiary or Contingent Beneficiary during the lifetime of the Annuitant
by written notice to the Company. Once proper notice of the change is recorded
by the Home Office, the change will become effective as of the date the written
request was signed, whether or not the Annuitant is living at the time of
recording, but without further liability as to any payment or settlement made by
the Company before receipt of such change.
SURRENDER (REDEMPTION)
Prior to the earlier of the Annuitization Date or the death of the Annuitant,
the Company will allow the Contract Owner to surrender a portion or all of the
Contract Value. The request for surrender must be made in writing and must
include the Contract when surrendering the Contract in full. In some cases the
Company will require additional documentation. The Company may require that the
signature(s) be guaranteed by a member firm of a major stock exchange or other
depository institution qualified to give such a guaranty.
When requested the Company will surrender a number of Accumulation Units from
the Variable Account to equal the gross dollar amount requested. The number of
Accumulation Units surrendered from each Sub-Account will be in the same
proportion that the Contract Owner's interest in the Sub-Accounts bears to the
total Contract Value.
The Company will pay any amounts surrendered from the Sub-Accounts within 7
days. However, the Company reserves the right to suspend or postpone the date of
any payment for any Valuation Period when:
(1) the New York Stock Exchange ("Exchange") is closed;
(2) trading on the Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held in
the Variable Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Variable Account's
net assets; or
(4) the SEC, by order, permits such suspension or postponement for the
protection of security holders.
The applicable rules and regulations of the SEC will govern as to whether the
conditions prescribed in (2) and (3) exist.
The Contract Value on surrender may be more or less than the total of Purchase
Payments made by a Contract Owner, depending on the market value of the
Underlying Mutual Fund shares.
SURRENDERS UNDER A QUALIFIED CONTRACT OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Contract Owner may surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a qualified cash or deferred arrangement (within the
meaning of Code Section 402(g)(3)(A)), a salary reduction agreement
(within the meaning of Code Section 402(g)(3)(C)), or transfers from
a Custodial Account described in Section 403(b)(7) of the Code, may
be executed only:
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the
case of hardship may not include any income attributable to
salary reduction contributions.
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B. The surrender limitations described in Section A above 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 exercise of a
contractual ten-day free look provision (when available), may result
in the immediate application of taxes and penalties and/or
retroactive disqualification of a Qualified Contract or Tax
Sheltered Annuity.
A premature Distribution may not be eligible for rollover treatment. To assist
in preventing disqualification of a Tax Sheltered Annuity in the event of a ten
day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Code Section
401(k)(2)(B), Code Section 403(b)(11) and Revenue Ruling 90-24. Such
restrictions are subject to legislative change and/or reinterpretation.
Distributions pursuant to Qualified Domestic Relations Orders will not be
considered to be a violation of the restrictions stated in this provision.
The Contract surrender provisions may also be modified pursuant to the plan
terms and tax provisions of the Code when the Contract is issued to fund a
Qualified Plan.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Contract Owner of a Qualified Contract or
Tax Sheltered Annuity Contract may receive a loan from the Contract Value
subject to the terms of the Contract, the plan, and the Code, which may impose
restrictions on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000, unless a lower minimum amount is mandated by state law. In
non-ERISA plans, for Contract Values up to $20,000, the maximum loan balance
which may be outstanding at any time is 80% of the Contract Value, but not more
than $10,000. If the Contract Value is $20,000 or more, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. For ERISA plans, the maximum loan balance which may be outstanding
at any time is 50% of the Contract Value, but not more than $50,000. The $50,000
limit will be reduced by the highest loan balances owed during the prior
one-year period. Additional loans are subject to the Contract minimum amount.
The aggregate of all loans may not exceed the Contract Value limitations stated
in this provision. For salary reduction Tax Sheltered Annuities, loans may only
be secured by the Contract Value.
All loans are made from a collateral fixed account. An amount equal to the
principal amount of the loan will be transferred to the collateral fixed
account. The Company will transfer to the collateral fixed account the
Sub-Account's Accumulation Units in proportion to the assets in each option
until the required balance is reached or all such Accumulation Units are
exhausted. No withdrawal charges are deducted at the time of the loan, or on the
transfer from the Variable Account to the collateral fixed account.
Until the loan has been repaid in full, that portion of the collateral fixed
account equal to the outstanding loan balance will be credited with interest at
a rate 2.25% less than the loan interest rate fixed by the Company for the term
of the loan. However, the interest rate credited to the collateral fixed account
will never be less than 3.0%.
Specific loan terms are disclosed at the time of loan application or loan
issuance.
Loans must be repaid in substantially level payments, not less frequently than
quarterly, within five years. Loans used to purchase the principal residence of
the Contract Owner must be repaid within 15 years. During the loan term, the
outstanding balance of the loan will continue to earn interest at an annual rate
as specified in the loan agreement. Loan repayments will consist of principal
and interest in amounts set forth in the loan agreement. Loan repayments will be
allocated among the Sub-Accounts in accordance with the Contract, unless the
Contract Owner and the Company agree to amend the Contract at a later date on a
case by case basis.
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Any amounts distributed will be reduced by the amount of the loan outstanding,
plus accrued interest if:
(1) the Contract is surrendered;
(2) the Contract Owner/Annuitant dies; or
(3) the Contract Owner who is not the Annuitant dies prior to
Annuitization.
In addition, the Contract Value will be reduced by the amount of any outstanding
loans plus accrued interest if annuity payments begin while the loan is
outstanding. Until the loan is repaid, the Company reserves the right to
restrict any transfer of the Contract which would otherwise qualify as a
transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available under the terms of the loan agreement. If a loan
payment is not made when due, or by the end of the applicable grace period, the
entire loan will be treated as a deemed Distribution, will be taxable to the
borrower, and may be subject to the early withdrawal tax penalty. Interest will
continue to accrue on the loan after default. Any defaulted amounts, plus
accrued interest, will be deducted from the Contract when the participant
becomes eligible for a Distribution of at least that amount. Additional loans
may not be available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions under the
terms of a Qualified Plan or Tax Sheltered Annuity Plan. Loans permitted under
this Contract may still be taxable in whole or part if the participant has
additional loans from other plans or contracts. The Company will calculate the
maximum nontaxable loan based on the information provided by the participant or
the employer.
Loan repayments must be identified as such or else they will be treated as
Purchase Payments and will not be used to reduce the outstanding loan principal
or interest due. The Company reserves the right to modify the loan's terms or
procedures if there is a change in applicable law. The Company also reserves the
right to assess a loan processing fee.
IRAs, Roth IRAs, SEP IRAs and Non-Qualified Contracts are not eligible for
loans.
ASSIGNMENT
The Contract Owner of a Non-Qualified Contract may assign some or all rights
under the Contract at any time during the lifetime of the Annuitant prior to the
Annuitization Date. Once proper notice of assignment is recorded by the Home
Office, the assignment will become effective as of the date the written request
was signed. The Company is not responsible for the validity or tax consequences
of any assignment. The Company will not be liable for any payment or other
settlement made by the Company before recording of the assignment. Where
necessary for the proper administration of the terms of the Contract, an
assignment will not be recorded until the Company has received sufficient
direction from the Contract Owner and assignee as to the proper allocation of
Contract rights under the assignment.
Any portion of the Contract Value which is pledged or assigned will be treated
as a Distribution and will be included in gross income to the extent that the
cash value exceeds the investment in the Contract for the taxable year in which
it was pledged or assigned. In addition, any Contract Value assigned may be
subject to a tax penalty equal to 10% of the amount which is included in gross
income. All rights in the Contract are personal to the Contract Owner and may
not be assigned without written consent of the Company. Assignment of the entire
Contract Value may cause the portion of the Contract Value exceeding the total
investment in the Contract and previously taxed amounts to be included in gross
income for federal income tax purposes each year that the assignment is in
effect.
IRAs, Roth IRAs, SEP IRAs, Tax Sheltered Annuities, and Qualified Contracts, may
not be assigned, pledged or otherwise transferred except under such conditions
as may be allowed by law.
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CONTRACT OWNER SERVICES
ASSET REBALANCING - The Contract Owner may direct the automatic reallocation of
Contract Values to the Sub-Accounts on a predetermined percentage basis. Asset
Rebalancing will occur every three months or on another frequency authorized by
the Company. If the last day of the three month period falls on a Saturday,
Sunday, recognized holiday or any other day when the New York Stock Exchange is
closed, the Asset Rebalancing reallocation will occur on the first business day
after that day. Asset Rebalancing requests must be in writing on a form provided
by the Company. The Contract Owner may want to contact a financial adviser to
discuss the use of Asset Rebalancing.
Asset Rebalancing may be subject to employer imposed limitations or restrictions
for Contracts issued to a Qualified Plan or Tax-Sheltered Annuity Plan.
The Company reserves the right to discontinue establishing new Asset Rebalancing
programs. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING - The Contract Owner may direct the Company to
automatically transfer a specified amount from the NSAT Money Market Fund to any
other Sub-Account within the Variable Account. Dollar Cost Averaging will occur
on a monthly basis or on another frequency permitted by the Company. Dollar Cost
Averaging is a long-term investment program which provides for regular, level
investments over time. There is no guarantee that Dollar Cost Averaging will
result in a profit or protect against loss. The minimum monthly transfer is
$100. Transfers will be processed until either the value in the originating
Sub-Account is exhausted or the Contract Owner instructs the Home Office in
writing to cancel the transfers.
The Company reserves the right to discontinue establishing new Dollar Cost
Averaging programs. The Company also reserves the right to assess a processing
fee for this service.
SYSTEMATIC WITHDRAWALS - A Contract Owner may elect in writing to begin
receiving withdrawals of a specified dollar amount (of at least $100) on a
monthly, quarterly, semi-annual, or annual basis. The withdrawals will be taken
from the Sub-Accounts and the Fixed Account on a prorated basis. A CDSC may
apply (see "Contingent Deferred Sales Charge"). Unless directed otherwise by the
Contract Owner, the Company will withhold federal income taxes. In addition, a
10% penalty tax may be assessed by the IRS if the Contract Owner is under age
59-1/2, unless the Contract Owner has made an irrevocable election of
distributions of substantially equal payments. Withdrawals may be discontinued
at any time by notifying the Home Office in writing.
The Company reserves the right to discontinue establishing new Systematic
Withdrawal programs. The Company also reserves the right to assess a processing
fee for this service. Systematic Withdrawals are not available prior to the
expiration of the ten day free look provision of the Contract (see "Right to
Revoke").
ANNUITY PAYMENT PERIOD, DEATH BENEFIT AND OTHER DISTRIBUTIONS
ANNUITY COMMENCEMENT DATE
An Annuity Commencement Date will be selected. Such date will be the first day
of a calendar month unless otherwise agreed upon. The date must be at least 2
years after the Date of Issue. In the event the Contract is issued subject to
the terms of a Qualified Plan or Tax Sheltered Annuity Plan, Annuitization may
occur during the first 2 years subject to approval by the Company.
The Annuity Commencement Date may be changed by the Contract Owner in writing
subject to approval by the Company.
ANNUITIZATION
Annuitization is irrevocable once payments have begun. When making an
Annuitization election, the Annuitant must choose:
(1) an Annuity Payout Option; and
(2) either a Fixed Payment Annuity, Variable Payment Annuity,
or an available combination.
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Payments under a Fixed Payment Annuity are guaranteed by the Company as to the
dollar amount during the annuity payment period. The dollar amount of each
payment under a Variable Payment Annuity will vary depending on the performance
of the selected Underlying Mutual Fund options. The dollar amount of each
variable payment could be higher or lower than a previous payment.
FIXED PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a Fixed Payment Annuity will be determined by applying
the portion of the total Contract Value specified by the Contract Owner to the
Fixed Payment Annuity table then in effect for the Annuity Payment Option
elected, after deducting any applicable premium taxes from the total Contract
Value. This will be done at the Annuitization Date on an age last birthday
basis. Subsequent payments will remain level unless the Annuity Payment Option
elected provides otherwise. The Company does not credit discretionary interest
paid by the Company to payments during the annuity payment period.
VARIABLE PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a Variable Payment Annuity will be determined by
applying the portion of the total Contract Value specified by the Contract Owner
to the Variable Payment Annuity table then effect for the Annuity Payment Option
elected, after deducting any applicable premium taxes from the total Contract
Value. This will be done at the Annuitization Date on an age last birthday
basis. The dollar amount of the first payment is divided by the value of an
Annuity Unit determined at the end of the market day or the close of the New
York Stock Exchange on the Annuitization Date to establish the number of Annuity
Units representing each monthly annuity payment. This number of Annuity Units
remains fixed during the annuity payment period. The dollar amount of the second
and subsequent payments is not predetermined and may change from month to month.
The dollar amount of each subsequent payment is determined by multiplying the
fixed number of Annuity Units by the Annuity Unit value for the Valuation Period
in which the payment is due. The Company guarantees that the dollar amount of
each payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
VARIABLE PAYMENT ANNUITY - ASSUMED INVESTMENT RATE
A 3.5% assumed investment rate is built into the variable payment annuity
purchase rate basis in the Contracts. A higher assumption would mean a higher
initial payment but more slowly rising or more rapidly falling subsequent
payments. A lower assumption would have the opposite effect. If the actual net
investment rate is at the annual rate of 3.5%, the annuity payments will be
level.
VARIABLE PAYMENT ANNUITY - VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit for a Sub-Account for any subsequent Valuation
Period is determined by multiplying the Annuity Unit value from the immediately
preceding Valuation Period by the net investment factor for the Valuation Period
for which the Annuity Unit value is being calculated, and multiplying the result
by an interest factor to neutralize the assumed investment rate of 3.5% per
annum built into the Variable Payment Annuity purchase rate basis in the
Contracts (see "Net Investment Factor").
VARIABLE PAYMENT ANNUITY - EXCHANGES AMONG UNDERLYING MUTUAL FUND OPTIONS
During the annuity payment period, exchanges among the Underlying Mutual Fund
options must be made in writing and the exchange will take place on the
anniversary of the Annuitization Date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments will be made based on the Annuity Payment Option selected. However, if
the net amount available under any Annuity Payment Option is less than $5000,
the Company will have the right to pay such amount in one lump sum in lieu of
periodic annuity payments. In addition, if the payments to be provided would be
or become less than $50, the Company will have the right to change the frequency
of payments to such intervals as will result in payments of at least $50. In no
event will the Company make payments under an annuity option less frequently
than annually.
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ANNUITY PAYMENT OPTIONS
The Contract Owner may, upon prior written notice to the Company, at any time
prior to the Annuitization Date, elect one of the following Annuity Payment
Options:
(1) Life Annuity - An annuity payable periodically, but at least
annually, during the lifetime of the Annuitant, ending with the last
payment due prior to the death of the Annuitant. FOR EXAMPLE, IF THE
ANNUITANT DIES BEFORE THE SECOND ANNUITY PAYMENT DATE, THE ANNUITANT
WILL RECEIVE ONLY ONE ANNUITY PAYMENT. THE ANNUITANT WILL ONLY
RECEIVE TWO ANNUITY PAYMENTS IF HE OR SHE DIES BEFORE THE THIRD
ANNUITY PAYMENT DATE AND SO ON.
(2) Joint and Last Survivor Annuity - An annuity payable periodically,
but at least annually, during the joint lifetimes of the Annuitant
and designated second individual and continuing thereafter during
the lifetime of the survivor. AS IS THE CASE UNDER OPTION 1 ABOVE,
THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION.
PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT
REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
(3) Life Annuity With 120 or 240 Monthly Payments Guaranteed - An
annuity payable monthly during the lifetime of the Annuitant. If the
Annuitant dies before all of the guaranteed payments have been made,
payments will continue to be made for the remainder of the selected
guaranteed period to a designee chosen by the Contract Owner at the
time the Annuity Payment Option was elected. Alternatively, the
designee may elect to receive the present value of any remaining
guaranteed payments in a lump sum. The present value will be
computed as of the date on which the Company receives the notice of
the Annuitant's death.
Some of the stated Annuity Payment Options may not be available in all states.
The Contract Owner may request an alternative option prior to the Annuitization
Date subject to approval by the Company.
For Non-Qualified Contracts, no Distribution will be made until an Annuity
Payment Option has been elected. Qualified Contracts, IRAs, SEP IRAs and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the plan, Contract, or Code.
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
For Non-Qualified Contracts, if the Contract Owner and the Annuitant are not the
same and a Contract Owner dies prior to the Annuitization Date, then the Joint
Owner, if any, becomes the new Contract Owner. If there is no surviving Joint
Owner, the Contingent Owner becomes the new Contract Owner. If there is no
surviving Contingent Owner, the estate of the last surviving Contract Owner
becomes the Contract Owner. The entire interest in the Contract Value, less any
applicable deductions, must be distributed in accordance with the "Required
Distributions for Non-Qualified Contracts" provision.
DEATH OF THE ANNUITANT - NON-QUALIFIED CONTRACTS
If the Contract Owner and Annuitant are not the same, and the Annuitant dies
prior to the Annuitization Date, a Death Benefit will be payable to the
Beneficiary, the Contingent Beneficiary, the Contract Owner, or the last
surviving Contract Owner's estate, as specified in the "Beneficiary" provision,
unless there is a surviving Contingent Annuitant. In such case, the Contingent
Annuitant becomes the Annuitant and no Death Benefit is payable.
The Beneficiary may elect to receive the Death Benefit:
(1) in a lump sum Distribution;
(2) as an annuity payout; or
(3) any Distribution permitted by law and approved by the Company.
An election must be received by the Company within 60 days of the Annuitant's
death. If the Annuitant dies after the Annuitization Date, any benefit that may
be payable will be paid according to the selected Annuity Payment Option.
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DEATH OF THE CONTRACT OWNER/ANNUITANT
If any Contract Owner and Annuitant are the same, and the Annuitant dies before
the Annuitization Date, a Death Benefit will be payable to the Beneficiary, the
Contingent Beneficiary, the Contract Owner, or the last surviving Contract
Owner's estate, as specified in the "Beneficiary" provision and in accordance
with the appropriate "Required Distributions" provisions.
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable will be paid according to the selected Annuity Payment Option.
DEATH BENEFIT PAYMENT
For Contracts issued on or after the later of May 1, 1998 or the date on which
state insurance authorities approve applicable Contract modifications of the
Annuitant dies prior to his or her 86th birthday, the dollar amount of the Death
Benefit will be the greatest of:
(1) the Contract Value; or
(2) the sum of all Purchase Payments, less an adjustment for amounts
surrendered; or
(3) the Contract Value as of the most recent five year Contract
Anniversary, less an adjustment for amounts surrendered since the
most recent five year Contract Anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the Contract Value was reduced on the date(s) of the
partial surrender(s).
For Contracts issued prior to May 1, 1998 or the date prior to approval of
applicable Contract modifications by state insurance authorities, if the
Annuitant dies prior to his or her 86th birthday, the dollar amount of the Death
Benefit will be the greatest of:
(1) the Contract Value; or
(2) the sum of all Purchase Payments, less any amounts surrendered; or
(3) the Contract Value as of the most recent five year Contract
Anniversary, less any amounts surrendered since the most recent five
year Contract Anniversary.
If the Annuitant dies on or after his or her 86th birthday and prior to
Annuitization, the Death Benefit will equal the Contract Value.
The Death Benefit value is determined as of the Valuation Date at or next
following the date the Home Office receives:
(1) proper proof of the Annuitant's death;
(2) an election specifying the Distribution method; and
(3) any state required form(s).
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Upon the death of any Contract Owner or Joint Owner (including an Annuitant who
becomes the Contract Owner on the Annuitization Date), certain distributions for
Non-Qualified Contracts issued on or after January 19, 1985, are required by
Section 72(s) of the Code. Notwithstanding any provision of the Contract to the
contrary, the following Distributions will be made in accordance with such
requirements:
1. If any Contract Owner dies on or after the Annuitization Date and
before the entire interest under the Contract has been distributed,
then the remaining interest will be distributed at least as rapidly
as under the method of distribution in effect as of the date of the
Contract Owner's death.
2. If any Contract Owner dies prior to the Annuitization Date, then the
entire interest in the Contract (consisting of either the Death
Benefit or the Contract Value reduced by certain charges as set forth
elsewhere in the Contract) will be distributed within 5 years of the
death of the Contract Owner, provided however:
(a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over
a period not extending beyond the life expectancy of the
designated beneficiary. Payments must begin within one year of
the date of the Contract Owner's death unless otherwise
permitted by federal income tax regulations; and
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(b) if the designated beneficiary is the surviving spouse of the
deceased Contract Owner, the spouse may elect to become the
Contract Owner in lieu of receiving a Death Benefit, and any
distributions required under these distribution rules will be
made upon the death of the spouse.
In the event that this Contract is owned by a person that is not a natural
person (e.g., a trust or corporation), then, for purposes of these distribution
provisions:
(i) the death of the Annuitant will be treated as the death of any
Contract Owner;
(ii) any change of the Annuitant will be treated as the death of
any Contract Owner; and
(iii) in either case, the appropriate Distribution required under
these distribution rules will be made upon such death or
change, as the case may be.
The Annuitant is the primary annuitant as defined in Section 72(s)(6)(B) of the
Code.
These distribution provisions will not be applicable to any Contract that is not
required to be subject to the provisions of 72(s) of the Code by reason of
Section 72(s)(5) or any other law or rule.
Upon the death of a Contract Owner, the designated beneficiary must elect a
method of Distribution which complies with the above distribution provisions and
which is acceptable to the Company. Such election must be received by the
Company within 60 days of the Contract Owner's death.
REQUIRED DISTRIBUTIONS FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
Amounts in a Qualified Contract or Tax Sheltered Annuity Contract will be
distributed in a manner consistent with the Minimum Distribution and Incidental
Benefit (MDIB) provisions of Section 401(a)(9) of the Code and applicable
regulations. Amounts will be paid, notwithstanding anything else contained
herein, to the Annuitant under the Annuity Payments Option selected, over a
period not exceeding:
(a) the life of the Annuitant or the joint lives of the Annuitant and
the Annuitant's designated beneficiary under the selected Annuity
Payment Option; or
(b) a period not extending beyond the life expectancy of the Annuitant
or the joint life expectancies of the Annuitant and the
Annuitant's designated beneficiary under the selected annuity
Payment Option.
For Tax Sheltered Annuity Contracts, no Distributions will be required from this
Contract if Distributions otherwise required from this Contract are being
withdrawn from another Tax Sheltered Annuity of the Annuitant.
If the Annuitant's entire interest in a Qualified Plan or Tax Sheltered Annuity
is to be distributed in equal or substantially equal payments over a period
described in (a) or (b) above, such payments will commence on the required
beginning date, which is the later of:
(a) the first day of April following the calendar year in which the
Annuitant attains age 70-1/2; or
(b) when the Annuitant retires.
However, provision (b) does not apply to any employee who is a 5% Owner (as
defined in Section 416 of the Code) with respect to the plan year ending in the
calendar year in which the employee attains the age of 70-1/2.
If the Annuitant dies prior to the commencement of his or her Distribution, the
interest in the Qualified Contract or Tax Sheltered Annuity must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs unless:
(a) the Annuitant names his or her surviving spouse as the Beneficiary
and the spouse elects to receive Distribution of the Contract in
substantially equal payments over his or her life (or a period not
exceeding his or her life expectancy) and commencing not later than
December 31 of the year in which the Annuitant would have attained
age 70-1/2; or
(b) the Annuitant names a Beneficiary other than his or her surviving
spouse and the Beneficiary elects to receive a Distribution of the
Contract in substantially equal payments over his or her life (or a
period not exceeding his or her life expectancy) commencing not
later than December 31 of the year following the year in which the
Annuitant dies.
If the Annuitant dies after Distribution has commenced, the Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
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Payments commencing on the required beginning date will not be less than the
lesser of the quotient obtained by dividing the entire interest of the Annuitant
by the life expectancy of the Annuitant, or the joint life expectancies of the
Annuitant and the Annuitant's designated beneficiary (if the Annuitant dies
prior to the required beginning date) or the Beneficiary under the selected
Annuity Payment Option (if the Annuitant dies after the required beginning date)
whichever is applicable under the applicable minimum distribution or MDIB
provisions. Life expectancy and joint life expectancies are computed by the use
of return multiples contained in Section 1.72-9 of the Treasury Regulations.
If the amounts distributed to the Annuitant are less than those mentioned above,
a penalty tax of 50% is levied on the excess of the amount that should have been
distributed for that year over the amount that actually was distributed for that
year.
REQUIRED DISTRIBUTIONS FOR IRAS AND SEP IRAS
Distribution from an IRA or SEP IRA must begin no later than April 1 of the
calendar year following the calendar year in which the Contract Owner attains
age 70-1/2. Distribution may be payable in a lump sum or in substantially equal
payments over:
(a) the Contract Owner's life or the lives of the Contract Owner and his
or her spouse or designated beneficiary; or
(b) a period not extending beyond the life expectancy of the Contract
Owner or the joint life expectancy of the Contract Owner and the
Contract Owner's designated beneficiary.
If the Contract Owner dies prior to the commencement of his or her Distribution,
the interest in the IRA or SEP IRA must be distributed by December 31 of the
calendar year in which the fifth anniversary of his or her death occurs, unless:
(a) The Contract Owner names his or her surviving spouse as the
Beneficiary and such spouse elects to:
(i) treat the annuity as an IRA or SEP IRA established for his or
her benefit; or
(ii) receive Distribution of the Contract in substantially equal
payments over his or her life (or a period not exceeding his
or her life expectancy) and commencing not later than December
31 of the year in which the Contract Owner would have attained
age 70-1/2; or
(b) The Contract Owner names a Beneficiary other than his or her
surviving spouse and the Beneficiary elects to receive a
Distribution of the Contract in nearly equal payments over his or
her life (or a period not exceeding his or her life expectancy)
commencing not later than December 31 of the year following the year
in which the Contract Owner dies.
No Distribution will be required from this Contract if Distributions otherwise
required from this Contract are being withdrawn from another IRA or SEP IRA of
the Contract Owner.
If the Contract Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse who is the beneficiary under the
Annuity Payment Option, may treat the Contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If the amounts distributed to the Contract Owner are less than those mentioned
above, a penalty tax of 50% is levied on the excess of the amount that should
have been distributed for that year over the amount that actually was
distributed for that year.
A pro-rata portion of all Distributions will be included in the gross income of
the person receiving the Distribution and taxed at ordinary income tax rates.
The portion of the Distribution which is taxable is based on the ratio between
the amount by which non-deductible Purchase Payments exceed prior non-taxable
Distributions and total account balances at the time of the Distribution. The
Owner of an IRA or SEP IRA must annually report the amount of non-deductible
Purchase Payments, the amount of any Distribution, the amount by which
non-deductible Purchase Payments for all years exceed non-taxable Distributions
for all years, and the total balance of all IRAs.
IRA and SEP IRA Distributions will not receive the benefit of the tax treatment
of a lump sum Distribution from a Qualified Plan. If the Contract Owner dies
prior to the time Distribution of his or her interest in the annuity is
completed, the balance will also be included in his or her gross estate.
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Simplified Employee Pensions (SEPs) and Salary Reduction Simplified Employee
Pensions (SAR SEPs), described in Section 408(k) of the Code are taxed in a
manner similar to IRAs, and are subject to similar distribution requirements as
IRAs. SAR SEPs cannot be established after 1996.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
Distributions from a Roth IRA, unlike other IRAs, are not required to commence
during the lifetime of the Contract Owner.
Upon the death of the Contract Owner, the Contract Owner's interest in the Roth
IRA must be distributed by December 31 of the calendar year in which the fifth
anniversary of his or her death occurs, unless:
(a) The Contract Owner names his or her surviving spouse as the
Beneficiary and such spouse elects to:
(i) treat the annuity as a Roth IRA established for his or her
benefit; or
(ii) receive Distribution of the account in substantially equal
payments over his or her life (or a period not exceeding his or
her life expectancy) and commencing not later than December 31
of the year following the year in which the Contract Owner would
have attained age 70-1/2; or
(b) The Contract Owner names a Beneficiary other than his or her
surviving spouse and such Beneficiary elects to receive a
Distribution of the Contract in substantially equal payments over his
or her life (or a period not exceeding his or her life expectancy)
commencing not later than December 31 of the following year in which
the Contract Owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "nonqualified distributions" (see
"Federal Income Taxes").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts. Contract Owners should
consult a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the Contracts.
Section 72 of the Code governs federal income taxation of annuities in general.
That section sets forth different rules for: (1) Qualified Contracts; (2) IRAs,
including SEP IRAs; (3) Tax Sheltered Annuities; and (4) Non-Qualified
Contracts. Each type of annuity is discussed below.
Distributions to participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on a formula required by the Code. The formula
required by the Code excludes from income an amount equal to the investment on
the Contract divided by the number of anticipated payments, as determined
pursuant to Section 72(d) of the Code, until the full investment in the Contract
is recovered; thereafter all Distributions are fully taxable.
Distributions from IRAs and SEP IRAs and Contracts owned by Individual
Retirement Accounts are generally taxed when received. The portion of each
payment which is excludable is based on the ratio between the amount by which
nondeductible Purchase Payments to all Contracts exceeds prior non-taxable
Distributions from the Contracts, and the total account balances in the
Contracts at the time of the Distribution. The owner of such IRAs or SEP IRAs or
the Annuitant under Contracts held by Individual Retirement Accounts must
annually report to the IRS the amount of nondeductible Purchase Payments, the
amount of any Distribution, the amount by which nondeductible Purchase Payments
for all years exceed non-taxable Distributions for all years, and the total
balance in all IRAs, SEP IRAs and Individual Retirement Accounts.
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "nonqualified distributions."
A "qualified distribution" is one that satisfies the five year rule and meets
one of the following four requirements: (i) it is made on or after the date on
which the Contract Owner attains the age of 59-1/2; (ii) it is made to a
Beneficiary (or the Contract Owner's estate) on or after the death of the
Contract Owner; (iii) it is attributable to the Contract Owner's disability; or
(iv) it is a qualified first-time homebuyer distribution (as defined in Section
72(t)(2)(F) of the Code). If the Roth IRA does not have any qualified rollover
contributions from a retirement plan other than a Roth IRA (or income allocable
thereto), the five year rule is satisfied if the Distribution is not made within
the five year period beginning with the first contribution
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to the Roth IRA. If the Roth IRA has any qualified rollover contributions from a
retirement plan other than a Roth IRA (or income allocable thereto), the five
year rule is satisfied if the Distribution is not made within the five taxable
year period commencing with the taxable year in which the qualified rollover
contribution was made.
A nonqualified distribution is any Distribution that is not a qualified
distribution.
A qualified distribution is not included in gross income for federal income tax
purposes. A nonqualified distribution is not includible in gross income to the
extent that such Distribution, when added to all previous Distributions, does
not exceed that aggregate amount of contributions made to the Roth IRA. Any
nonqualified distribution in excess of the aggregate amount of contributions
will be included in the Contract Owner's gross income in the year that is
distributed to the Contract Owner.
Taxable Distributions will not receive the benefit of the tax treatment of a
lump sum Distribution from a qualified plan. If the Contract Owner dies prior to
the complete Distribution of the Contract, the balance will also be included in
the Contract Owner's gross estate for federal estate tax purposes.
A change of the Annuitant or Contingent Annuitant may be treated by the IRS a
taxable transaction.
PUERTO RICO
Under the Puerto Rico tax code, Distributions from a Non-Qualified Contract
prior to Annuitization are treated as nontaxable return of principal until the
principal is fully recovered; thereafter, all Distributions are fully taxable.
Distributions after Annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
Annuitization is equal to the amount of the Distribution in excess of 3% of the
total Purchase Payments paid, until an amount equal to the total Purchase
Payments paid has been excluded; thereafter, the entire Distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
Distributions of income. A personal adviser should be consulted.
NON-QUALIFIED CONTRACTS - NATURAL PERSONS AS CONTRACT OWNERS
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment received is excludable from taxable income based on the ratio
between the Contract Owner's investment in the Contract and the expected return
on the Contract until the investment has been recovered; thereafter the entire
amount is includable in income. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are taxable
to the Contract Owner to the extent that the cash value of the Contract exceeds
the Contract Owner's investment at the time of the Distribution. Distributions,
for this purpose, include partial surrenders, dividends, loans, or any portion
of the Contract which is assigned or pledged; or for Contracts issued after
April 22, 1987, any portion of the Contract transferred by gift. For these
purposes, a transfer by gift may occur upon Annuitization if the Contract Owner
and the Annuitant are not the same individual. In determining the taxable amount
of a Distribution, all annuity Contracts issued after October 21, 1988, by the
same company to the same Contract Owner during any 12 month period, will be
treated as one annuity Contract. Additional limitations on the use of multiple
Contracts may be imposed by Treasury Regulations. Distributions prior to the
Annuitization Date with respect to that portion of the Contract invested prior
to August 14, 1982, are treated first as a recovery of the investment in the
Contract as of that date. A Distribution in excess of the amount of the
investment in the Contract as of August 14, 1982, will be treated as taxable
income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for immediate annuities and certain Contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium Contract on which payments begin within one year of purchase. If this
Contract is issued as the result of an exchange described in Section 1035 of the
Code, for purposes of determining whether the Contract is an immediate annuity,
it will generally be considered to have been purchased on the purchase date of
the Contract given up in the exchange.
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Code Section 72 also provides for a penalty tax, equal to 10% of the portion of
any Distribution that is includable in gross income, if such Distribution is
made prior to attaining age 59-1/2. The penalty tax does not apply if the
Distribution is attributable to the Contract Owner's death, disability or one of
a series of substantially equal periodic payments made over the life or life
expectancy of the Contract Owner (or the joint lives or joint life expectancies
of the Contract Owner and the beneficiary selected by the Contract Owner to
receive payment under the Annuity Payment Option selected by the Contract Owner)
or for the purchase of an immediate annuity, or is allocable to an investment in
the Contract before August 14, 1982. A Contract Owner wishing to begin taking
Distributions to which the 10% tax penalty does not apply should forward a
written request to the Company. Upon receipt of a written request from the
Contract Owner, the Company will inform the Contract Owner of the procedures
pursuant to Company policy and subject to limitations of the Contract including
but not limited to, first year withdrawals. Such election shall be irrevocable
and may not be amended or changed.
In order to qualify as an annuity contract under Section 72 of the Code, the
contract must provide for Distribution of the entire contract to be made upon
the death of a Contract Owner. If a Contract Owner dies prior to the
Annuitization Date, then the Joint Contract Owner, the Contingent Owner or other
named recipient must receive the Distribution within 5 years of the Contract
Owner's death. However, the recipient may elect for payments to be made over
his/her life or life expectancy provided that such payments begin within one
year from the death of the Contract Owner. If the Joint Contract Owner,
Contingent Owner or other named recipient is the surviving spouse, the spouse
may be treated as the Contract Owner and the Contract may be continued
throughout the life of the surviving spouse. In the event the Contract Owner
dies on or after the Annuitization Date and before the entire interest has been
distributed, the remaining portion must be distributed at least as rapidly as
under the method of Distribution being used on the date of the Contract Owner's
death (see "Required Distribution For Qualified Plans and Tax Sheltered
Annuities"). If the Contract Owner is not a natural person, the death of the
Annuitant (or a change in the Annuitant) will result in a Distribution pursuant
to these rules, regardless of whether a Contingent Annuitant is named.
The Code requires that any election to receive an annuity in lieu of a lump sum
payment must be made within 60 days after the lump sum becomes payable
(generally, the election must be made within 60 days after the death of a
Contract Owner or the Annuitant). If the election is made more than 60 days
after the lump sum first becomes payable, the election will be ignored for tax
purposes, and the entire amount of the lump sum will be subject to immediate
tax. If the election is made within the 60 day period, each Distribution will be
taxable when it is paid.
NON-QUALIFIED CONTRACTS - NON-NATURAL PERSONS AS CONTRACT OWNERS
The foregoing discussion of the taxation of Non-Qualified Contracts applies to
Contracts owned (or, pursuant to Section 72(u) of the Code, deemed to be owned)
by individuals.
As a general rule, contracts owned by corporations, partnerships, trusts, and
similar entities ("non-natural persons"), rather than by one or more
individuals, are not treated as annuity contracts for most purposes under the
Code; in particular, they are not treated as annuity contracts for purposes of
Section 72. Therefore, the taxation rules for Distributions, as described above,
do not apply to Non-Qualified Contracts owned by non-natural persons. Rather the
income earned under a non-qualified contract that is owned by a non-natural
person is taxed as ordinary income during the taxable year that it is earned,
and is not deferred, even if the income is not distributed out of the Contract
to the Contract Owner.
The foregoing non-natural person rule does not apply to all entity-owned
contracts. A Contract that is owned by a non-natural person as an agent for an
individual is treated as owned by the individual. This exception does not apply,
however, to a non-natural person who is an employer that holds the Contract
under a non-qualified deferred compensation arrangement for one or more
employees.
The non-natural person rules also do not apply to a Contract that is:
(a) acquired by the estate of a decedent by reason of the death of the
decedent;
(b) issued in connection with certain qualified retirement plans and
individual retirement plans;
(c) used in connection with certain structured settlements;
(d) purchased by an employer upon the termination of certain qualified
retirement plans; or
(e) an immediate annuity.
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<PAGE> 29
QUALIFIED PLANS, IRAS, SEP IRAS AND TAX SHELTERED ANNUITIES
Contract Owners seeking information regarding eligibility, limitations on
permissible amounts of Purchase Payments, and the tax consequences of
distributions from Qualified Plans, Tax Sheltered Annuities, IRAs, SEP IRAs and
other plans that receive favorable tax treatment should seek competent advice;
the terms of such plans may limit the rights available under the Contracts.
Pursuant to Section 403(b)(1)(E) of the Code, a Contract that is issued as a Tax
Sheltered Annuity is required to limit the amount of the Purchase Payments for
any year to an amount that does not exceed the limit set forth in Section 402(g)
of the Code ($7,000), as it is from time to time increased to reflect increases
in the cost of living. This limit may be reduced by any deposits, contributions
or payments made to any other Tax Sheltered Annuity or other plan, contract or
arrangement by or on behalf of the Contract Owner.
The Code permits the rollover of most Distributions from Qualified Plans to
other Qualified Plans, IRAs or SEP IRAs. Most Distributions from Tax Sheltered
Annuities may be rolled into another Tax Sheltered Annuity, IRA or SEP IRA.
Distributions that may not be rolled over are those which are:
(a) one of a series of substantially equal annual (or more frequent)
payments made:
(i) over the life (or life expectancy) of the Contract Owner;
(ii) over the joint lives (or joint life expectancies) of the
Contract Owner and the Contract Owner's designated Beneficiary;
or
(iii) for a specified period of ten years or more; or
(b) a required minimum distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a rate of twenty percent (20%) unless the Distribution is
transferred directly to an appropriate plan as described above.
The Contract is available for Qualified Plans electing to comply with section
404(c) of ERISA. It is the responsibility of the plan and its fiduciaries to
determine and satisfy the requirements of Section 404(c).
IRAs and SEP IRAs may not provide life insurance benefits. If the Death Benefit
exceeds the greater of the cash value of the Contract or the sum of all Purchase
Payments (less any surrenders), it is possible the IRS could determine that the
IRA or SEP IRA did not qualify for the desired tax treatment.
ROTH IRAS
The Contract may be purchased as a Roth IRA. The Contract Owner should seek
competent advice as to the tax consequences associated with the use of a
Contract as a Roth IRA, for information regarding eligibility to invest in a
Roth IRA, for limitations on permissible amounts of Purchase Payments that may
be made to a Roth IRA, and as to the tax consequences of Distributions from Roth
IRAs.
The Code permits the rollover of most Distributions from Individual Retirement
Accounts or IRAs to Roth IRAs. The rollovers are subject to federal income tax
as Distributions from the Individual Retirement Account or IRA. For rollovers
that take place in 1998, the income from rollover is included in income ratably
over the four year period commencing in 1998. For rollovers in subsequent years,
the entire amount of income from the rollover will be required to be included in
income in the year of the rollover Distribution from the Individual Retirement
Account or IRA.
A Distribution from a Roth IRA that received the proceeds of a rollover from an
Individual Retirement Account or IRA within the previous five years could be
subject to a 10% penalty even if the Distribution is not taxable. In addition,
if the rollover from the Individual Retirement Account or IRA was made in 1998
and the income from that rollover was included in income ratably over a four
year period, a Distribution from the Roth IRA within four years of the rollover
may be subject to an additional 10% penalty.
WITHHOLDING
The Company is required to withhold tax from certain Distributions to the extent
that such Distribution would constitute income to the Contract Owner or other
payee. The Contract Owner or other payee is entitled to elect not to have
federal income tax withheld from certain types of Distributions, but may be
subject to penalties in the event insufficient federal income tax is withheld
during a calendar year. However, if the IRS notifies the Company that the
Contract Owner or other payee has furnished an incorrect taxpayer identification
number, or if the Contract Owner or other payee fails to provide a taxpayer
identification number, the Distributions may be subject to back-up withholding
at the statutory rate which is presently 31% and which cannot be waived by the
Contract Owner or other payee.
27
<PAGE> 30
NON-RESIDENT ALIENS
Distributions to nonresident aliens (NRAs) are generally subject to federal
income tax and tax withholding at a statutory rate of thirty percent (30%) of
the amount of income that is distributed. The Company may be required to
withhold such amount from the Distribution and remit it to the IRS.
Distributions to certain NRAs may be subject to lower, or in certain instances,
zero tax and withholding rates, if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to the Company sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. For
Distributions the NRA must obtain an Individual Taxpayer Identification Number
from the IRS, and furnish that number to the Company prior to the Distribution.
If the Company does not have the proper proof of citizenship or residency and a
proper Individual Taxpayer Identification Number prior to any Distribution, the
Company will be required to withhold 30% of the income, regardless of any treaty
provision.
A payment may not be subject to withholding where the recipient sufficiently
establishes to the Company that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and that such
payment is includable in the recipient's gross income for United States federal
income tax purposes. Any such Distributions will be subject to the rules set
forth in the section entitled "Withholding."
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
A transfer of the Contract from one Contract Owner to another, or the payment of
a Distribution under the Contract to someone other than a Contract Owner, may
constitute a gift for federal gift tax purposes. Upon the death of the Contract
Owner, the value of the Contract may be included in his or her gross estate for
federal estate tax purposes, even if all or a portion of the value is also
subject to federal income taxes.
The Company may be required to determine whether the Death Benefit or any other
payment or Distribution constitutes a "direct skip" as defined in Section 2612
of the Code, and the amount of the generation skipping transfer tax, if any,
resulting from such direct skip. A direct skip may occur when property is
transferred to, or a Death Benefit or other Distribution is made to:
(a) an individual who is two or more generations younger than the Contract
Owner; or
(b) certain trusts, as described in Section 2613 of the Code (generally,
trusts that have no beneficiaries who are not 2 or more generations
younger than the Contract Owner).
If the Contract Owner is not an individual, then for this purpose only,
"Contract Owner" refers to any person who would be required to include the
Contract, Death Benefit, Distribution, or other payment in his or her federal
gross estate at his or her death, or who is required to report the transfer of
the Contract, Death Benefit, Distribution, or other payment for federal gift tax
purposes.
If the Company determines that a generation-skipping transfer tax is required to
be paid by reason of a direct skip, the Company is required to reduce the amount
of such Death Benefit, Distribution, or other payment by such tax liability, and
pay the tax liability directly to the IRS.
Federal estate, gift and generation-skipping transfer tax consequences, and
state and local estate, inheritance, succession, generation skipping transfer,
and other tax consequences of owning or transferring a Contract, and of
receiving a Distribution, Death Benefit, or other payment, depend on the
circumstances of the person owning or transferring the Contract, or person
receiving a Distribution, Death Benefit, or other payment.
CHARGE FOR TAX
The Company is no longer required to maintain a capital gain reserve liability
on Non-Qualified Contracts since capital gains attributable to assets held in
the Sub-Accounts for such Contracts are not taxable to the Company. However, the
Company reserves the right to implement and adjust the tax charge in the future,
if the tax laws change.
28
<PAGE> 31
DIVERSIFICATION
The IRS has promulgated regulations under Section 817(h) of the Code relating to
diversification standards for the investments underlying a variable annuity
contract. The regulations provide that a variable annuity contract which does
not satisfy the diversification standards will not be treated as an annuity
Contract, unless the failure to satisfy the regulations was inadvertent, the
failure is corrected, and the Contract Owner or the Company pays an amount to
the IRS. The amount will be based on the tax that would have been paid by the
Contract Owner if the income, for the period the contract was not diversified,
had been received by the Contract Owner. If the failure to diversify is not
corrected in this manner, the Contract Owner of an annuity contract will be
deemed the owner of the underlying securities and will be taxed on the earnings
of his or her account. The Company believes, under its interpretation of the
Code and regulations thereunder, that the investments underlying this Contract
meet these diversification standards.
Representatives of the IRS have suggested, from time to time, that the number of
Underlying Mutual Funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of Underlying Mutual Funds, transfers between
Underlying Mutual Funds, exchanges of Underlying Mutual Funds or changes in
investment objectives of Underlying Mutual Funds such that the Contract would no
longer qualify as an annuity under Section 72 of the Code, the Company will take
whatever steps are available to remain in compliance.
TAX CHANGES
The Code has been subjected to numerous amendments and changes, and it is
reasonable to believe that it will continue to be revised. The United States
Congress has considered numerous legislative proposals that, if enacted, could
change the tax treatment of the Contracts. It is reasonable to believe that such
proposals may be enacted into law. In addition, the Treasury Department may
amend existing regulations, issue new regulations, or adopt new interpretations
of existing law that may be in variance with its current positions on these
matters. In addition, current state law (which is not discussed herein) may
affect the tax consequences of the Contract.
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice. Statutes, regulations, and rulings are subject to
interpretation by the courts. The courts may determine that a different
interpretation than the currently favored interpretation is appropriate, thereby
changing the operation of the rules that are applicable to annuity contracts.
Any of the foregoing may change from time to time without any notice, and the
tax consequences arising out of a Contract may be changed retroactively. There
is no way of predicting whether, when, and to what extent any such change may
take place. No representation is made as to the likelihood of the continuation
of these current laws, interpretations, and policies.
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO
ANNUITY CONTRACTS. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD NOT
TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR.
GENERAL INFORMATION
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life and Annuity
Insurance Company by writing P.O. Box 182008, Columbus, Ohio 43218-2008, or
calling 1-800-860-3946, TDD 1-800-238-3035.
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<PAGE> 32
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address, any
statements and reports required by law. Contract Owners should promptly notify
the Company of any address change. Statements are mailed detailing the
Contract's quarterly activity. The Company will also send a confirmation
statement to Contract Owners each time a transaction is made affecting the
Contract Value. However, instead of receiving an immediate confirmation of
transactions made pursuant to some types of recurring payment plans (such as a
dollar cost averaging program or salary reduction arrangement), the Contract
Owner may receive confirmation of such transactions in their quarterly
statements. The Contract Owner should review the information in these statements
carefully. All errors or corrections must be reported to the Company immediately
to assure proper crediting to the Contract. The Company will assume all
transactions are accurately reported on quarterly statements or confirmation
statements unless the Contract Owner notifies the Home Office within 30 days
after receipt of the statement. The Company will also send to Contract Owners a
semi-annual report as of June 30 and an annual report as of December 31,
containing financial statements for the Variable Account.
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT-Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT-Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT-Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of a
Sub-Account of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual fund options with similar or
different objectives, or the investment industry as a whole. Other investments
to which the Sub-Accounts may be compared include, but are not limited to:
precious metals; real estate; stocks and bonds; closed-end funds; CDs; bank
money market deposit accounts and passbook savings; and the Consumer Price
Index.
The Sub-Accounts of the Variable Account may also be compared to certain market
indexes, which may include, but are not limited to: S&P 500; Shearson/Lehman
Intermediate Government/Corporate Bond Index; Shearson/Lehman Long-Term
Government/Corporate Bond Index; Donoghue Money Fund Average; U.S. Treasury Note
Index; Bank Rate Monitor National Index of 2-1/2 Year CD Rates; and Dow Jones
Industrial Average.
Normally, these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar, Donoghue's,
magazines such as Money, Forbes, Kiplinger's Personal Finance Magazine,
Financial World, Consumer Reports, Business Week, Time, Newsweek, National
Underwriter, U.S. News and World Report; rating services such as LIMRA, Value,
Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports; and
other publications such as the Wall Street Journal, Barron's, Investor's Daily,
and Standard & Poor's Outlook. In addition, Variable Annuity Research & Data
Service (The VARDS Report) is an independent rating service that ranks over 500
variable annuity funds based upon total return performance. These rating
services and publications rank the performance of the Underlying Mutual Fund
options against all underlying mutual funds over specified periods and against
underlying mutual funds in specified categories. The rankings may or may not
include the effects of sales charges or other fees.
The Company is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or claims-paying ability of
the Company. The ratings are not intended to reflect the investment experience
or financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts. Furthermore, the
Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
30
<PAGE> 33
The Company may, from time to time advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the Sub-Accounts
standardized "average annual total return," calculated in a manner prescribed by
the SEC, and nonstandardized "total return." "Average annual total return"
illustrates the percentage rate of return of a hypothetical initial investment
of $1,000 for the most recent one, five and ten year periods, or for a period
covering the time the Underlying Mutual Fund option has been available in the
Variable Account, if the Underlying Mutual Fund option has not been available
for one of the prescribed periods. THIS CALCULATION REFLECTS THE DEDUCTION OF
ALL APPLICABLE CHARGES MADE TO THE CONTRACTS EXCEPT FOR THE PREMIUM TAXES, WHICH
MAY BE IMPOSED BY CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $10,000 for the most recent one, five and ten
year periods, or for a period covering the time the Underlying Mutual Fund
option has been in existence. For those Underlying Mutual Fund options which
have not been held as Sub-Accounts for one of the prescribed periods, the
nonstandardized total return illustrations will show the investment performance
such Underlying Mutual Fund options would have achieved (reduced by all
applicable charges) had such Underlying Mutual Fund options been available in
the Variable Account for the periods quoted. AN INITIAL INVESTMENT OF $10,000 IS
ASSUMED BECAUSE THAT AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF A TYPICAL
CONTRACT THAN DOES THE $1,000 ASSUMPTION USED IN CALCULATING THE STANDARDIZED
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS.
The standardized average annual total return and nonstandardized total return
quotations are calculated as described in this section using Underlying Mutual
Fund performance for the periods ended December 31, 1997. However, the Company
generally provides performance quotations on a more frequent basis, the results
of which could reflect better or worse results than shown below. The quotations
and other comparative material advertised by the Company are based upon
historical earnings and are not intended to represent or guarantee future
results. A Contract Owner's Contract Value at redemption may be more or less
than the original cost.
SUB-ACCOUNT PERFORMANCE SUMMARY*
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
10 Years to
1 Year To 5 Years To 12/31/97 Date Fund
Sub-Account Options 12/31/97 12/31/97 or Life of Fund Effective
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Separate Account Trust - 4.00% 3.27% 4.35% 11/10/81
Money Market Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 8.36% NA 6.76% 08/01/94
Government Bond Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 28.28% NA 17.51% 08/01/94
Growth Opportunities Fund
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
10 Years or Date
Fund Available in
the Variable Date Fund
1 Year To 5 Years To Account to 12/31/97 Added to Variable
Sub-Account Options 12/31/97 12/31/97 Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Separate Account Trust - 4.00% NA 3.99% 08/01/94
Money Market Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 8.36% NA 6.76% 08/01/94
Government Bond Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 28.28% NA 17.51% 08/01/94
Growth Opportunities Fund
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* The AIM V.I. Capital Appreciation Fund, AIM V.I. High Yield Fund, AIM V.I.
International Equity Fund, AIM V.I. Value Fund, Templeton Variable Products
Fund - Developing Markets Fund: Class 2, Templeton Variable Products Fund -
International Fund: Class 2, and One Group(R) Investment Trust - Equity Index
Fund were added to the Variable Account on the effective date of this
registration statement, and therefore such investment options are not included
in the "SUB-ACCOUNT PERFORMANCE SUMMARY."
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<PAGE> 34
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the Year 2000. The
problem relates to many existing computer programs using only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company has been evaluating its exposure to the Year
2000 issue through a review of all of its operating systems as well as
dependencies on the systems of others since 1996. The Company expects all system
changes and replacements needed to achieve Year 2000 compliance to be completed
by the end of 1998. Compliance testing will be completed in the first quarter of
1999. The Company's parent, Nationwide Life Insurance Company ("NLIC"), charges
all costs associated with these system changes as the costs are incurred.
Operating expenses for NLIC in 1997 include approximately $45 million on
technology projects, which includes costs related to Year 2000 and the
development of a new policy administration system for traditional life insurance
products and other system enhancements. NLIC anticipates spending a comparable
amount in 1998 on technology projects, including Year 2000 initiatives. These
expenses do not have an effect on the assets of the Variable Account and are not
charged through to the Contract Owner.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The General Distributor, Nationwide Advisory Services, Inc., is not engaged in
any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History..............................................1
Services.....................................................................1
Purchase of Securities Being Offered.........................................1
Underwriters.................................................................2
Calculations of Performance..................................................2
Annuity Payments.............................................................2
Financial Statements.........................................................3
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<PAGE> 35
APPENDIX
PARTICIPATING UNDERLYING MUTUAL FUNDS
Below are the investment objectives of each Underlying Mutual Fund available
through the Variable Account. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
AVAILABLE FOR ALL CONTRACTS
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc., A Maryland corporation organized on January
22, 1993, is an open-end, series, management investment company. Shares of the
Funds are currently offered only to insurance company separate accounts to fund
the benefits of variable annuity contracts and variable life insurance policies.
Each Fund has its own investment objective(s) and policies designed to meet
specific investment goals. A I M Advisors, Inc. ("AIM"), is the investment
advisor for the Funds.
-AIM V.I. CAPITAL APPRECIATION FUND
Investment Objective: Seek capital appreciation through investments in
common stocks, with emphasis on medium-sized and smaller emerging
growth companies.
-AIM V.I. HIGH YIELD FUND
Investment Objective: Achieve a high level of current income. The Fund
seeks to achieve its objective by investing primarily in publicly
traded non-investment grade debt securities.
-AIM V.I. INTERNATIONAL EQUITY FUND
Investment Objective: Seek to provide long-term growth of capital by
investing in a diversified portfolio of international equity securities
the issuers of which are considered by AIM to have strong earnings
momentum.
-AIM V.I. VALUE FUND
Investment Objective: Achieve long-term growth of capital by investing
primarily in equity securities judged by AIM to be undervalued relative
to the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market
generally. Income is a secondary objective and would be satisfied
principally from the income (interest and dividends) generated by the
common stocks, convertible bonds and convertible preferred stocks that
make up the Fund's portfolio.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the Mutual Fund listed below, which will be sold only to life insurance
company separate accounts to fund the benefits under variable life insurance
policies or variable annuity contracts issued by life insurance companies. The
assets of the Trust are managed by Nationwide Advisory Services, Inc., Three
Nationwide Plaza, Columbus, Ohio 43215, a wholly-owned subsidiary of Nationwide
Life Insurance Company.
-MONEY MARKET FUND
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
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<PAGE> 36
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund (the "Trust") was organized as a
Massachusetts business trust on February 25, 1988. The Trust offers shares of
the separately managed funds listed below (the "Funds"). Each class of each Fund
is sold only to insurance company separate accounts to serve as an investment
vehicle for variable annuity and variable life insurance contracts.
-DEVELOPING MARKETS FUND: CLASS 2
Investment Objective: To achieve long-term capital appreciation by
investing in securities of issuers of countries having developing
markets. The Fund is subject to heightened foreign securities
investment risks that accompany foreign developing markets and an
investment in the Fund may be considered speculative. The Fund is
managed by Templeton Asset Management Ltd. ("Templeton Singapore").
-INTERNATIONAL FUND: CLASS 2
Investment Objective: To achieve long-term capital growth through a
flexible policy of investing in stocks and debt obligations of
companies and governments outside the United States. The Fund will
invest at least 65% of its assets in securities of issuers in at least
three countries outside the United States. Any income realized will be
incidental. The Fund is managed by Templeton Investment Counsel, Inc.
THE ONE GROUP(R) INVESTMENT TRUST
The One Group(R) Investment Trust is a diversified, open-end management
investment company organized under the laws of Massachusetts by a Declaration of
Trust, dated June 7, 1993. The One Group(R) Investment Trust offers shares in
the three separate mutual funds (the "Funds") shown below, each with its own
investment objective. The shares of the Funds are sold to Nationwide Life and
Annuity Insurance Company to fund the benefits of One Investor Select Annuity
and certain other separate accounts funding variable annuity contracts and
variable life policies issued by other life insurance companies and qualified
pension and retirement plans. The assets of The One Group(R) Investment Trust
are managed by Banc One Investment Advisers Corporation.
-EQUITY INDEX FUND
Investment Objective: To seek investment results that correspond to the
aggregate price and dividend performance of securities in the Standard &
Poor's 500 Composite Stock Index* ("S&P" 500") .
*"S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with the Fund.
-GOVERNMENT BOND FUND
Investment Objective: To seek a high level of current income with
liquidity and safety of principal.
-GROWTH OPPORTUNITIES FUND
Investment Objective: To seek growth of capital and, secondarily, current
income, by investing primarily in equity securities. Issuers will include
medium sized companies with a history of above-average growth or
companies that are expected to enter periods of above-average growth, and
smaller companies which are positioned in emerging growth industries.
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<PAGE> 37
STATEMENT OF ADDITIONAL INFORMATION
________, 1998
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS NATIONWIDE VA SEPARATE ACCOUNT-C
This Statement of Additional Information is not a prospectus. It contains
information in addition to and in some respects more detailed than set forth in
the prospectus and should be read in conjunction with the prospectus dated
________, 1998. The prospectus may be obtained from Nationwide Life and Annuity
Insurance Company by writing P.O. Box 182008, Columbus, Ohio 43218-2008, or
calling 1-800-860-3946, TDD 1-800-238-3035.
TABLE OF CONTENTS
PAGE
General Information and History...............................................1
Services......................................................................1
Purchase of Securities Being Offered..........................................1
Underwriters..................................................................2
Calculations of Performance...................................................2
Annuity Payments..............................................................2
Financial Statements..........................................................3
GENERAL INFORMATION AND HISTORY
The Nationwide VA Separate Account-C is a separate investment account of
Nationwide Life and Annuity Insurance Company ("Company"). The Company is a
member of the Nationwide Insurance Enterprise and all of the Company's common
stock is owned by Nationwide Life Insurance Company which is owned by Nationwide
Financial Services, Inc. ("NFS"), a holding company. NFS has two classes of
common stock outstanding with different voting rights enabling Nationwide
Corporation (the holder of all of the outstanding Class B Common Stock) to
control NFS. Nationwide Corporation is a holding company, as well. All of the
common stock is held by Nationwide Mutual Insurance Company (95.3%) and
Nationwide Mutual Fire Insurance Company (4.7%), the ultimate controlling
persons of Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise
is one of America's largest insurance and financial services family of
companies, with combined assets of over $83.2 billion as of December 31, 1997.
SERVICES
The Company, which has responsibility for administration of the Contracts and
the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The Company
will maintain a record of all purchases and redemptions of shares of the
Underlying Mutual Funds. The Company, or subsidiaries of the Company may have
entered into agreements with either the investment adviser or distributor for
several of the Underlying Mutual Funds. The agreements relate to administrative
services furnished by the Company or an affiliate of the Company and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular Underlying Mutual Funds.
These fees in no way affect the Net Asset Value of the Underlying Mutual Funds
or fees paid by the Contract Owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states where the
Contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
1
37 of 90
<PAGE> 38
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215,
an affiliate of the Company. No underwriting commissions have been paid by the
Company to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of hypothetical pre-existing account having a balance of one Accumulation
Unit at the beginning of the base period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the net change
in account value by the value of the account at the beginning of the period to
obtain a base period return, and multiplying the base period return by (365/7)
or (366/7) in a leap year.
The NSAT Money Market Fund Sub-Account'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 calendar day period, it
may use a different time period on occasion. The yield quotes may reflect the
expense limitation described "Investment Manager and Other Services" in the NSAT
Money Market Fund's Statement of Additional Information. There is no assurance
that the yields quoted on any given occasion will remain in effect for any
period of time and there is no guarantee that the Net Asset Values will remain
constant. It should be noted that a Contract Owner's investment in the NSAT
Money Market Fund is not guaranteed or insured. Yield of other money market
funds may not be comparable if a different base period or another method of
calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual return is found by taking a
hypothetical $1,000 investment in each of the Sub-Accounts' units on the first
day of the period at the offering price, which is the Accumulation Unit value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
return reflects the deduction of a 1.20% Mortality and Expense Risk 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
$10,000. An assumed initial investment of $10,000 will be used because that
figure more closely approximates the size of a typical Contract than does the
$1,000 figure used in calculating the standardized average annual total return
quotations.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the Underlying Mutual Fund has been available in the Variable Account if
the Underlying Mutual Fund has not been available for one of the prescribed
periods. The nonstandardized annual total return will be based on rolling
calendar quarters and will cover periods of one, five and ten years, or a period
covering the time the Underlying Mutual Fund has been in existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance is not a
guarantee of future performance. Factors affecting a Sub-Account's performance
include general market conditions, operating expenses and investment management.
A Contract Owner's account when redeemed may be more or less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
- --------------------------------------------------------------------------------
The One Investor Select Annuity commenced sales in __________, 19__.
Therefore, the following Financial Statements do not reflect performance
for the One Investor Select Annuity. However, the Financial Statements do
reflect performance for other annuity contracts issued through the
Nationwide VA Separate Account - C.
- --------------------------------------------------------------------------------
2
38 of 90
<PAGE> 39
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VA Separate Account-C:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VA Separate Account-C as of December 31,
1997, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide VA Separate
Account-C as of December 31, 1997, and the results of its operations and its
changes in contract owners' equity for each of the years in the two year period
then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
<PAGE> 2
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
3,566,076 shares (cost $72,188,237) .............................. $ 86,584,335
Fidelity VIP - Overseas Portfolio (FidVIPOv)
786,071 shares (cost $14,146,470) ................................ 15,092,557
Nationwide SAT - Money Market Fund (NSATMyMkt)
8,807,935 shares (cost $8,807,935) ............................... 8,807,935
Nationwide SAT - Total Return Fund (NSATTotRe)
3,205,220 shares (cost $44,633,544) .............................. 52,501,509
One Group - Asset Allocation Fund (OGAstAll)
3,094,482 shares (cost $38,640,124) .............................. 40,816,210
One Group - Government Bond Fund (OGGvtBd)
2,136,061 shares (cost $21,834,056) .............................. 22,385,919
One Group - Growth Opportunities Fund (OGGrOpp)
3,576,169 shares (cost $47,300,553) .............................. 50,817,362
One Group - Large Company Growth Fund (OGLgCoGr)
5,802,479 shares (cost $81,859,034) .............................. 99,860,666
----------
Total investments ............................................. 376,866,493
Accounts receivable .................................................... 4,925
----------
Total assets .................................................. 376,871,418
ACCOUNTS PAYABLE .......................................................... 8,948
----------
CONTRACT OWNERS' EQUITY ................................................... $ 376,862,470
==========
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
-------- --------- -------
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ................................ 1,663,574 $ 19.268781 $ 32,055,043 26%
Non-tax qualified ............................ 2,829,983 19.268781 54,530,323 26%
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................ 360,753 12.709885 4,585,129 10%
Non-tax qualified ............................ 826,716 12.709885 10,507,465 10%
Nationwide SAT - Money Market Fund:
Tax qualified ................................ 269,586 11.392164 3,071,168 4%
Non-tax qualified ............................ 502,861 11.392164 5,728,675 4%
Nationwide SAT - Total Return Fund:
Tax qualified ................................ 1,003,531 19.118736 19,186,244 28%
Non-tax qualified ............................ 1,742,657 19.118736 33,317,399 28%
One Group - Asset Allocation Fund:
Tax qualified ................................ 882,338 15.674014 13,829,778 21%
Non-tax qualified ............................ 1,619,845 15.674014 25,389,473 21%
Initial Funding by Depositor (note 1a) ....... 97,500 16.381936 1,597,239 23%
One Group - Government Bond Fund:
Tax qualified ................................ 488,790 12.460216 6,090,429 8%
Non-tax qualified ............................ 785,214 12.460216 9,783,936 8%
Initial Funding by Depositor (note 1a) ....... 500,000 13.023184 6,511,592 10%
One Group - Growth Opportunities Fund:
Tax qualified ................................ 969,427 17.286833 16,758,323 28%
Non-tax qualified ............................ 1,967,681 17.286833 34,014,973 28%
Initial Funding by Depositor (note 1a) ....... 2,500 18.067840 45,170 30%
One Group - Large Company Growth Fund:
Tax qualified ................................ 1,752,117 18.376907 32,198,491 30%
Non-tax qualified ............................ 3,368,336 18.376907 61,899,597 30%
Initial Funding by Depositor (note 1a) ....... 300,000 19.206744 5,762,023 32%
========== ========== -----------
$376,862,470
============
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL FIDVIPEI
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 4,265,024 2,249,625 715,785 19,753
Mortality, expense and administration
charges (note 2) ............................... (3,381,832) (1,332,177) (831,713) (328,693)
-------------- -------------- -------------- --------------
Net investment activity ........................ 883,192 917,448 (115,928) (308,940)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 11,087,093 6,134,856 833,449 480,832
Cost of mutual fund shares sold .................. (10,118,939) (5,900,535) (586,402) (373,323)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ 968,154 234,321 247,047 107,509
Change in unrealized gain (loss) on investments .. 35,424,272 8,440,018 10,419,343 2,840,714
-------------- -------------- -------------- --------------
Net gain (loss) on investments ................. 36,392,426 8,674,339 10,666,390 2,948,223
-------------- -------------- -------------- --------------
Reinvested capital gains ......................... 17,620,814 4,402,311 3,598,807 566,259
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 54,896,432 13,994,098 14,149,269 3,205,542
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 164,145,907 97,359,956 33,139,661 24,203,112
Transfers between funds .......................... - - 1,982,841 1,415,097
Redemptions ...................................... (9,912,134) (3,074,851) (2,166,009) (700,730)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... - (39,851) - (9,145)
Contingent deferred sales charges (note 2) ....... (345,222) (162,806) (82,994) (39,566)
Adjustments to maintain reserves ................. 2,745 10,270 2,207 1,589
-------------- -------------- -------------- --------------
Net equity transactions ...................... 153,891,296 94,092,718 32,875,706 24,870,357
-------------- -------------- -------------- --------------
Net change in contract owners' equity ............ 208,787,728 108,086,816 47,024,975 28,075,899
Contract owner's equity beginning of period ...... 168,074,742 59,987,926 39,560,391 11,484,492
-------------- -------------- -------------- --------------
Contract owners' equity end of period ............ $ 376,862,470 168,074,742 86,585,366 39,560,391
============== ============== ============== ==============
<CAPTION>
FIDVIPOV NSATMYMKT
------------------------------ -------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 140,536 34,549 410,915 194,298
Mortality, expense and administration
charges (note 2) ............................... (155,335) (66,321) (104,872) (51,406)
------------- -------------- -------------- --------------
Net investment activity ........................ (14,799) (31,772) 306,043 142,892
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 296,780 56,135 7,532,542 4,682,527
Cost of mutual fund shares sold .................. (247,708) (52,055) (7,532,542) (4,682,527)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ 49,072 4,080 - -
Change in unrealized gain (loss) on investments .. 230,256 572,885 - -
------------- -------------- -------------- --------------
Net gain (loss) on investments ................. 279,328 576,965 - -
------------- -------------- -------------- --------------
Reinvested capital gains ......................... 557,884 38,004 - -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 822,413 583,197 306,043 142,892
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 6,345,492 4,290,279 12,257,596 8,086,975
Transfers between funds .......................... 555,514 212,509 (7,836,939) (5,203,304)
Redemptions ...................................... (287,407) (180,584) (1,106,114) (161,261)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... - (2,811) - (645)
Contingent deferred sales charges (note 2) ....... (11,122) (9,223) (12,456) (5,593)
Adjustments to maintain reserves ................. 210 129 853 489
------------- -------------- -------------- --------------
Net equity transactions ...................... 6,602,687 4,310,299 3,302,940 2,716,661
------------- -------------- -------------- --------------
Net change in contract owners' equity ............ 7,425,100 4,893,496 3,608,983 2,859,553
Contract owner's equity beginning of period ...... 7,667,494 2,773,998 5,190,860 2,331,307
------------- -------------- -------------- --------------
Contract owners' equity end of period ............ 15,092,594 7,667,494 8,799,843 5,190,860
============= ============== ============== ==============
</TABLE>
<PAGE> 5
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NSATTOTRE OGASTALL
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 581,993 277,827 851,407 307,550
Mortality, expense and administration
charges (note 2) ............................... (486,093) (169,743) (327,460) (109,456)
-------------- -------------- -------------- --------------
Net investment activity ........................ 95,900 108,084 523,947 198,094
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 1,234,589 346,275 230,267 136,365
Cost of mutual fund shares sold .................. (782,774) (281,951) (180,939) (118,065)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ 451,815 64,324 49,328 18,300
Change in unrealized gain (loss) on investments .. 6,133,091 1,567,068 1,354,415 500,594
-------------- -------------- -------------- --------------
Net gain (loss) on investments ................. 6,584,906 1,631,392 1,403,743 518,894
-------------- -------------- -------------- --------------
Reinvested capital gains ......................... 1,667,393 810,338 2,977,924 338,743
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 8,348,199 2,549,814 4,905,614 1,055,731
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 23,481,911 11,827,035 21,558,362 8,038,469
Transfers between funds .......................... 990,636 1,169,436 739,176 510,173
Redemptions ...................................... (1,737,301) (340,223) (662,596) (293,784)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... - (4,548) - (2,812)
Contingent deferred sales charges (note 2) ....... (60,534) (18,078) (23,352) (12,802)
Adjustments to maintain reserves ................. 5,636 1,096 7 330
-------------- -------------- -------------- --------------
Net equity transactions ...................... 22,680,348 12,634,718 21,611,597 8,239,574
-------------- -------------- -------------- --------------
Net change in contract owners' equity ............ 31,028,547 15,184,532 26,517,211 9,295,305
Contract owners' equity beginning of period ...... 21,475,096 6,290,564 14,299,279 5,003,974
-------------- -------------- -------------- --------------
Contract owners' equity end of period ............ $ 52,503,643 21,475,096 40,816,490 14,299,279
============== ============== ============== ==============
<CAPTION>
OGGVTBD OGGROPP
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 1,067,051 752,586 - 284,265
Mortality, expense and administration
charges (note 2) ............................... (149,083) (86,698) (471,076) (186,274)
------------- -------------- -------------- --------------
Net investment activity ........................ 917,968 665,888 (471,076) 97,991
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 475,970 286,338 238,598 65,570
Cost of mutual fund shares sold .................. (475,470) (277,564) (172,586) (51,439)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ 500 8,774 66,012 14,131
Change in unrealized gain (loss) on investments .. 586,023 (324,635) 3,478,714 (69,471)
------------- -------------- -------------- --------------
Net gain (loss) on investments ................. 586,523 (315,861) 3,544,726 (55,340)
------------- -------------- -------------- --------------
Reinvested capital gains ......................... 41,992 3,690 4,836,828 1,711,951
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 1,546,483 353,717 7,910,478 1,754,602
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 6,064,947 5,476,081 20,472,239 13,529,593
Transfers between funds .......................... 493,915 (109,357) 1,411,094 822,315
Redemptions ...................................... (359,045) (156,819) (1,253,599) (487,993)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... - (1,880) - (6,440)
Contingent deferred sales charges (note 2) ....... (9,910) (7,344) (54,360) (27,512)
Adjustments to maintain reserves ................. 43 266 (3,179) 3,150
------------- -------------- -------------- --------------
Net equity transactions ...................... 6,189,950 5,200,947 20,572,195 13,833,113
------------- -------------- -------------- --------------
Net change in contract owners' equity ............ 7,736,433 5,554,664 28,482,673 15,587,715
Contract owners' equity beginning of period ...... 14,649,524 9,094,860 22,335,793 6,748,078
------------- -------------- -------------- --------------
Contract owners' equity end of period ............ 22,385,957 14,649,524 50,818,466 22,335,793
============= ============== ============== ==============
(Continued)
</TABLE>
<PAGE> 6
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
OGLGCOGR
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 497,337 378,797
Mortality, expense and administration
charges (note 2) .................................... (856,200) (333,586)
-------------- --------------
Net investment activity ............................. (358,863) 45,211
-------------- --------------
Proceeds from mutual fund shares sold ................. 244,898 80,814
Cost of mutual fund shares sold ....................... (140,518) (63,611)
-------------- --------------
Realized gain (loss) on investments ................. 104,380 17,203
Change in unrealized gain (loss) on investments ....... 13,222,430 3,352,863
-------------- --------------
Net gain (loss) on investments ...................... 13,326,810 3,370,066
-------------- --------------
Reinvested capital gains .............................. 3,939,986 933,326
-------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 16,907,933 4,348,603
-------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 40,825,699 21,908,412
Transfers between funds ............................... 1,663,763 1,183,131
Redemptions ........................................... (2,340,063) (753,457)
Annuity benefits ...................................... - -
Annual contract maintenance charge (note 2) ........... - (11,570)
Contingent deferred sales charges (note 2) ............ (90,494) (42,688)
Adjustments to maintain reserves ...................... (3,032) 3,221
-------------- --------------
Net equity transactions ........................... 40,055,873 22,287,049
-------------- --------------
Net change in contract owners' equity ................. 56,963,806 26,635,652
Contract owners' equity beginning of period ........... 42,896,305 16,260,653
-------------- --------------
Contract owners' equity end of period ................. $ 99,860,111 42,896,305
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE> 7
NATIONWIDE VA SEPARATE ACCOUNT-C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide VA Separate Account-C (the Account) was established pursuant
to a resolution of the Board of Directors of Nationwide Life and
Annuity Insurance Company (the Company) on July 24, 1991. The Account
has been registered as a unit investment trust under the Investment
Company Act of 1940.
On August 17, 1994, the Company (Depositor) transferred to the Account
97,500 shares of the One Group-Asset Allocation Fund, 500,000 shares of
the One Group-Government Bond Fund, 2,500 shares of the One
Group-Growth Opportunities Fund and 300,000 shares of the One
Group-Large Company Growth Fund, for which the Account was credited
with 97,500 units of the One Group-Asset Allocation Fund, 500,000 units
of the One Group-Government Bond Fund, 2,500 units of the One
Group-Growth Opportunities Fund and 300,000 units of the One
Group-Large Company Growth Fund. These amounts represent the initial
funding of the Account. The value of the units purchased by the Company
on August 17, 1994 was $9,000,000.
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 banks and other financial
institutions.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase.
See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in any of the following funds:
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Funds of The One Group(R) Investment Trust (One Group);
One Group - Asset Allocation Fund (OGAstAll)
One Group - Government Bond Fund (OGGvtBd)
One Group - Growth Opportunities Fund (OGGrOpp)
One Group - Large Company Growth Fund (OGLgCoGr)
At December 31, 1997, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
<PAGE> 8
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1997. The cost of investments
sold is determined on a specific identification basis. Investment
transactions are accounted 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 provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
period presentation.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge not to exceed 7% of the lesser of purchase payments or the amount
surrendered, such charge declining 1% per year, to 0%, after the purchase
payment has been held in the contract for 84 months. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The Company deducts a mortality risk charge, an expense risk charge and an
administration charge assessed through the daily unit value calculation
equal to an annual rate of 0.80%, 0.45% and 0.05%, respectively. Prior to
1997, the Company deducted an annual contract maintenance charge of $30.
This charge is no longer assessed. No charges are deducted from the initial
funding by the Depositor, or from earnings thereon.
(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> 40
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life and Annuity Insurance Company:
We have audited the accompanying balance sheets of Nationwide Life and Annuity
Insurance Company, a wholly owned subsidiary of Nationwide Life Insurance
Company, as of December 31, 1997 and 1996, and the related statements of income,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nationwide Life and Annuity
Insurance Company as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
December 31, 1997 and 1996
($000's omitted)
<TABLE>
<CAPTION>
Assets 1997 1996
------ ---------- ------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $ 796,919 $ 648,076
Equity securities 14,767 12,254
Mortgage loans on real estate, net 218,852 150,997
Real estate, net 2,824 1,090
Policy loans 215 126
Short-term investments 18,968 492
---------- ----------
1,052,545 813,035
---------- ----------
Cash 5,163 4,296
Accrued investment income 10,778 9,189
Deferred policy acquisition costs 30,087 16,168
Other assets 15,624 37,482
Assets held in Separate Accounts 891,101 486,251
---------- ----------
$2,005,298 $1,366,421
========== ==========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $ 986,191 $ 80,720
Funds withheld under coinsurance agreement with affiliate -- 679,571
Other liabilities 29,426 35,842
Liabilities related to Separate Accounts 891,101 486,251
---------- ----------
1,906,718 1,282,384
---------- ----------
Commitments (notes 6 and 7)
Shareholder's equity:
Common stock, $40 par value. Authorized, issued and outstanding 66,000 shares 2,640 2,640
Additional paid-in capital 52,960 52,960
Retained earnings 35,812 25,209
Unrealized gains on securities available-for-sale, net 7,168 3,228
---------- ----------
98,580 84,037
---------- ----------
$2,005,298 $1,366,421
========== ==========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 3
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
Years ended December 31, 1997, 1996 and 1995
($000's omitted)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 11,244 $ 6,656 $ 4,322
Traditional life insurance premiums 363 246 674
Net investment income 11,577 51,045 49,108
Realized losses on investments (246) (3) (702)
Other income 1,057 -- --
-------- -------- --------
23,995 57,944 53,402
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 3,948 34,711 33,276
Other benefits and claims 433 813 904
Amortization of deferred policy acquisition costs 1,402 7,380 5,508
Other operating expenses 1,860 7,247 6,567
-------- -------- --------
7,643 50,151 46,255
-------- -------- --------
Income before federal income tax expense 16,352 7,793 7,147
Federal income tax expense 5,749 2,707 2,373
-------- -------- --------
Net income $ 10,603 $ 5,086 $ 4,774
======== ======== ========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1997, 1996 and 1995
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Common paid-in Retained available-for- shareholder's
stock capital earnings sale, net equity
----- ------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $2,640 $52,960 $15,349 $(3,703) $ 67,246
Net income -- -- 4,774 -- 4,774
Unrealized gains on securities available-
for-sale, net -- -- -- 8,157 8,157
------ ------- ------- ------- --------
December 31, 1995 2,640 52,960 20,123 4,454 80,177
Net income -- -- 5,086 -- 5,086
Unrealized losses on securities available-
for-sale, net -- -- -- (1,226) (1,226)
------ ------- ------- ------- --------
December 31, 1996 2,640 52,960 25,209 3,228 84,037
Net income -- -- 10,603 -- 10,603
Unrealized gains on securities available-
for-sale, net -- -- -- 3,940 3,940
------ ------- ------- ------- --------
December 31, 1997 $2,640 $52,960 $35,812 $ 7,168 $ 98,580
====== ======= ======= ======= ========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 5
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
($000's omitted)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 10,603 $ 5,086 $ 4,774
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to policyholder account balances 3,948 34,711 33,276
Capitalization of deferred policy acquisition costs (20,099) (19,987) (6,754)
Amortization of deferred policy acquisition costs 1,402 7,380 5,508
Commission and expense allowances under coinsurance
agreement with affiliate -- 26,473 --
Amortization and depreciation 250 1,721 878
Realized losses on invested assets, net 246 3 702
Increase in accrued investment income (1,589) (725) (423)
Decrease (increase) in other assets 21,858 (32,539) 62
Increase (decrease) in policy liabilities and funds withheld
on coinsurance agreement with affiliate 228,898 (7,101) 627
(Decrease) increase in other liabilities (7,488) 23,198 1,427
--------- --------- --------
Net cash provided by operating activities 238,029 38,220 40,077
--------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 95,366 73,966 41,729
Proceeds from sale of securities available-for-sale 30,431 2,480 3,070
Proceeds from maturity of fixed maturity securities held-to-maturity -- -- 11,251
Proceeds from repayments of mortgage loans on real estate 15,199 10,975 8,673
Proceeds from sale of real estate -- -- 655
Proceeds from repayments of policy loans 67 23 50
Cost of securities available-for-sale acquired (267,899) (179,671) (79,140)
Cost of fixed maturity securities held-to maturity acquired -- -- (8,000)
Cost of mortgage loans on real estate acquired (84,736) (57,395) (18,000)
Cost of real estate acquired (13) -- (10)
Policy loans issued (155) (55) (66)
Short-term investments, net (18,476) 4,352 (4,479)
--------- --------- --------
Net cash used in investing activities (230,216) (145,325) (44,267)
--------- --------- --------
Cash flows from financing activities:
Increase in investment product and universal life insurance
product account balances 6,952 200,575 46,247
Decrease in investment product and universal life insurance
product account balances (13,898) (89,174) (42,057)
--------- --------- --------
Net cash (used in) provided by financing activities (6,946) 111,401 4,190
--------- --------- --------
Net increase in cash 867 4,296 --
Cash, beginning of year 4,296 -- --
--------- --------- --------
Cash, end of year $ 5,163 $ 4,296 $
========= ========= ========
</TABLE>
See accompanying notes to finanacial statements.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
($000's omitted)
(1) Organization and Description of Business
Nationwide Life and Annuity Insurance Company (the Company) is a wholly
owned subsidiary of Nationwide Life Insurance Company (NLIC).
The Company sells primarily fixed and variable rate annuities through
banks and other financial institutions. In addition, the Company sells
universal life insurance and other interest-sensitive life insurance
products and is subject to competition from other financial services
providers throughout the United States. The Company is subject to
regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, which differ from statutory
accounting practices prescribed or permitted by regulatory authorities.
An Annual Statement, filed with the Department of Insurance of the
State of Ohio (the Department), is prepared on the basis of accounting
practices prescribed or permitted by the Department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosures of contingent assets and
liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses for the reporting period.
Actual results could differ significantly from those estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
<PAGE> 7
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Impairment losses are recorded on long-lived
assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(b) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual variable and
fixed annuities. Universal life insurance products include
universal life insurance, variable universal life insurance and
other interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of certain annuities with life
contingencies. Premiums for traditional life insurance products
are recognized as revenue when due. Benefits and expenses are
associated with earned premiums so as to result in recognition of
profits over the life of the contract. This association is
accomplished by the provision for future policy benefits and the
deferral and amortization of policy acquisition costs.
(c) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(a).
(d) Separate Accounts
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
statements of income and cash flows except for the fees the
Company receives.
<PAGE> 8
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(e) Future Policy Benefits
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
(f) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC). The members of the
consolidated tax return group have a tax sharing agreement which
provides, in effect, for each member to bear essentially the same
federal income tax liability as if separate tax returns were
filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(g) Reinsurance Ceded
Reinsurance revenues ceded and reinsurance recoveries on benefits
and expenses incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(h) Statements of Cash Flows
The Company routinely invests its available cash balances in
highly liquid, short-term investments with affiliated companies.
See note 11. As such, the Company had no cash balance as of
December 31, 1995.
(i) Recently Issued Accounting Pronouncements
Statement of Financial Accounting Standards No. 130 - Reporting
Comprehensive Income was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(j) Reclassification
Certain items in the 1996 and 1995 financial statements have been
reclassified to conform to the 1997 presentation.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 5,923 $ 109 $ (27) $ 6,005
Obligations of states and political subdivisions 267 5 -- 272
Debt securities issued by foreign governments 6,077 57 (1) 6,133
Corporate securities 482,478 10,964 (509) 492,933
Mortgage-backed securities 285,224 6,458 (106) 291,576
-------- -------- --------- --------
Total fixed maturity securities 779,969 17,593 (643) 796,919
Equity securities 11,704 3,063 -- 14,767
-------- -------- --------- --------
$791,673 $ 20,656 $ (643) $811,686
======== ======== ========= ========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 3,695 $ 7 $ (78) $ 3,624
Obligations of states and political subdivisions 269 -- (2) 267
Debt securities issued by foreign governments 6,129 133 (8) 6,254
Corporate securities 393,371 5,916 (1,824) 397,463
Mortgage-backed securities 236,839 4,621 (992) 240,468
-------- -------- --------- --------
Total fixed maturity securities 640,303 10,677 (2,904) 648,076
Equity securities 10,854 1,540 (140) 12,254
-------- -------- --------- --------
$651,157 $ 12,217 $ (3,044) $660,330
======== ======== ========= ========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $ 31,421 $ 31,623
Due after one year through five years 231,670 235,764
Due after five years through ten years 175,633 180,174
Due after ten years 56,021 57,782
-------- --------
494,745 505,343
Mortgage-backed securities 285,224 291,576
-------- --------
$779,969 $796,919
======== ========
</TABLE>
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Gross unrealized gains $20,013 $ 9,173
Adjustment to deferred policy acquisition costs (8,985) (4,207)
Deferred federal income tax (3,860) (1,738)
------- -------
$ 7,168 $ 3,228
======= =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 9,177 $(8,764) $30,647
Equity securities 1,663 249 1,283
Fixed maturity securities held-to-maturity -- -- 3,941
------- ------- -------
$10,840 $(8,515) $35,871
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $30,431, $2,480 and $3,070, respectively. During
1997, gross gains of $825 ($181 and $64 in 1996 and 1995, respectively)
and gross losses of $1,124 (none and $6 in 1996 and 1995, respectively)
were realized on those sales. See note 11.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $2,000 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $600.
As permitted by the Financial Accounting Standards Board's Special
Report, A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities, issued in November
1995, the Company transferred all of its fixed maturity securities
previously classified as held-to-maturity to available-for-sale. As of
December 14, 1995, the date of transfer, the fixed maturity securities
had amortized cost of $77,405, resulting in a gross unrealized gain of
$1,709.
The Company had no investments in mortgage loans on real estate
considered to be impaired as of December 31, 1997. The recorded
investment of mortgage loans on real estate considered to be impaired
as of December 31, 1996 was $955, for which the related valuation
allowance was $184. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $386 ($964 in
1996) and no interest income was recognized on those loans ($16 in
1996), which is equal to interest income recognized using a cash-basis
method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Allowance, beginning of year $ 934 $750
(Reductions) additions charged to operations (53) 184
Direct write-downs charged against the allowance (131) --
----- ----
Allowance, end of year $ 750 $934
===== ====
</TABLE>
<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Real estate is presented at cost less accumulated depreciation of $153
as of December 31, 1997 ($108 as of December 31, 1996) and valuation
allowances of $229 as of December 31, 1997 ($229 as of December 31,
1996).
The Company has no investments which were non-income producing for the
twelve month periods preceding December 31, 1997 and 1996.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $53,491 $40,552 $35,093
Equity securities 375 598 713
Fixed maturity securities held-to-maturity -- -- 4,530
Mortgage loans on real estate 14,862 9,991 9,106
Real estate 318 214 273
Short-term investments 899 507 348
Other 90 57 41
------- ------- -------
Total investment income 70,035 51,919 50,104
Less:
Investment expenses 1,386 874 996
Net investment income ceded (note 11) 57,072 -- --
------- ------- -------
Net investment income $11,577 $51,045 $49,108
======= ======= =======
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $(299) $ 181 $(822)
Mortgage loans on real estate 53 (184) 110
Real estate and other -- -- 10
----- ----- -----
$(246) $ (3) $(702)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $3,383 and $3,403
as of December 31, 1997 and 1996, respectively, were on deposit with
various regulatory agencies as required by law.
(4) Future Policy Benefits
The liability for future policy benefits for investment contracts has
been established based on policy terms, interest rates and various
contract provisions. The average interest rate credited on investment
product policies was approximately 5.1%, 5.6% and 5.6% for the years
ended December 31, 1997, 1996 and 1995, respectively.
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(5) Federal Income Tax
The Company's current federal income tax liability was $806 and $7,914
as of December 31, 1997 and 1996, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 13,168 $ 1,070
Liabilities in Separate Accounts 8,080 5,311
Mortgage loans on real estate and real estate 336 407
Other assets and other liabilities 48 3,836
-------- -------
Total gross deferred tax assets 21,632 10,624
-------- -------
Deferred tax liabilities:
Fixed maturity securities 7,186 3,268
Deferred policy acquisition costs 6,159 2,131
Equity securities 1,072 490
Other 7,892 --
-------- -------
Total gross deferred tax liabilities 22,309 5,889
-------- -------
$ (677) $ 4,735
======== =======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. All future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. The
Company has determined that valuation allowances are not necessary as
of December 31, 1997, 1996 and 1995 based on its analysis of future
deductible amounts.
Federal income tax expense for the years ended Decmber 31 was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Currently payable $2,458 $ 9,612 $2,012
Deferred tax expense (benefit) 3,291 (6,905) 361
------ ------- ------
$5,749 $ 2,707 $2,373
====== ======= ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ---------------- ----------------
Amount % Amount % Amount %
------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $5,723 35.0 $2,728 35.0 $2,501 35.0
Tax exempt interest and dividends
received deduction -- (0.0) (175) (2.3) (150) (2.1)
Other, net 26 (0.2) 154 2.0 22 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $5,749 35.2 $2,707 34.7 $2,373 33.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $9,566, $2,335 and $1,314 during the
years ended December 31, 1997, 1996 and 1995, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(6) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
Mortgage loans on real estate: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the balance sheets for these instruments approximates
their fair value.
Separate Account assets and liabilities: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Policy reserves on life insurance contracts: The estimated fair
value is the amount payable on demand. Also included are
disclosures for the Company's limited payment policies, which the
Company has used discounted cash flow analyses similar to those
used for investment contracts with known maturities to estimate
fair value.
Commitments to extend credit: Commitments to extend credit have
nominal value because of the short-term nature of such
commitments. See note 7.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------ -----------------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $796,919 $796,919 $648,076 $648,076
Equity securities 14,767 14,767 12,254 12,254
Mortgage loans on real estate, net 218,852 229,881 150,997 152,496
Policy loans 215 215 126 126
Short-term investments 18,968 18,968 492 492
Cash 5,163 5,163 4,296 4,296
Assets held in Separate Accounts 891,101 891,101 486,251 486,251
Liabilities
Investment contracts 980,263 950,105 75,417 72,262
Policy reserves on life insurance contracts 5,928 6,076 5,303 5,390
Liabilities related to Separate Accounts 891,101 868,056 486,251 471,125
</TABLE>
(7) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by operating throughout the
United States, thus reducing its exposure to any single jurisdiction,
and also by employing underwriting practices which identify and
minimize the adverse impact of this risk.
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties which owe the Company money, will
not pay. The Company minimizes this risk by adhering to a conservative
investment strategy, by maintaining credit and collection policies and
by providing for any amounts deemed uncollectible.
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $61,200 extending into
1998 were outstanding as of December 31, 1997. The Company also had
$4,000 of commitments to purchase fixed maturity securities as of
December 31, 1997.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 29% (31% in 1996) in any geographic area and no more than 3% (5%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997 37% (42% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed apartment
building properties.
(8) Pension Plan
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
of service. The Company funds an allocation of pension costs accrued
for employees of affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $257, $189 and $214,
respectively.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77,303 $ 75,466 $ 64,524
Interest cost on projected benefit obligation 118,556 105,511 95,283
Actual return on plan assets (327,965) (210,583) (249,294)
Net amortization and deferral 196,366 101,795 143,353
--------- --------- ---------
$ 64,260 $ 72,189 $ 53,866
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547,462 $1,338,554
Nonvested 13,531 11,149
---------- ----------
$1,560,993 $1,349,703
========== ==========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033,761 $1,847,828
Plan assets at fair value 2,212,848 1,947,933
---------- ----------
Plan assets in excess of projected benefit obligation 179,087 100,105
Unrecognized prior service cost 34,658 37,870
Unrecognized net gains (330,656) (201,952)
Unrecognized net asset at transition 33,337 37,158
---------- ----------
$ (83,574) $ (26,819)
========== ==========
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau, an affiliate.
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(9) Postretirement Benefits Other Than Pensions
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1997 and 1996 was $891 and $840, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1997, 1996 and 1995 was $94,
$78 and $66, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93,327 $ 92,954
Fully eligible, active plan participants 31,580 23,749
Other active plan participants 112,951 83,986
--------- ---------
Accumulated postretirement benefit obligation 237,858 200,689
Plan assets at fair value 69,165 63,044
--------- ---------
Plan assets less than accumulated postretirement
benefit obligation (168,693) (137,645)
Unrecognized transition obligation of affiliates 1,481 1,654
Unrecognized net gains 1,576 (23,225)
--------- ---------
$(165,636) $(159,216)
========= =========
</TABLE>
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7,077 $ 6,541 $ 6,235
Interest cost on accumulated postretirement
benefit obligation 14,029 13,679 14,151
Actual return on plan assets (3,619) (4,348) (2,657)
Amortization of unrecognized transition
obligation of affiliates 173 173 2,966
Net amortization and deferral (528) 1,830 (1,619)
------- ------- -------
$17,132 $17,875 $19,076
======= ======= =======
</TABLE>
<PAGE> 18
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1997, 1996 and 1995 and the NPPBC for 1997, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $410 and the NPPBC for the year ended December 31, 1997 by $46.
(10) Regulatory Risk-Based Capital and Dividend Restriction
Ohio, the Company's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. The Company exceeds the
minimum risk-based capital requirements.
The statutory capital shares and surplus of the Company as reported to
regulatory authorities as of December 31, 1997, 1996 and 1995 was
$74,820, $71,390 and $54,978, respectively. The statutory net income of
the Company as reported to regulatory authorities for the years ended
December 31, 1997, 1996 and 1995 was $7,446, $670 and $8,023,
respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1997,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $7,482.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(11) Transactions With Affiliates
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $703, $410
and $287, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $2,564, $2,682 and $2,596 in 1997, 1996
and 1995, respectively. The allocations are based on techniques and
procedures in accordance with insurance regulatory guidelines. Measures
used to allocate expenses among companies include individual employee
estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
inter-company agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $4,981 and $2,275 as of December 31, 1997 and 1996,
respectively.
Effective December 31, 1996, the Company entered into an intercompany
reinsurance agreement with NLIC whereby certain inforce and
subsequently issued fixed individual deferred annuity contracts are
ceded on a 100% coinsurance with funds withheld basis. On December 31,
1997, the agreement was amended to a modified coinsurance basis. Under
modified coinsurance agreements, invested assets and liabilities for
future policy benefits are retained by the ceding company and net
investment earnings on the invested assets are paid to the assuming
company. Under terms of the Company's agreement, the investment risk
associated with changes in interest rates is borne by NLIC. Risk of
asset default is retained by the Company, although a fee is paid by
NLIC to the Company for the Company's retention of such risk. The
agreement will remain inforce until all contract obligations are
settled. The ceding of risk does not discharge the original insurer
from its primary obligation to the contractholder. The Company believes
that the terms of the modified coinsurance agreement are consistent in
all material respects with what the Company could have obtained with
unaffiliated parties. Amounts ceded to NLIC in 1997 are included in
NLIC's results of operations for 1997 and include premiums of $300,617,
net investment income of $57,072 and benefits, claims and other
expenses of $343,426.
Under the 100% coinsurance with funds withheld agreement, the Company
recorded a liability equal to the amount due to NLIC as of December 31,
1996 for $679,571, which represents the future policy benefits of the
fixed individual deferred annuity contracts ceded. In consideration for
the initial inforce business reinsured, NLIC paid the Company $26,473
in commission and expense allowances which were applied to the
Company's deferred policy acquisition costs as of December 31, 1996. No
significant gain or loss was recognized as a result of the agreement.
During 1997, the Company sold fixed maturity securities
available-for-sale at fair value of $27,253 to NLIC. The Company
recognized a $693 gain on the transactions.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $18,968 and $492 as of December 31,
1997 and 1996, respectively, and are included in short-term investments
on the accompanying balance sheets.
Certain annuity products are sold through an affiliated company. Total
commissions paid to the affiliate for the three years ended December
31, 1997 were $8,053, $14,644 and $5,949, respectively.
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(12) Segment Information
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by an affiliated company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses are reported
in the Corporate and Other segment.
The following table summarizes the revenues and income (loss) before
federal income tax expense for the years ended December 31, 1997, 1996
and 1995 and assets as of December 31, 1997, 1996 and 1995, by segment.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 9,950 $ 4,591 $ 2,927
Fixed Annuities 7,752 51,643 50,056
Life Insurance 182 165 185
Corporate and Other 6,111 1,545 234
----------- ----------- ---------
$ 23,995 $ 57,944 $ 53,402
=========== =========== =========
Income (loss) before federal income tax expense:
Variable Annuities $ 7,267 $ 1,094 $ 1,196
Fixed Annuities 3,202 5,156 5,633
Life Insurance (228) (1) (381)
Corporate and Other 6,111 1,544 699
----------- ----------- ---------
$ 16,352 $ 7,793 $ 7,147
=========== =========== =========
Assets:
Variable Annuities $ 925,021 $ 503,111 $ 267,097
Fixed Annuities 989,116 787,682 643,313
Life Insurance 2,228 2,597 2,665
Corporate and Other 88,933 73,031 54,507
----------- ----------- ---------
$ 2,005,298 $ 1,366,421 $ 967,582
=========== =========== =========
</TABLE>
<PAGE> 41
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE
<S> <C>
(a) Financial Statements:
(1) Financial statements included
in Prospectus (Part A): N/A
(2) Financial statements included
in Part B as required: 39
Nationwide VA Separate Account-C:
Independent Auditors' Report. 39
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1997. 40
Statement of Operations and Changes in Contract Owners'
Equity for the year ended December 31, 1997 and for the
period February 1, 1996
(commencement of operations) through December 31, 1996. 42
Notes to Financial Statements. 45
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report. 47
Balance Sheets as of December
31, 1997 and 1996. 48
Statements of Income for the
years ended December 31, 1997, 1996
and 1995. 49
Statements of Shareholder's
Equity for the years ended December 31,
1997, 1996 and 1995. 50
Statements of Cash Flows for
the years ended December 31, 1997, 1996
and 1995. 51
Notes to Financial Statements. 52
Schedule I - Summary of Investments - Other
Than Investments in Related Parties 86
Schedule III - Supplementary Insurance Information 87
Schedule IV - Reinsurance 88
Schedule V - Valuation and Qualifying Accounts 89
</TABLE>
<PAGE> 42
<TABLE>
<S> <C>
(b) Exhibits:
(1) Resolution of the Depositor's Board of Filed previously with Registration Statement
Directors authorizing the establishment of (33-66496) and is hereby incorporated by
the Registrant. reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts Filed previously with Registration Statement
between the Registrant and Principal (33-66496) and is hereby incorporated by
Underwriter. reference.
(4) The form of the variable annuity contract Filed previously with Registration Statement
(333-44485) and is hereby incorporated by
reference.
(5) Variable Annuity Application Filed previously with Registration Statement
(333-44485) and is hereby incorporated by
reference.
(6) Articles of Incorporation of Depositor Filed previously with Registration Statement
(33-66496) and is hereby incorporated by
reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel Filed previously with this Registration Statement
and incorporated by reference.
(10)Not Applicable
(11)Not Applicable
(12)Not Applicable
(13)Performance Advertising Calculation Filed previously with Registration Statement
Schedule. (33-66496) and is hereby incorporated by
reference.
</TABLE>
<PAGE> 43
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 46
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons, associations,
corporations, domestic or foreign and to
form or acquire the control of other
corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons, associations,
corporations, domestic or foreign and to
form or acquire the control of other
corporations
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation III Ohio Investment Company
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
Public Employees Benefit Services Delaware Markets and Administers Deferred Compensation
Corporation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART) UNLESS
STATE OTHERWISE INDICATED
OF ORGANIZATION
COMPANY PRINCIPAL BUSINESS
<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 VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-C Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-D Separate Account Policies
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| KEY HEALTH PLAN, INC. | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 1,000 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
| 80% $1,828,478 | |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $1,461,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | AGENCY, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | |
| Cost | | | Cost | | | Cost | | Cost |
| ---- | | | ---- | | | ---- | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | |WSC-100% $10,000 |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | PENSION ASSOCIATES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | OF WAUSAU, INC. |
| | | | | | | CORPORATION | |Common Stock: 1,000 |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | |------------ Shares |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |
| |-------| | |---|Preferred Stock: 11,540 | | |
| | | | | | |--------------- Shares | |Companies Cost |
| | | | | | | | |Agency, Inc. ---- |
| Cost | | | Cost | | | Cost | |(Wisconsin)-100% $10,000 |
| ---- | | | ---- | | | ---- | | |
|WSC-100% $1,000 | | |WSC-100% $1,000 | | |WSC-33-1/3% $6,215,459| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| |
| --------------------------- | ----------------------------
| | WAUSAU | | | PREVEA HEALTH |
| | (BERMUDA) LTD. | | | INSURANCE PLAN, INC. |
| | Common Stock: 120,000 | | |Common Stock: 3,000 Shares|
| | ------------- Shares | | |------------ |
----| | ----| |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| WSC-100% $5,000,000| |WSC-33-1/3% $500,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 10,330 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-18.6% $88,320 | || | | Cost | | Cost |
|Fire-18.6% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-6.8% $100,000 | || | | | | | |
|Fire-6.8% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate |-------- | |------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | | |
- -------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WINCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ | ------| |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | |
- -------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |-------- |----|------------ Shares | ---- |--------|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
| | | | | | | | |
| | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares |------------ | | Common Stock: 100,000 | | | |Common Stock: 1 Share |
| | | | ------------ Shares | ---| |--------|------------ |
| Cost | | | | | | | Cost |
|Casualty-99.9% ---- | | | Cost | | | | ---- |
|Other Capital: $26,714,335 | | | ---- | | | |Neckura-100% DM 51,639 |
|------------- | | | SIC-100% $6,000,000 | | | | |
|Casualty-Ptd. $ 713,576 | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |------------- |------------ Shares |----- ---------|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
| | | | | | |
| | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
- -------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1,500 Shares |
| | |------------ |----------------- |------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
| |------------ Shares | | | Cost |
| | Cost | | | ---- |
| | ---- | | |Casualty-90% $9,000 |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
| -------------------------------- | --------------------------------
| || |
| -------------------------------- | --------------------------------
| | COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| | INSURANCE COMPANY | | | MANAGEMENT |
| | | | | (Inactive) |
| |Surplus Debentures | | | |
| |------------------ | |----| |
| | Cost | | | |
| | ---- | | | |
| |Colonial $500,000 | | |Casualty-100% |
| |Lone Star 150,000 | | | |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | THE BEAK AND |
| | INSURANCE COMPANY | | | WIRE CORPORATION |
| |Common Stock 12,500 | | | |
-----|------------ Shares | | |Common Stock: 750 Shares |
| | | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $1,419,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE/DISPATCH LLC |
| | ENTERPRISE SERVICES, LTD. | | | |
| | | | | |
| |Single Member Limited | | | |
- - - |Liability Company | - - -| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- | |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
Limited Liability Company -- Dotted Line
December 31, 1997
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
(Left Side)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| PROPERTIES, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ - -| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE | | | NATIONWIDE | ||
| PROPERTIES, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: - -| | | ||
| ------ | | |==||
| | | | ||
| | | | ||
| NW Life -97.6% | | | ||
| NW Mutual -2.4% | | COMMON LAW TRUST | ||
--------------------------- --------------------------- ||
||
--------------------------- ||
| NATIONWIDE | ||
| SEPARATE ACCOUNT | ||
| TRUST | ||
| | ||
| |__||
| |
| |
| |
| COMMON LAW TRUST |
---------------------------
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|-----------------------------------------------------------------
--------------------------- |
| NATIONWIDE FINANCIAL | |
| SERVICES, INC. (NFS) | |
| | |
| Common Stock: Control | |
| ------------ ------- | |
| | |
| | |
| Class A Public--100% | |
| Class B NW Corp--100% | |
--------------------------- |
| |
---------------------------------------------------------------------- |
| | | |
--------------------------- --------------------------- --------------------------- | -------------------------
| IRVIN L. SCHWARTZ | | PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | | NATIONWIDE GLOBAL |
| & ASSOCIATES | | SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | | HOLDINGS, INC. |
| | | (PEBSCO) | | (NEA) | | | |
| Common Stock: Control | | Common Stock: 236,494 |==|| | Common Stock: 500 |= || | | Common Stock: 1 Share |
| ------------ ------- | | ------------ Shares | || | ------------ Shares | || |--| ------------ |
| | | | || | | || | | |
| | | | || | | || | | Cost |
| Class A Other -100% | | | || | | || | | ---- |
| Class B NFS -100% | | NFS -100% | || | NFS -100% | || | | NW Corp-100% $7,000,00 |
- ---------------------------- ---------------------------- || ---------------------------- || | --------------------------
--------------------------- || --------------------------- || |
| PEBSCO OF | || | NEA VALUEBUILDER | || | --------------------------
| ALABAMA | || | INVESTOR SERVICES | || | | MRM INVESTMENT, INC. |
| | || | OF ALABAMA, INC. | || | | |
| Common Stock: 100,000 | || | Common Stock: 500 | || | | |
| ------------ Shares |--|| | ------------ Shares |--|| __ | Common Stock: 1 Share |
| | || | | || | ----------- |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | Cost |
| PEBSCO -100% $1,000 | || | NEA -100% $5,000 | || | ---- |
--------------------------- || --------------------------- || | NW Corp.-100% $7,000,000|
|| || --------------------------
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC. | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $500 | || | NEA -100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $1,000 | || | NEA -100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| MONTANA | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF NEVADA, INC. | || | OF OHIO, INC. |
| Common Stock: 500 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $500 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| NEW MEXICO | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF WYOMING, INC. | || | OF OKLAHOMA, INC. |
| Common Stock: 1,000 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $1,000 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || --------------------------
| | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| | || | SERVICES INSURANCE | || | INVESTOR SERVICES |
| PEBSCO OF | || | AGENCY, INC. | || | OF TEXAS, INC. |
| TEXAS, INC. | || | Common Stock: 100 | || | |
| |==|| | ------------ Shares |--||=== | |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA -100% $1,000 | | |
--------------------------- --------------------------- --------------------------
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | HEALTH PLANS, INC. (NHP) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP. -100% $25,683,532 | | | NW CORP. -100% $126,509,480 | | | NW CORP. -100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 200 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NHP Cost |
| | ---- | | ---- | | | ---- |
| | GATES -100% $106,947 | | ELIOW -100% $57,413,193 | | | Inc. -100% $25,149 |
| ----------------------------- ------------------------------ | ------------------------------
| |
| ----------------------------- | ------------------------------
| | GATES, MCDONALD & COMPANY | | | NATIONWIDE |
| | OF NEVADA | | | AGENCY, INC. |
| | | | | |
| | Common Stock: 40 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares |
| | | | |
| | Cost | | Cost |
| | ---- | | NHP ---- |
| | Gates -100% $93,750 | | Inc. -99% $116,077 |
| ----------------------------- ------------------------------
|
| -----------------------------
| | GATESMCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| Gates -100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1997
Page 2
</TABLE>
<PAGE> 59
Item 27. NUMBER OF CONTRACT OWNERS
Not applicable.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by the Company of
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of the Company, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide DC Variable Account,
Nationwide DCVA II, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide VL Separate
Account-C, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VL Separate Account-B,
Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, Nationwide VLI Separate Account-4, NACo Variable
Account and the Nationwide Variable Account, all of which
are separate investment accounts of the Company or its
affiliates.
NAS also acts as principal underwriter for Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, Nationwide Asset
Allocation Trust and Nationwide Investing Foundation II, and
Nationwide Investing Foundation III which are open-end
management investment companies.
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
</TABLE>
<PAGE> 60
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Dennis W. Click Secretary
One Nationwide Plaza
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Edwin P. Mc Causland Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
Charles Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NET UNDERWRITING
NAME OF PRINCIPAL DISCOUNTS AND COMPENSATION ON
UNDERWRITER COMMISSIONS REDEMPTION OR BROKERAGE
ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide
Advisory Services, N/A N/A N/A N/A
Inc.
</TABLE>
<PAGE> 61
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under this
form promptly upon written or oral request.
The Registrant represents that any of the Contracts which are
issued pursuant to Section 403(b) of the Code is issued by the
Company through the Registrant in reliance upon, and in compliance
with, a no-action letter issued by the Staff of the Securities and
Exchange Commission to the American Council of Life Insurance
(publicly available November 28, 1988) permitting withdrawal
restrictions to the extent necessary to comply with Section
403(b)(11) of the Code.
The Company represents that the fees and charges deducted under
the Contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred and risks
assumed by the Company.
<PAGE> 62
Offered by
Nationwide Life and Annuity Insurance Company
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide VA Separate Account-C
Individual Deferred Variable Annuity Contract
PROSPECTUS
________, 1998
<PAGE> 63
INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of the Nationwide VA Separate Account-C:
The audits referred to in our report on Nationwide Life and Annuity Insurance
Company (the Company) dated January 30, 1998 included the related financial
statement schedules as of December 31, 1997, and for each of the years in the
three-year period ended December 31, 1997, included in the registration
statement. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth herein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
July 7, 1998
<PAGE> 64
<PAGE> 1
SCHEDULE I
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
($000's omitted)
As of December 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------- ---------- ---------- ---------
Column A Column B Column C Column D
- -------------------------------------------------------------------------- ---------- ---------- ---------
Amount at
which shown
in the
Type of Investment Cost Market value balance sheet
- -------------------------------------------------------------------------- ---------- ------------ -------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale:
Bonds:
U.S. Government and government agencies and authorities $ 284,851 $291,184 $ 291,184
States, municipalities and political subdivisions 267 272 272
Foreign governments 6,077 6,133 6,133
Public utilities 81,611 83,307 83,307
All other corporate 407,163 416,023 416,023
---------- -------- ----------
Total fixed maturity securities available-for-sale 779,969 796,919 796,919
---------- -------- ----------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 11,704 14,767 14,767
---------- -------- ----------
Total equity securities available-for-sale 11,704 14,767 14,767
---------- -------- ----------
Mortgage loans on real estate, net 219,602 218,852 (1)
Real estate, net:
Investment properties 1,428 1,062 (1)
Acquired in satisfaction of debt 1,779 1,762 (1)
Policy loans 215 215
Short-term investments 18,968 18,968
---------- ----------
Total investments $1,033,665 $1,052,545
========== ==========
</TABLE>
- -------------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 3 to the financial statements.
See accompanying independent auditor's report.
<PAGE> 2
SCHEDULE III
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
SUPPLEMENTARY INSURANCE INFORMATION
($000's omitted)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, Unearned claims and
acquisition claims and premiums benefits payable Premium
Segment costs loss expenses (1) (1) revenue
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
<C> <C> <C> <C>
1997: Variable Annuities $ 34,026 $ -- $ --
Fixed Annuities 4,708 984,408 363
Life Insurance 338 1,783 --
Corporate and Other (8,985) -- --
-------- -------- ----
Total $ 30,087 $986,191 $363
======== ======== ====
1996: Variable Annuities $ 17,335 $ -- $ --
Fixed Annuities 2,691 78,947 246
Life Insurance 349 1,773 --
Corporate and Other (4,207) -- --
-------- -------- ----
Total $ 16,168 $ 80,720 $246
======== ======== ====
1995: Variable Annuities $ 9,966 $ -- $ --
Fixed Annuities 23,913 619,400 674
Life Insurance 360 1,880 --
Corporate and Other (10,834) -- --
-------- -------- ----
Total $ 23,405 $621,280 $674
======== ======== ====
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
Other
Net investment Benefits, claims, Amortization operating
income losses and of deferred policy expenses Premiums
Segment (2) settlement expenses acquisition costs (2) written
- ----------------------------------- ---------------- -------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
1997: Variable Annuities $ (873) $ 238 $ 1,035 $1,410
Fixed Annuities 5,927 4,023 347 180
Life Insurance 166 120 20 270
Corporate and Other 6,357 -- -- --
-------- ------- ------- ------
Total $ 11,577 $ 4,381 $ 1,402 $1,860
======== ======= ======= ======
1996: Variable Annuities $ (849) $ 238 1,473 $1,786
Fixed Annuities 50,197 35,193 5,888 5,407
Life Insurance 149 93 19 54
Corporate and Other 1,548 -- -- --
-------- ------- ------- ------
Total $ 51,045 $35,524 7,380 $7,247
======== ======= ======= ======
1995: Variable Annuities $ (450) $ 107 739 $ 886
Fixed Annuities 48,454 33,974 5,211 5,238
Life Insurance 169 99 24 443
Corporate and Other 935 -- (466) --
-------- ------- ------- ------
Total $ 49,108 $34,180 5,508 $6,567
======== ======= ======= ======
</TABLE>
(1) Unearned premiums and other policy claims and benefits are included in
Column C amounts.
(2) Allocations of net investment income and certain operating expenses are
based on a number of assumptions and estimates, and reported operating
results would change by segment if different methods were applied.
See accompanying independent auditor's report.
<PAGE> 3
SCHEDULE IV
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
REINSURANCE
($000's omitted)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- -------------------------------- --------------- -------------- ------------- ------------- -------------
Column A Column B Column C Column D Column E Column F
- -------------------------------- --------------- -------------- ------------- ------------- -------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
-------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Life Insurance in force $6,519 $456 $ -- $6,063 0.0%
====== ==== ==== ====== ===
Premiums:
Life insurance $ 363 $ -- $ -- $ 363 0.0%
------ ---- ---- ------ ---
Total $ 363 $ -- $ -- $ 363 0.0%
====== ==== ==== ====== ===
1996:
Life Insurance in force $7,221 $463 $ -- $6,758 0.0%
====== ==== ==== ====== ===
Premiums:
Life insurance $ 246 $ -- $ -- $ 246 0.0%
------ ---- ---- ------ ---
Total $ 246 $ -- $ -- $ 246 0.0%
====== ==== ==== ====== ===
1995:
Life Insurance in force $8,186 $468 $ -- $7,718 0.0%
====== ==== ==== ====== ===
Premiums:
Life insurance $ 674 $ -- $ -- $ 674 0.0%
------ ---- ---- ------ ---
Total $ 674 $ -- $ -- $ 674 0.0%
====== ==== ==== ====== ===
</TABLE>
- --------------
Note: The life insurance caption represents premiums from life-contingent
immediate annuities and excludes deposits on investment products and
universal life insurance products.
See accompanying independent auditor's report.
<PAGE> 4
SCHEDULE V
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
VALUATION AND QUALIFYING ACCOUNTS
($000's omitted)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------ ----------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------ ------------ ----------------------------- ------------- -------------
Balance at Charged to Charged to Balance at
beginning costs and other Deductions end of
Description of period expenses accounts (1) period
- ------------------------------------------------------ ------------ -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Valuation allowances - fixed maturity securities $ -- $ 1,011 $ -- $1,011 $ --
Valuation allowances - mortgage loans on real estate 934 (53) -- 131 750
Valuation allowances - real estate 229 -- -- -- 229
------ ------- ---- ------ ------
Total $1,163 $ 958 $ -- $1,142 $ 979
====== ======= ==== ====== ======
1996:
Valuation allowances - mortgage loans on real estate $ 750 $ 184 $ -- $ -- $ 934
Valuation allowances - real estate 229 -- -- -- 229
------ ------- ---- ------ ------
Total $ 979 $ 184 $ -- $ -- $1,163
====== ======= ==== ====== ======
1995:
Valuation allowances - fixed maturity securities $ -- $ 996 $ -- $ 996 $ --
Valuation allowances - mortgage loans on real estate 860 (110) -- -- 750
Valuation allowances - real estate 472 (243) -- -- 229
------ ------- ---- ------ ------
Total $1,332 $ 643 $ -- $ 996 $ 979
====== ======= ==== ====== ======
</TABLE>
- --------
(1) Amounts represent direct write-downs charged against the valuation
allowance.
See accompanying independent auditor's report.
<PAGE> 65
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE VA
SEPARATE ACCOUNT-C, has caused this Registration Statement to be signed on its
behalf in the City of Columbus, and State of Ohio, on this 7th day of July,
1998.
NATIONWIDE VA SEPARATE ACCOUNT-C
----------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
----------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
----------------------------------------------
Joseph P. Rath
Vice President - Product and Market Compliance
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on this 7th day of
July, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
- -------------------------------------------------
Lewis J. Alphin
A. I. BELL Director
- -------------------------------------------------
A. I. Bell
KEITH W. ECKEL Director
- -------------------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -------------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- -------------------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- ------------------------------------------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ------------------------------------------------- Nationwide Insurance Enterprise and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President-
- -------------------------------------------------
Robert A. Oakley Chief Financial Officer
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- -------------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -------------------------------------------------
Harold W. Weihl
</TABLE>
<PAGE> 1
EXHIBIT 4
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(Hereinafter called the Company)
One Nationwide Plaza
PO Box 16609
Columbus, Ohio 43216-6609
1-(800)-848-6331 (For any inquiries)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY will make annuity payments to the
Annuitant starting on the Annuitization Date, as set forth in the Contract.
This Contract is provided in return for the Purchase Payments made as required
in the Contract.
TEN DAY LOOK
To be sure that the Contract Owner is satisfied with this Contract, the Contract
Owner has a TEN DAY "FREE LOOK". Within ten days of the day the Contract is
received by the Contract Owner, it may be returned to the Home Office of the
Company. When the Contract is received at the Home Office, the Contract Value as
of the date of cancellation will be refunded in full.
Executed for the Company on the Date of Issue.
______ _______
| |
| |
| /s/ DENNIS W. CLICK /s/ JOSEPH J. GASPER |
| |
| |
| SECRETARY PRESIDENT |
| |
______ _______
READ YOUR CONTRACT CAREFULLY
Individual Deferred Variable Annuity, Non-Participating
ANNUITY PAYMENTS, DEATH BENEFITS, AND OTHER CONTRACT VALUES PROVIDED BY THIS
CONTRACT ARE VARIABLE AND MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE
FLUCTUATIONS IN THE NET INVESTMENT FACTOR, AND ARE NOT GUARANTEED AS TO
FIXED-DOLLAR AMOUNT.
NOTICE - The details of the variable provisions in the
Contract may be found on Pages - 11, 12 and 15.
<PAGE> 3
CONTENTS
DATA PAGE.................................................................INSERT
CONTENTS.....................................................................2
DEFINITIONS..................................................................4
GENERAL PROVISIONS...........................................................6
ALTERATION OR MODIFICATION
ASSIGNMENT
ENTIRE CONTRACT
MISSTATEMENT OF AGE
EVIDENCE OF SURVIVAL
PROTECTION OF PROCEEDS
REPORTS
INCONTESTABILITY
CONTRACT SETTLEMENT
NUMBER
NON-PARTICIPATING
DEDUCTIONS AND CHARGES.......................................................7
DEDUCTION FOR PREMIUM TAXES
MORTALITY AND EXPENSE RISK CHARGE
OWNERSHIP PROVISIONS.........................................................7
CONTRACT OWNERSHIP PROVISIONS
JOINT OWNERSHIP PROVISIONS
CONTINGENT OWNERSHIP PROVISIONS
BENEFICIARY PROVISIONS
CHANGE OF PARTIES PROVISIONS
DEATH PROVISIONS.............................................................9
DEATH OF CONTRACT OWNER PROVISIONS
DEATH OF CONTRACT OWNER/ANNUITANT PROVISIONS
DEATH OF ANNUITANT PROVISIONS
REQUIRED DISTRIBUTIONS PROVISIONS
DEATH BENEFIT PAYMENT PROVISIONS
ACCUMULATION PROVISIONS.....................................................11
PURCHASE PAYMENTS
ALLOCATION OF PURCHASE PAYMENTS
CONTRACT VALUE
VARIABLE ACCOUNT CONTRACT VALUE
THE VARIABLE ACCOUNT
INVESTMENTS OF THE VARIABLE ACCOUNT
VALUATION OF ASSETS
VARIABLE ACCOUNT ACCUMULATION UNITS
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
NET INVESTMENT FACTOR
2
<PAGE> 4
CONTENTS (CONT)
SURRENDERS, WITHDRAWALS and TRANSFERS.........................................13
TRANSFER PROVISIONS
SURRENDER
SURRENDER VALUE
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER
SYSTEMATIC WITHDRAWALS
DISTRIBUTION PROVISIONS
ANNUITIZATION PROVISIONS......................................................14
GENERAL
ANNUITIZATION
ANNUITY COMMENCEMENT DATE
CHANGE OF ANNUITY COMMENCEMENT DATE
SELECTION OF ANNUITY PAYMENT OPTION...........................................15
SUPPLEMENTARY AGREEMENT
FREQUENCY AND AMOUNT OF PAYMENTS
FIXED ANNUITY PROVISIONS
VARIABLE ANNUITY PROVISIONS
DETERMINATION OF FIRST VARIABLE ANNUITY PAYMENT
ANNUITY UNIT VALUE
VARIABLE ANNUITY PAYMENTS AFTER THE FIRST PAYMENT
ANNUITY PAYMENT OPTIONS.......................................................16
GENERAL
LIFE ANNUITY
JOINT AND LAST SURVIVOR ANNUITY
LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
CHANGE OF ANNUITY PAYMENT OPTION
ANNUITY TABLES................................................................17
3
<PAGE> 5
DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNIVERSARY VALUE - The Contract Value on a Contract Anniversary.
ANNUITANT - The person designated to receive annuity payments during
Annuitization and upon whose continuation of life any annuity payment involving
life contingencies depends. This person must be age 85 or younger at the time of
Contract issuance, unless the Company has approved a request for an Annuitant of
greater age. The Annuitant may be changed prior to the Annuitization Date with
the consent of the Company.
ANNUITIZATION - The period during which annuity payments are received.
ANNUITIZATION DATE - The date annuity payments commence.
ANNUITY COMMENCEMENT DATE - The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract and is subject to change by the Contract Owner.
ANNUITY PAYMENT OPTION - The chosen form of annuity payments. Several options
are available under this Contract.
ANNUITY UNIT - An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY - The person designated to receive certain benefits under the
Contract upon the death of the Annuitant prior to the Annuitization Date. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE - The Internal Revenue Code of 1986, as amended.
COMPANY - Nationwide Life and Annuity Insurance Company.
CONTINGENT ANNUITANT - The person designated to be the recipient of certain
rights or benefits under this Contract when the Annuitant dies before the
Annuitization Date. If a Contingent Annuitant is designated and the Annuitant
dies before the Annuitization Date, the Contingent Annuitant becomes the
Annuitant. A Contingent Annuitant may be named for contracts issued as
Non-Qualified Contracts only.
CONTINGENT BENEFICIARY - The person designated to be the Beneficiary if the
named Beneficiary is not living at the time of the death of the Annuitant.
CONTINGENT OWNER - A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization.
CONTRACT - The Individual Deferred Variable Annuity issued to the Contract
Owner.
CONTRACT ANNIVERSARY - Each 12 month anniversary the Contract remains in force
commencing with the Date of Issue.
CONTRACT OWNER (OWNER) (S) - The person who possesses all rights under the
Contract, including the right to designate and change any designations of the
Owner, Contingent Owner, Annuitant, Contingent Annuitant, Beneficiary,
Contingent Beneficiary, Annuity Payment Option, and the Annuity Commencement
Date. The Contract Owner is the person named as owner on the application unless
a subsequent change is made.
4
<PAGE> 6
CONTRACT VALUE - The sum of the value of all Variable Account Accumulation Units
attributable to the Contract.
CONTRACT YEAR - Each calendar year the Contract remains in force commencing with
the Date of Issue.
DATE OF ISSUE - The date the first purchase payment is applied to the Contract.
DEATH BENEFIT - The benefit payable upon the death of the last surviving
Annuitant or Contingent Annuitant if applicable. This benefit does not apply
upon the death of the Contract Owner when the Owner and Annuitant are not the
same person. If the Annuitant dies after the Annuitization Date, any benefit
that may be payable shall be as specified in the Annuity Payment Option elected.
DISTRIBUTION - Any payment of part or all of the Contract Value.
FIXED ANNUITY - An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE - The main office of the Company located in Columbus, Ohio.
JOINT OWNER - The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Contract Owner. If a Joint Owner is
named, references to "Contract Owner" or "Owner" in this Contract will apply to
both the Owner and Joint Owner. Joint Owners must be spouses at the time Joint
Ownership is requested where such restriction is permitted by state law. Joint
Ownership may be selected only for Non-Qualified Contracts.
MUTUAL FUND (FUND) - A registered management investment company in which the
assets of the Sub-Accounts will be invested.
NON-QUALIFIED CONTRACT - A Contract which does not qualify for favorable tax
treatment under the provisions of sections 401 and 403(a) (Qualified Plans), 408
(Individual Retirement Annuities) or 403(b) (Tax Sheltered Annuities) of the
Code.
PURCHASE PAYMENT - A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers among the Sub-Accounts.
QUALIFIED CONTRACT - A Contract issued to fund a Qualified Plan.
QUALIFIED PLAN - A retirement plan which receives favorable tax treatment under
the Sections 401 and 403(a) of the Code.
SUB-ACCOUNTS - Separate and distinct divisions of the Variable Account to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
VALUATION DATE - Each day the New York Stock Exchange and the Company's Home
Office are open for business, any other day during which there is a sufficient
degree of trading of the Variable Account's underlying Mutual Fund shares such
that the current net asset value of its Accumulation Units might be materially
affected.
VALUATION PERIOD - The period of time commencing at the close of a Valuation
Date and ending at the close of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT - The Nationwide VA Separate Account - C, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in the shares of a separate underlying Mutual Fund.
VARIABLE ANNUITY - An annuity providing for payments which are not predetermined
or guaranteed as to dollar amount and which vary in amount with the investment
experience of the Variable Account.
5
<PAGE> 7
GENERAL PROVISIONS
ALTERATION OR MODIFICATION
All changes to the terms of the Contract must be: (1) made in writing; and (2)
signed by the President or Secretary of the Company. No other person can alter
or change any of the terms or conditions of this Contract.
ASSIGNMENT
Where permitted, the Contract Owner may assign some or all rights under this
Contract at any time during the lifetime of the Annuitant, prior to the
Annuitization Date. The Company shall not be liable as to any payment or other
settlement made by the Company before recording of the assignment. The Company
is not responsible for the validity or tax consequences of any assignment. Such
assignment will take effect upon receipt and recording by the Home Office of
written notice executed by the Contract Owner. Where necessary for proper
administration of the terms of the Contract, an assignment will not be recorded
until the Company has received sufficient direction from the Contract Owner and
assignee as to the proper allocation of Contract rights under the assignment.
The value of any portion of the Contract which is assigned, pledged or
transferred by gift may be treated like a cash withdrawal for federal tax
purposes and may be subject to a tax penalty. All rights in this Contract are
personal to the Contract Owner and may not be assigned without written consent
of the Company.
If this Contract is issued to fund a retirement plan pursuant to the Code
sections 401, 403, 408 or 408K, it may not be assigned, pledged, or otherwise
transferred except as allowed by applicable law.
ENTIRE CONTRACT
This document is the whole Contract between the Owner and the Company. This
Contract, data page and endorsement(s) (if any), make up the entire Contract.
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, all payments and benefits under
this Contract will be adjusted. Payments and benefits will be made based on the
correct age. Proof of age of an Annuitant may be required at any time, in a form
satisfactory to the Company. When the age of an Annuitant has been misstated,
the dollar amount of any overpayment will be deducted from the next payment or
payments due under this Contract. The dollar amount of any underpayment made by
the Company as a result of any such misstatement will be paid in full with the
next payment due under this Contract. Where required by state law, any
adjustment on overpayment or underpayment will include interest.
EVIDENCE OF SURVIVAL
Where any payments under this Contract depend on the recipient being alive on a
given date, the Company may require proof that such person is living prior to
making the payments.
PROTECTION OF PROCEEDS
Proceeds under this Contract are not assignable by any Beneficiary prior to the
time they are due. Proceeds are not subject to the claims of creditors or to
legal process, except as mandated by applicable law.
REPORTS
At least once each year, the Company will mail to the Contract Owner, at the
last known address, a statement showing the Contract Value and any other
information required by the Superintendent of the state in which the Contract is
delivered.
6
<PAGE> 8
INCONTESTABILITY
This Contract will not be contested.
CONTRACT SETTLEMENT
The Company may require this Contract to be returned to the Home Office prior to
making any payments. All sums payable to or by the Company under this Contract
are payable at the Home Office.
NUMBER
Unless otherwise provided, all references in this Contract which are in the
singular form will include the plural; all references in the plural form will
include the singular.
NON-PARTICIPATING
This Contract is non-participating. It will not share in the surplus of the
Company.
DEDUCTIONS AND CHARGES
DEDUCTION FOR PREMIUM TAXES
The Company will charge against the Contract Value the amount of any premium
taxes levied by a state or any other government entity upon Purchase Payments
received by the Company. The method used to recoup premium taxes will be
determined by the Company at its sole discretion and in compliance with state
law. The Company currently deducts such charges from the Contract Value: (1)
when the Contract is surrendered; (2) at Annuitization; or (3) at such earlier
date as the Company may be subject to such taxes.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a Mortality and Expense Risk Charge equal on an annual
basis to [1.20%] of the daily net asset value of the Variable Account. This
deduction is made to compensate the Company for assuming the mortality risks and
expense risks under this Contract. The Company assumes a "mortality risk" that
fixed and variable annuity payments will not be affected by the death rates of
persons receiving such payments or of the general population by virtue of
annuity rates incorporated in the Contract which cannot be changed. The Company
also assumes a mortality risk by its promise to pay in certain circumstances a
Death Benefit that is greater than the Contract Value. The "expense risk"
involves the guaranty by the Company that it will not increase charges for
administration of the Contract regardless of the Company's actual administrative
expenses.
OWNERSHIP PROVISIONS
CONTRACT OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the Contract.
IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF AS OWNER, THE PURCHASER WILL
HAVE NO RIGHTS UNDER THE CONTRACT.
On the Annuitization Date, the Annuitant shall become the Contract Owner.
JOINT OWNERSHIP PROVISIONS
Where such restriction is permitted by state law, Joint Owners must be spouses
at the time joint ownership is requested. If a Joint Owner is named, the Joint
Owner will possess an undivided interest in the Contract. Unless otherwise
provided, the exercise of any ownership right in the Contract (including the
right to surrender or partially surrender the Contract, to change the Contract
Owner, the Contingent Owner, the Annuitant, the Contingent Annuitant, the
Beneficiary, the Contingent Beneficiary, the Annuity Payment Option or the
Annuitization Date) shall require a written request signed by both Contract
Owners.
7
<PAGE> 9
CONTINGENT OWNERSHIP PROVISIONS
The Contingent Owner is the person who may receive certain benefits under the
Contract if the Contract Owner, who is not the Annuitant, dies prior to the
Annuitization Date and there is no surviving Joint Owner. If more than one
Contingent Owner survives the Contract Owner, each will share equally unless
otherwise specified in the Contingent Owner designation. If no Contingent Owner
survives a Contract Owner and there is no surviving Joint Owner, all rights and
interest of the Contingent Owner will vest in the Contract Owner's estate.
If a Contract Owner, who is also the Annuitant, dies before the Annuitization
Date, then the Contingent Owner does not have any rights in the Contract.
However, if the Contingent Owner is also the Beneficiary, the Contingent Owner
will have all the rights of a beneficiary.
BENEFICIARY PROVISIONS
The Beneficiary is the person or persons who may receive certain benefits under
the Contract in the event the Annuitant dies prior to the Annuitization Date. If
more than one Beneficiary survives the Annuitant, each will share equally unless
otherwise specified in the Beneficiary designation. If no Beneficiary survives
the Annuitant, all rights and interest of the Beneficiary shall vest in the
Contingent Beneficiary, and if more than one Contingent Beneficiary survives,
each will share equally unless otherwise specified in the Contingent Beneficiary
designation. If no Contingent Beneficiary survives the Annuitant, all rights and
interests of the Contingent Beneficiary will vest with the Contract Owner or the
estate of the last surviving Contract Owner.
CHANGE OF PARTIES PROVISIONS
Prior to the Annuitization Date, the Contract Owner may request a change in the
Annuitant, Contingent Annuitant or Contingent Owner, Beneficiary, or Contingent
Beneficiary. Such change, upon receipt and recording by the Company at its Home
Office, will take effect as of the time the written notice was signed, whether
or not the Contract Owner or Annuitant are living at the time of record, but
without further liability as to any payment or settlement made by the Company
before receipt of such change.
Any request for change of Contract Owner must be made in writing, may require a
signature guarantee and must be signed by the Contract Owner and the person
designated as the new Contract Owner. A change in Contract Owner may be subject
to state and federal gift taxes as well as current federal income tax.
Any change to the Annuitant or Contingent Annuitant is subject to underwriting
and approval by the Company. Notwithstanding any provisions in this Contract, if
the Contract Owner is not a natural person, the change of the Annuitant will be
treated as the death of the Contract Owner and will result in a distribution,
regardless of whether a Contingent Annuitant is also named. Distributions shall
be made as if the Contract Owner died at the date of such change.
8
<PAGE> 10
DEATH PROVISIONS
DEATH OF CONTRACT OWNER PROVISIONS
If any Contract Owner and the Annuitant are not the same person and such
Contract Owner dies prior to the Annuitization Date, then the Joint Owner, if
any, becomes the new Contract Owner. If there is no surviving Joint Owner, the
Contingent Owner becomes the new Contract Owner. If there is no surviving
Contingent Owner, the last surviving Contract Owner's estate becomes the new
Contract Owner. The entire interest in the Contract Value must be distributed in
accordance with the "Required Distribution Provisions".
DEATH OF CONTRACT OWNER/ANNUITANT PROVISIONS
If any Contract Owner and the Annuitant are the same person, and such person
dies prior to the Annuitization Date, the Death Benefit shall be payable to the
Beneficiary, the Contingent Beneficiary, the Contract Owner, or the last
surviving Contract Owner's estate, as specified in the "Beneficiary Provisions",
and distributed in accordance with the "Required Distribution Provisions".
DEATH OF ANNUITANT PROVISIONS
If the Contract Owner and Annuitant are not the same person, and the Annuitant
dies prior to the Annuitization Date, a Death Benefit will be payable to the
Beneficiary, the Contingent Beneficiary, the Contract Owner, or the last
surviving Contract Owner's estate, as specified in the "Beneficiary Provisions",
unless there is a surviving Contingent Annuitant. In such case, the Contingent
Annuitant becomes the Annuitant and no Death Benefit is payable.
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable shall be paid according to the Annuity Payment Option selected.
REQUIRED DISTRIBUTION PROVISIONS
Upon the death of any Owner, Contract Owner, or Joint Owner (including an
Annuitant who becomes the Owner of the Contract on the Annuitization Date) (each
of the foregoing an Owner), certain distributions are required by Section 72(s)
of the Code. Notwithstanding any provision of this Contract to the contrary, the
following distributions shall be made in accordance with such requirements.
1. If any Contract Owner dies on or after the Annuitization Date and
before the entire interest under the Contract has been distributed, then the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution in effect as of the date of such Contract
Owner's death.
2. If any Contract Owner dies prior to the Annuitization Date, then the
entire interest in the Contract (consisting of either the Death Benefit or the
Contract Value reduced by certain charges as set forth elsewhere in the
Contract) will be distributed within 5 years of the death of the Contract Owner,
provided however:
(a) If any portion of such interest is payable to or for the benefit of
a natural person who is a surviving Contract Owner, Contingent Owner, Joint
Owner, Annuitant, Contingent Annuitant, Beneficiary, or Contingent Beneficiary
as the case may be (each a "designated Beneficiary"), such portion may, at the
election of the designated Beneficiary, be distributed over the life of such
designated Beneficiary, or over a period not extending beyond the life
expectancy of such designated Beneficiary, provided that payments begin within
one year of the date of the deceased Contract Owner's death (or such longer
period as may be permitted by federal income tax regulations).
(b) If the designated Beneficiary is the surviving spouse of the
deceased Contract Owner, such spouse may elect to become the Contract Owner of
this Contract, and the Distributions required under these Required Distribution
Provisions will be made upon the death of such spouse.
9
<PAGE> 11
In the event that the Contract Owner is not a natural person (e.g., a trust or
corporation), for purposes of these Distribution provisions: (i) the death of
the Annuitant will be treated as the death of any Contract Owner; (ii) any
change of the Annuitant will be treated as the death of any Contract Owner; and
(iii) in any case the appropriate Distribution required under these Distribution
rules shall be made upon such death or change, as the case may be. The Annuitant
is the primary annuitant as defined in Section 72(s)(6)(B) of the Code.
These Distribution provisions shall not be applicable to any Contract that is
not required to be subject to the provisions of 72(s) of the Code by reason of
Section 72(s)(5) or any other law or rule. Such contracts include, but are not
limited to, any Contract: (i) which is provided under a plan described in
Section 401(a) of the Code which includes a trust exempt from tax under Section
501 of the Code; (ii) which is provided under a plan described in Section 403(a)
of the Code; (iii) which is described in Section 403(b) of the Code; (iv) which
is an individual retirement annuity or provided under an individual retirement
account as described in Section 408 of the Code; or (v) which is a qualified
funding asset (as defined in Section 130(d) of the Code, but without regard to
whether there is a qualified assignment).
This Contract is intended to be treated as an "annuity contract" for federal
income tax purposes. Accordingly, all provisions of this Contract shall be
interpreted and administered in accordance with the requirements of Section
72(s) of the Code. In no event shall any payment be deferred beyond the time
limits permitted by Section 72(s) of the Code. The Company reserves the right to
amend this Contract to comply with requirements set out in the Code, regulations
and rulings thereunder.
Upon the death of a Contract Owner, the designated Beneficiary must elect a
method of distribution which complies with the above Distribution Provisions and
which is acceptable to the Company. Such election must be made within 60 days of
the Contract Owner's death.
DEATH BENEFIT PAYMENT PROVISIONS
The value of the Death Benefit will be determined as of the Valuation Date
coincident with or next following the date the Home Office receives in writing
the following three items: (1) proper proof of the Annuitant's death; (2) an
election specifying the method of distribution; and (3) any applicable state
required form(s).
Proof of death is either:
(1) a copy of a certified death certificate;
(2) a copy of a certified decree of a court of competent jurisdiction as to
the finding of death;
(3) a written statement by a medical doctor who attended the deceased; or
(4) any other proof satisfactory to the Company.
If the Annuitant dies prior to his [86th] birthday, the value of the Death
Benefit will be the greatest of (1) the sum of all Purchase Payments, less any
amounts surrendered, (2) the Contract Value or (3) the Contract Value as of the
most recent five-year Contract Anniversary, less any amounts surrendered since
the most recent five-year Contract Anniversary. If the Annuitant dies on or
after his 86th birthday, then 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 date of the
partial surrender.
10
<PAGE> 12
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
The Contract is bought for the initial Purchase Payment and any subsequent
Purchase Payments. The cumulative total of all Purchase Payments under this and
any other annuity Contract(s) issued by the Company having the same Annuitant
may not exceed $1,000,000 without the prior consent of the Company.
The initial Purchase Payment is due on the Date of Issue and may not be less
than [$15,000.] Purchase Payments, if any, after the initial Purchase Payment
must be at least [$1,000] and may be made at any time.
If no considerations have been received under this Contract for a period of two
full years and the paid-up annuity benefit at maturity would be less than $20
monthly, the Company may, at its option, terminate the Contract by payment of
the accumulated value and will, by such payment, be relieved of any further
obligation under the Contract.
ALLOCATION OF PURCHASE PAYMENTS
The Owner elects to have Purchase Payments allocated among the Sub-Accounts of
the Variable Account at the time of application. The allocation of future
Purchase Payments may be changed by the Contract Owner by a proper submission
that is received and recorded by the Company.
CONTRACT VALUE
The Contract Value at any time will be the Variable Account Contract Value.
VARIABLE ACCOUNT CONTRACT VALUE
The Variable Account Contract Value is the sum of the value of all Variable
Account Accumulation Units under this Contract.
If: (1) part or all of the Variable Account is surrendered; or (2) charges or
deductions are made against the Variable Account, then an appropriate number of
Accumulation Units will be surrendered to equal such amount.
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account of the Company. The
Company has allocated a part of its assets for this Contract and certain other
contracts to the Variable Account. Such assets of the Variable Account remain
the property of the Company. However, they may not be charged with the
liabilities from any other business in which the Company may take part.
The Variable Account is divided into Sub-Accounts which invest in shares of the
underlying Mutual Funds. Purchase Payments are allocated among one or more of
these Sub-Accounts, as designated by the Contact Owner and are subject to the
terms and conditions of the underlying mutual funds.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Purchase Payments applied to the Variable Account will be invested at net
asset value in one or more of the designated Sub-Accounts.
11
<PAGE> 13
VALUATION OF ASSETS
Mutual Fund shares in the Variable Account will be valued at their net asset
value.
VARIABLE ACCOUNT ACCUMULATION UNITS
The number of Accumulation Units for each Sub-Account is found by dividing the
net amount allocated to the Sub-Account by the Accumulation Unit value for the
Sub-Account for the Valuation Period during which the Company received the
Purchase Payment.
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account of the Variable Account
was arbitrarily set at $10 when the first Mutual Fund shares were available for
purchase. The value for any later valuation period is found as follows:
The Accumulation Unit Value for any Valuation Period is determined by
multiplying the Accumulation Unit value for each Sub-Account for the immediately
preceding Valuation Period by the net investment factor for the Sub-Account
during the subsequent Valuation Period. The value of an Accumulation Unit may
increase or decrease from one Valuation Period to the next. The number of
Accumulation Units will not change as a result of investment experience.
NET INVESTMENT FACTOR
The net investment factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The net
investment factor may be greater or less than one; therefore, the value of an
Accumulation Unit may increase or decrease.
The net investment factor for any Sub-Account for any Valuation Period is
determined by: dividing (1) by (2), and then subtracting (3) where:
1. is the net of:
a. the net asset value per share of the underlying Mutual Fund
held in the Sub-Account, determined at the end of the current
Valuation Period; and
b. the per share amount of any dividend or capital gain
distributions made by the underlying Mutual Fund held in the
Sub-Account, if the "ex-dividend" date occurs during the
current Valuation Period.
2. is the net result of
a. the net asset value per share of the underlying Mutual Fund
held in the Sub-Account, determined at the end of the
immediately preceding Valuation Period; plus or minus
b. the per share charge or credit for any taxes reserved for the
last prior Valuation Period, plus or minus
c. a per share charge or credit for any taxes reserved for, which
is determined by the Company to have resulted from the
investment operations of the Sub-Account.
3. is a factor representing the Mortality and Expense Risk Charge deducted
from the Variable Account. Such factor is equal, on an annual basis, to
[1.20%] of the daily net asset value of the Variable Account.
For underlying Mutual Funds that credit dividends on a daily basis and pay such
dividends once a month, the net investment factor allows for the monthly
reinvestment of these daily dividends.
12
<PAGE> 14
SURRENDERS, WITHDRAWALS AND TRANSFERS
TRANSFER PROVISIONS
Transfers may occur among the Sub-Accounts once daily; however, the Company
reserves the right to refuse any transfer requests submitted by individuals or
firms performing market timing services on behalf of multiple Contract Owners.
Transfers among the Sub-Accounts are subject to the terms and conditions of the
underlying Mutual Funds.
SURRENDER
The Contract Owner may surrender part or all of the Contract Value at any time
this Contract is in force and prior to the earlier of the Annuitization Date or
the death of the Annuitant or Contingent Annuitant, if any. All surrenders must
meet the following conditions:
1. The request for surrender must be in writing in a form acceptable to
the Company.
2. The Surrender value will be paid to the Contract Owner within seven (7)
days after proper written application and any proof of interest are
received and recorded at the Home Office.
3. The Company reserves the right to require that the signature(s) be
guaranteed by a member firm of a major stock exchange or other
depository institution qualified to give such a guaranty.
4. When written application and the Contract are received, the Company
will surrender the number of Variable Account Accumulation Units needed
to equal the dollar amount requested minus any applicable taxes.
5. If a partial surrender is requested, the amounts surrendered will be
withdrawn, on a pro-rata basis, from the Sub-Accounts of the Variable
Account.
For tax purposes, a surrender is treated as a withdrawal of earnings first.
SURRENDER VALUE
The surrender value at any time will be the Contract Value, less any applicable
taxes.
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER
The Company has the right to suspend or delay the date of any surrender payment
for any period:
1. When the New York Stock Exchange is closed;
2. When trading on the New York Stock Exchange is restricted;
3. When an emergency exists as a result of which disposal of securities
held in the Variable Account is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the net assets
of the Sub-Accounts; or
4. During any other period when the Securities and Exchange Commission, by
order, so permits for the protection of security holders;
Rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions set forth in numbers 2 and 3 exist.
SYSTEMATIC WITHDRAWALS
The Contract Owner may elect in writing on a form provided by the Company to
take systematic withdrawals of a specified dollar amount of at least $100 on a
monthly, quarterly, semi-annual or annual basis. The Company will process the
withdrawals as directed by surrendering on a pro-rata basis Accumulation Units
from all of the Sub-Accounts in which the Contract Owner has an interest. Each
systematic withdrawal is subject to federal income taxes on the taxable portion.
In addition, a 10% federal penalty tax may be assessed on systematic withdrawals
if the Contract Owner is under age 59-1/2, unless
13
<PAGE> 15
the Contract Owner has made an irrevocable election of Distributions of
substantially equal periodic payments. Unless otherwise directed by the Contract
Owner, the Company will withhold federal income taxes from each systematic
withdrawal. An age-based systematic withdrawal program will terminate
automatically at the end of each Contract Year and may be reinstated only on or
after the next Contract Anniversary pursuant to a new request. The systematic
withdrawals may be discontinued at any time by notifying the Company in writing.
Systematic withdrawals are not available prior to the expiration of the ten day
free look provision of the Contract. The Company also reserves the right to
assess a processing fee for this service.
DISTRIBUTION PROVISIONS
The following events will give rise to a Distribution:
1. Reaching the Annuitization Date - Distribution will be made pursuant to
the Annuity Payment Option selected.
2. Death of the Annuitant prior to the Annuitization Date - Distribution
to be made in accordance with the options available under the "Death of
Annuitant Provisions" of this Contract. When the Contract Owner is a
non-natural person, upon the death of the Annuitant, Distribution will
be made in a manner that is consistent with the Required Distribution
Provisions of this Contract.
3. Death of the Owner - Distribution to be made in a manner consistent
with the "Required Distribution Provisions" of this Contract.
4. Other Surrender - Distribution to be made in accordance with the
"Surrender Provisions" of this Contract.
ANNUITIZATION PROVISIONS
GENERAL
All of the provisions within this section are subject to the restrictions set
forth in the Section entitled "Death Of Contract Owner Provisions".
ANNUITIZATION
As of the Annuitization Date, the Contract Value is surrendered and applied to
the purchase rate then in effect for the option selected. The purchase rates for
any options guaranteed to be available will be determined on a basis not less
favorable than the 1983 "Table a" with ages set back 6 years, with minimum
interest at 3.0%. The rates shown in the Annuity Tables are calculated on this
guaranteed basis. The choice to Annuitize is irrevocable once payments have
begun.
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is a date chosen by the Contract Owner at
application and is generally the first day of a calendar month. The date must be
at least two years after the Date of Issue. The Annuity Commencement Date may
not be later than the first day of the first calendar month after the
Annuitant's 90th birthday unless otherwise agreed upon. Any applicable premium
taxes not already deducted will be deducted from the Contract Value at the
Annuitization Date. The remaining Contract Value will then be applied to the
Annuity Payment Option selected by the Contract Owner.
14
<PAGE> 16
CHANGE OF ANNUITY COMMENCEMENT DATE
The Contract Owner may change the Annuity Commencement Date. A change of Annuity
Commencement Date must be made by written request, approved by the Company, and
must comply with Annuity Commencement Date Provisions above.
SELECTION OF ANNUITY PAYMENT OPTION
SUPPLEMENTARY AGREEMENT
A supplementary agreement will be issued within 30 days following the
Annuitization Date. The supplementary agreement will set forth the terms of the
Annuity Payment Option selected.
FREQUENCY AND AMOUNT OF PAYMENTS
Payments will be made based on the Annuity Payment Option selected and frequency
selected. However, if the net amount to be applied to any annuity payment option
at the Annuitization Date is less than [$5,000], the Company has the right to
pay such amount in one lump sum.
If any payment would be or becomes less than [$50], the Company has the right to
change the frequency of payments to an interval that will result in payments of
at least [$50]. In no event will the Company make payments under an annuity
option less frequently than annually.
FIXED ANNUITY PROVISIONS
A Fixed Annuity is an annuity with level payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. At the
Annuitization Date, a designated portion of the Contract Value will be applied
to the applicable annuity table. This will be done in accordance with the
Annuity Payment Option selected.
VARIABLE ANNUITY PROVISIONS
A Variable Annuity is a series of payments which are not predetermined or
guaranteed as to dollar amount and which vary in amount with the investment
experience of the Variable Account.
DETERMINATION OF FIRST VARIABLE ANNUITY PAYMENT
At the Annuitization Date, a designated portion of the Contract Value will be
applied to purchase rates not less favorable than those based on the 1983 Table
a with ages set back 6 years and 3.5% interest.
ANNUITY UNIT VALUE
An Annuity Unit is used to calculate the value of annuity payments. The value
for any later Valuation Period is found as follows:
1. The Annuity Unit value for each Sub-Account for the immediately
preceding Valuation Period is multiplied by the net investment factor
for the Sub-Account for the Valuation Period for which the Annuity Unit
Value is being calculated.
2. The result is multiplied by an interest factor because the Assumed
Investment Rate of [3.5%] per year is built into the Annuity Tables.
15
<PAGE> 17
VARIABLE ANNUITY PAYMENTS AFTER THE FIRST PAYMENT
Variable Annuity payments after the first payment vary in amount. The payment
amount changes with the investment performance of the Sub-Accounts. The dollar
amount of such payments is determined as follows:
1. The dollar amount of the first annuity payment is divided by the unit
value as of the Annuitization Date. This result establishes the fixed
number of Annuity Units for each monthly annuity payment after the
first. The number of Annuity Units remains fixed during the annuity
payment period.
2. The fixed number of Annuity Units is multiplied by the Annuity Unit
value for the Valuation Date for which the payment is due. This result
establishes the dollar amount of the payment.
The Company guarantees that the dollar amount of each payment after the first
will not be affected by variations in the Company's expenses or mortality
experience.
ANNUITY PAYMENT OPTIONS
GENERAL
An Annuity Payment Option must be selected prior to annuitization. The following
are the annuity payment options which are guaranteed to be available by the
Company. If no option is chosen, the automatic option will be the "Life Annuity
with 240 Payments Guaranteed" as described below.
LIFE ANNUITY
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. Payments will cease with the last payment due prior to the death of
the Annuitant.
JOINT AND LAST SURVIVOR ANNUITY
The amount to be paid under this option will be paid during the joint lifetimes
of the Annuitant and a designated second person. Payments will continue as long
as either is living.
LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be selected. If the
Annuitant dies prior to the end of this guaranteed period, the recipient chosen
by the Annuitant will receive the remaining guaranteed payments.
ANY OTHER OPTION
The amount and period under any other option will be determined by the Company.
Payment options not set forth in the Certificate Agreement are available only if
they are approved by both the Company and the Annuitant.
CHANGE OF ANNUITY PAYMENT OPTION
The Owner may change the Annuity Payment Option prior to the Annuitization Date.
A change of the Annuity Payment Option must be received at the Home Office prior
to the Annuitization Date. After a change of Annuity Payment Option is received
at the Home Office, it will become effective as of the date the request was
recorded at the Home Office. A change of Annuity Payment Option will not apply
to any payment made or action taken by the Company before it is received.
16
<PAGE> 18
MONTHLY BENEFITS PER $1000 APPLIED
ANNUITY TABLES
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS
ANNUITANT'S AGE LAST BIRTHDAY
<TABLE>
<CAPTION>
FEMALE AGE
----------
50 55 60 65 70
-- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
MALE AGE 50 3.36 3.46 3.56 3.64 3.71
-------- 55 3.42 3.56 3.69 3.82 3.93
60 3.47 3.64 3.82 3.99 4.16
65 3.70 3.92 4.15 4.39
70 4.00 4.30 4.61
</TABLE>
LIFE ANNUITY: MONTHLY ANNUITY PAYMENTS
<TABLE>
<CAPTION>
MALE GUARANTEED PERIOD FEMALE GUARANTEED PERIOD
ANNUITANT'S ANNUITANT'S
ATTAINED AGE 120 240 ATTAINED AGE 120 240
LAST BIRTHDAY NONE MONTHS MONTHS LAST BIRTHDAY NONE MONTHS MONTHS
------------- ---- ------ ------ ------------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
50 3.87 3.85 3.77 50 3.59 3.58 3.55
51 3.93 3.90 3.82 51 3.64 3.63 3.59
52 3.99 3.96 3.87 52 3.68 3.67 3.63
53 4.05 4.02 3.92 53 3.74 3.72 3.68
54 4.12 4.09 3.97 54 3.79 3.78 3.72
55 4.19 4.15 4.03 55 3.85 3.83 3.77
56 4.27 4.22 4.08 56 3.90 3.89 3.82
57 4.34 4.30 4.14 57 3.97 3.95 3.88
58 4.43 4.37 4.20 58 4.03 4.01 3.93
59 4.51 4.45 4.26 59 4.10 4.08 3.99
60 4.60 4.54 4.32 60 4.18 4.15 4.04
61 4.70 4.62 4.39 61 4.25 4.22 4.11
62 4.80 4.72 4.45 62 4.34 4.30 4.17
63 4.91 4.82 4.51 63 4.42 4.38 4.23
64 5.03 4.92 4.58 64 4.52 4.47 4.30
65 5.15 5.03 4.65 65 4.61 4.56 4.37
66 5.28 5.14 4.71 66 4.72 4.66 4.44
67 5.43 5.27 4.78 67 4.83 4.76 4.51
68 5.58 5.39 4.84 68 4.95 4.87 4.58
69 5.74 5.53 4.90 69 5.08 4.98 4.65
70 5.91 5.66 4.96 70 5.21 5.10 4.72
71 6.10 5.81 5.02 71 5.36 5.22 4.79
72 6.30 5.96 5.08 72 5.51 5.36 4.86
73 6.51 6.12 5.13 73 5.67 5.50 4.93
74 6.73 6.28 5.18 74 5.85 5.65 5.00
75 6.97 6.44 5.23 75 6.04 5.80 5.06
76 7.23 6.61 5.27 76 6.25 5.97 5.12
77 7.51 6.79 5.31 77 6.47 6.14 5.18
78 7.80 6.96 5.34 78 6.71 6.32 5.23
79 8.12 7.14 5.37 79 6.98 6.50 5.28
80 8.46 7.32 5.40 80 7.26 6.69 5.32
</TABLE>
<PAGE> 1
EXHIBIT 5
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
P.O. Box 182008
Columbus, Ohio 43218-2008 THE ONE INVESTOR SELECT ANNUITY (SM)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Owner Name
- ------------------------------------------------------------------------------------------------------------------------------------
Day Phone / / Male Date of Birth Social Security No.
( ) / / Female / /
- ------------------------------------------------------------------------------------------------------------------------------------
Owner Address
- ------------------------------------------------------------------------------------------------------------------------------------
Joint Owner Name / / Male Date of Birth Social Security No.
/ / Female / /
- ------------------------------------------------------------------------------------------------------------------------------------
Joint Owner Address
- ------------------------------------------------------------------------------------------------------------------------------------
Annuitant Name / / Male Date of Birth Social Security No.
/ / Female / /
- ------------------------------------------------------------------------------------------------------------------------------------
Annuitant Address
- ------------------------------------------------------------------------------------------------------------------------------------
Beneficiary Relationship Date of Birth Social Security No.
/ /
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: If the Owner/Joint Owners wish to name multiple Beneficiaries or a Contingent Beneficiary, please do so in the
Remarks section below.
- ------------------------------------------------------------------------------------------------------------------------------------
To authorize Nationwide Life and Annuity Insurance Company to allow the exercise of Ownership rights (including the right to make
telephone exchanges among investment options) independently by EITHER the Owner or Joint Owner, please initial here: (Owner)
_____________, (Joint Owner) ________________, NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY WILL NOT BE LIABLE FOR ANY LOSS,
LIABILITY, COST OR EXPENSE FOR ACTING IN ACCORDANCE WITH THE REQUESTS OR INSTRUCTIONS OF THE OWNER OR JOINT OWNER.
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUITY PURCHASE PAYMENTS: First Purchase Payment $__________ (Min. Initial Payment: $15,000) submitted herewith. A copy of this
application duly signed by the agent will constitute receipt for such amount. If this application is declined, there will be no
liability on the part of the Insurance Company, and any sums submitted with this application will be refunded.
- ------------------------------------------------------------------------------------------------------------------------------------
PURCHASE PAYMENT ALLOCATION (MUST TOTAL 100%):
THE ONE(R)GROUP INVESTMENT TRUST: AIM VARIABLE INS. FUNDS: TEMPLETON VAR. PROD. SERIES FUND:
___% Equity Index ___% Capital Appreciation ___% Developing Markets Class 2
___% Government Bond ___% High Yield ___% International Class 2
___% Growth Opportunities ___% International Equity NATIONWIDE SEP. ACCT. TRUST:
___% Value ___% Money Market
- ------------------------------------------------------------------------------------------------------------------------------------
TAX QUALIFIED STATUS: [ ]Non-Qualified [ ]IRA [ ] ROTH IRA [ ] Other ANNUITY COMMENCEMENT DATE:
Year for which contribution is applied ____.Please attach appropriate agreements. The First Day of MO. YEAR
[ ] IRA rollover [ ] IRA transfer --------------------------------------------------
Direct rollover of qualified retirement plan assets to an IRA? [ ] Yes [ ] No
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONAL ANNUITY FORM ELECTED: The Annuity Option is assumed to be the Standard Life Annuity with 10 years certain unless Nationwide
Life and Annuity Insurance Company receives a written request to change.
- ------------------------------------------------------------------------------------------------------------------------------------
Will the annuity applied for replace or change existing annuity or life insurance?
[ ] Yes [ ] No If Yes, explain:
- ------------------------------------------------------------------------------------------------------------------------------------
REMARKS:
- ------------------------------------------------------------------------------------------------------------------------------------
I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief and agree that
this application shall be a part of any annuity contract issued by the Insurance Company. I UNDERSTAND THAT ANNUITY PAYMENTS AND
SURRENDER VALUES, WHEN BASED UPON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO A FIXED
DOLLAR AMOUNT. RECEIPT OF A CURRENT VARIABLE ANNUITY PROSPECTUS IS HEREBY ACKNOWLEDGED.
[ ] Please send me a copy of the Statement of Additional Information to the prospectus.
- ------------------------------------------------------------------------------------------------------------------------------------
OWNER'S(S')
SIGNATURE(S) X ____________________________________________ X ____________________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNED AT STATE OF _______________________________________________ ON THIS DATE OF ______________________________
- ------------------------------------------------------------------------------------------------------------------------------------
AGENT'S SIGNATURE AGENT'S TELEPHONE #
- ------------------------------------------------------------------------------------------------------------------------------------
AGENT: Do you have reason to believe the Contract applied for is to replace or change existing annuities or
insurance owned by the annuitant? [ ] Yes [ ] No
- ------------------------------------------------------------------------------------------------------------------------------------
General Agent Principal Office
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Branch Office Location
- ------------------------------------------------------------------------------------------------------------------------------------
FHL-619 White - Nationwide Life and Annuity Insurance Co. Yellow - Customer Pink - Agent (AO) (4/98) Bank One
</TABLE>
