<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-66496
'40 Act File No. 811-7908
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 6 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 8 [X]
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)
This Post-Effective amendment amends the Registration Statement in respect of
the Prospectus, Statement of Additional Information, and the Financial
Statements.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
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<PAGE> 2
NATIONWIDE VA SEPARATE ACCOUNT-C
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
Caption in Prospectus and Statement of Additional Information and Other Information
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C> <C>
Item 1. Cover page..........................................................................................3
Item 2. Definitions.........................................................................................5
Item 3. Synopsis or Highlights.............................................................................12
Item 4. Condensed Financial Information....................................................................13
Item 5. General Description of Registrant, Depositor, and Portfolio Companies..............................15
Item 6. Deductions and Expenses............................................................................17
Item 7. General Description of Variable Annuity Contracts..................................................20
Item 8. Annuity Period.....................................................................................27
Item 9. Death Benefit and Distributions....................................................................27
Item 10. Purchases and Contract Value.......................................................................20
Item 11. Redemptions........................................................................................23
Item 12. Taxes..............................................................................................33
Item 13. Legal Proceedings..................................................................................41
Item 14. Table of Contents of the Statement of Additional Information.......................................41
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page.........................................................................................43
Item 16. Table of Contents..................................................................................43
Item 17. General Information and History....................................................................43
Item 18. Services...........................................................................................43
Item 19. Purchase of Securities Being Offered...............................................................44
Item 20. Underwriters.......................................................................................44
Item 21. Calculation of Performance Information.............................................................44
Item 22. Annuity Payments...................................................................................45
Item 23. Financial Statements...............................................................................46
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits..................................................................74
Item 25. Directors and Officers of the Depositor............................................................76
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant.....................78
Item 27. Number of Contract Owners..........................................................................88
Item 28. Indemnification....................................................................................88
Item 29. Principal Underwriter..............................................................................88
Item 30. Location of Accounts and Records...................................................................90
Item 31. Management Services................................................................................90
Item 32. Undertakings.......................................................................................90
</TABLE>
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<PAGE> 3
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
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY THROUGH ITS
NATIONWIDE VA SEPARATE ACCOUNT-C
The Contracts described in this prospectus are flexible 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 Flexible Fund 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 Contracts; IRAs; Tax Sheltered Annuities; SEP IRAs; Roth IRAs and
Qualified Contracts. 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 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:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP")
VIP Equity-Income Portfolio
VIP Overseas Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
NSAT - Money Market Fund
NSAT - Total Return Fund
THE ONE GROUP(R) INVESTMENT TRUST
-Asset Allocation Fund
-Equity Index Fund
-Government Bond Fund
-Growth Opportunities Fund
-Large Company Growth 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
May 1, 1998, containing further information about the Contracts and the Variable
Account has been filed with the Securities and Exchange Commission ("SEC"). You
can obtain a copy without charge from the Company by calling 1-800-860-3946, 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 BANC ONE CORPORATION OR ANY OF ITS AFFILIATES OR
CORRESPONDENTS. INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. AN INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISKS, 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.
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<PAGE> 4
THE SEC MAINTAINS A WEBSITE, 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 MAY 1, 1998, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 39 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
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<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 age 85 or younger at the time of
Contract issuance, unless the Company has approved a request for an Annuitant of
greater age. The Annuitant may be changed prior to the Annuitization Date with
the consent of the Company.
ANNUITIZATION - The period during which annuity payments are received.
ANNUITIZATION DATE - The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE - The date on which the annuity payments are scheduled
to commence. The Annuity Commencement Date is shown on the data page of the
Contract. The Annuity Commencement Date may be changed by the Contract Owner
with the consent of the Company.
ANNUITY PAYMENT OPTION - The chosen form of annuity payments. Several options
are available under the Contract.
ANNUITY UNIT - An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY - The person designated to receive certain benefits under the
Contract when the Annuitant dies prior to the Annuitization Date. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE - The Internal Revenue Code of 1986, as amended.
COMPANY - Nationwide Life and Annuity Insurance Company.
CONTINGENT BENEFICIARY - The person designated to be the Beneficiary if the
named Beneficiary is not living at the time of the death of the Annuitant.
CONTRACT - The Deferred Variable Annuity Contract described in this prospectus.
CONTRACT ANNIVERSARY - An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER) - The person who possesses all rights under the Contract,
including the right to designate and change any designations of the Contract
Owner, Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment Option,
and 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 plus any amount
held under the Contract in the Fixed Account.
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.
This benefit does not apply upon the death of the Contract Owner when the
Contract Owner and Annuitant are not the same person. If the Annuitant dies
after the Annuitization Date, any benefit that may be payable will be as
specified in the Annuity Payment Option elected.
DISTRIBUTION - Any payment of part or all of the Contract Value.
ERISA - The Employee Retirement Income Securities Act of 1974, as amended.
FIXED ACCOUNT- An investment option which is funded by the General Account of
the Company.
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.
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INDIVIDUAL RETIREMENT ACCOUNT - An account that qualifies for favorable tax
treatment under Section 408 of the Code.
INDIVIDUAL RETIREMENT ANNUITY (IRA) - An annuity contract which qualifies for
favorable tax treatment under Section 408 of the Code.
INTEREST RATE GUARANTEE PERIOD - The interval of time during which an interest
rate credited to the Fixed Account is guaranteed to remain the same. For new
Purchase Payments allocated to the Fixed Account or transfers from the Variable
Account, this period begins upon the date of deposit or transfer and ends at the
end of the calendar quarter at least one year (but not more than 15 months) from
deposit or transfer. At the end of an Interest Rate Guarantee Period, a new
interest rate is declared with an Interest Rate Guarantee Period starting at the
end of the prior period and ending at the end of the calendar quarter one year
later.
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", "Owner", or "Joint Owner" in this prospectus
will apply to both the Contract Owner and Joint Owner or either of them. 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 Exchanges. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
NON-QUALIFIED CONTRACT - A Contract which does not qualify for favorable tax
treatment under Sections 401 and 403(a) (Qualified Plans), 408 (IRAs) 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 between the Variable Account and Fixed
Account, or among the Sub-Accounts.
QUALIFIED CONTRACT - A contract issued to fund a Qualified Plan.
QUALIFIED PLANS - Retirement plans which receive 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 business 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 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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<PAGE> 7
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF SPECIAL TERMS...........................................................................................3
SUMMARY OF CONTRACT EXPENSES........................................................................................7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..............................................................................8
EXAMPLE.............................................................................................................9
SYNOPSIS...........................................................................................................10
CONDENSED FINANCIAL INFORMATION....................................................................................11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY......................................................................13
NATIONWIDE ADVISORY SERVICES, INC..................................................................................13
THE VARIABLE ACCOUNT...............................................................................................13
Underlying Mutual Fund Options..........................................................................13
Fidelity Variable Insurance Products Fund...............................................................14
Nationwide Separate Account Trust.......................................................................14
The One Group(R) Investment Trust.......................................................................14
Voting Rights...........................................................................................15
Substitution of Securities..............................................................................15
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS......................................................................15
Expenses of the Variable Account........................................................................15
Mortality Risk Charge...................................................................................16
Expense Risk Charge.....................................................................................16
Administration Charge...................................................................................16
Contingent Deferred Sales Charge ("CDSC")...............................................................16
Waiver of CDSC..........................................................................................17
Premium Taxes...........................................................................................17
OPERATION OF THE CONTRACT..........................................................................................18
Investments of the Variable Account.....................................................................18
Allocation of Purchase Payments and Contract Value......................................................18
Value of an Accumulation Unit...........................................................................18
Net Investment Factor...................................................................................18
Determining the Contract Value..........................................................................19
Right to Revoke.........................................................................................19
Transfers...............................................................................................19
Contract Ownership......................................................................................20
Joint Ownership.........................................................................................20
Beneficiary.............................................................................................21
Surrender (Redemption)..................................................................................21
Surrenders Under a Qualified Contract or Tax Sheltered Annuity..........................................22
Loan Privilege..........................................................................................22
Assignment..............................................................................................23
CONTRACT OWNER SERVICES............................................................................................24
Asset Rebalancing......................................................................................24
Dollar Cost Averaging..................................................................................24
Systematic Withdrawals.................................................................................24
ANNUITY PAYMENT PERIOD, DEATH BENEFIT, AND OTHER DISTRIBUTIONS.....................................................25
Annuity Commencement Date...............................................................................25
Annuitization...........................................................................................25
Fixed Payment Annuity - First and Subsequent Payments...................................................25
Variable Payment Annuity - First and Subsequent Payments................................................25
Variable Payment Annuity - Assumed Investment Rate......................................................25
Variable Payment Annuity - Value of an Annuity Unit.....................................................26
Variable Payment Annuity - Exchanges Among Underlying Mutual Fund Options...............................26
Frequency and Amount of Annuity Payments................................................................26
Annuity Payment Options.................................................................................26
Death of Contract Owner - Non-Qualified Contracts.......................................................26
Death of Annuitant - Non-Qualified Contracts............................................................27
Death of the Owner/Annuitant............................................................................27
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C> <C>
Death Benefit Payment...................................................................................27
Required Distributions for Non-Qualified Contracts......................................................28
Required Distributions for Qualified Plans or Tax Sheltered Annuities...................................28
Required Distributions for IRAs and SEP IRAs............................................................29
Required Distributions for Roth IRAs....................................................................30
FEDERAL TAX CONSIDERATIONS.........................................................................................31
Federal Income Taxes....................................................................................31
Puerto Rico.............................................................................................31
Non-Qualified Contracts - Natural Persons as Contract Owners............................................32
Non-Qualified Contracts - Non-Natural Persons as Contract Owners........................................33
Qualified Plans, IRAs, SEP IRAs, and Tax Sheltered Annuities............................................33
Roth IRAs...............................................................................................34
Withholding.............................................................................................34
Non-Resident Aliens.....................................................................................34
Federal Estate, Gift, and Generation Skipping Transfer Taxes............................................35
Charge for Tax..........................................................................................35
Diversification.........................................................................................35
Tax Changes.............................................................................................36
GENERAL INFORMATION................................................................................................36
Contract Owner Inquiries................................................................................36
Statements and Reports..................................................................................36
Advertising.............................................................................................36
YEAR 2000 COMPLIANCE ISSUES........................................................................................39
LEGAL PROCEEDINGS..................................................................................................39
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...........................................................39
APPENDIX...........................................................................................................40
</TABLE>
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<PAGE> 9
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<CAPTION>
CONTRACT OWNER TRANSACTION EXPENSES
<S> <C>
Maximum Contingent Deferred Sales Charge ("CDSC")(1)...................................... 7.00 %
----------
- ---------------------------------------------------------------------------------------------------
<CAPTION>
RANGE OF CDSC OVER TIME
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
<S> <C> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
VARIABLE ACCOUNT ANNUAL EXPENSES
<S> <C>
Mortality and Expense Risk Charges........................................................ 1.25 %
----------
Administration Charge..................................................................... 0.05 %
----------
Total Variable Account Annual Expenses................................................ 1.30 %
----------
<FN>
1 During the first Contract Year, the Contract Owner may withdraw, without
a CDSC, any amount in order for this Contract to meet minimum
distribution requirements under the Code. Starting with the second year
after a Purchase Payment has been made, the Contract Owner may withdraw
without a CDSC, the greater of (a) an amount equal to 10% of that
Purchase Payment; or (b) any amount in order for this Contract to meet
minimum distribution requirements. This CDSC free withdrawal privilege is
non-cumulative and must be used in the year available. The CDSC is
imposed only against Purchase Payments (see "Contingent Deferred Sales
Charge").
</FN>
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND EXPENSES(2)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND AVERAGE NET ASSETS)
- ------------------------------------------------------------------------------------------------------------------
Management Total Portfolio
Fees Other Expenses Company Expenses
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio(3) 0.50% 0.07% 0.57%
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(3) 0.75% 0.15% 0.90%
- ------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 0.40% 0.08% 0.48%
- ------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund 0.60% 0.07% 0.67%
- ------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - Asset 0.70% 0.30% 1.00%
Allocation Fund(3)
- ------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - Equity 0.20% 0.35% 0.55%
Index Fund
- ------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 0.45% 0.30% 0.75%
Government Bond Fund(3)
- ------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - Growth 0.65% 0.45% 1.10%
Opportunities Fund(3)
- ------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - Large 0.65% 0.35% 1.10%
Company Growth Fund(3)
- ------------------------------------------------------------------------------------------------------------------
<FN>
2 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.
3 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, "Management Fees" and "Other Expenses" would have been 0.50%
and 0.08% for the Fidelity VIP Equity-Income Portfolio; 0.75% and 0.17% for
the Fidelity VIP Overseas Portfolio; 0.70% and 0.45% for The One Group(R)
Investment Trust - Asset Allocation Fund; 0.45% and 0.43% for The One Group(R)
Investment Trust - Government Bond Fund; 0.65% and 0.46% for The One Group(R)
Investment Trust - Growth Opportunities.
</FN>
</TABLE>
Except as otherwise noted, the Management Fees and Other Expenses are not
currently subject to fee waivers or expense reimbursements.
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<PAGE> 11
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment 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
less than those shown below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender your If you annuitize your
Contract at the end of the Contract at the end of the Contract at the end of the
applicable time period applicable time period applicable time period
- ------------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10 Yrs. 1 3 5 10 Yrs.
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yr. Yrs. Yrs.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP 90 106 131 225 20 61 104 225 * 61 104 225
Equity-Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 93 116 149 261 23 71 122 261 * 71 122 261
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 89 103 126 216 19 58 99 216 * 58 99 216
- ------------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund 91 109 137 236 21 64 110 236 * 64 110 236
- ------------------------------------------------------------------------------------------------------------------------
The One Group(R) 94 119 154 272 24 74 127 272 * 74 127 272
Investment Trust - Asset
Allocation Fund
- ------------------------------------------------------------------------------------------------------------------------
The One Group(R) 89 105 130 223 19 60 103 223 * 60 103 223
Investment Trust -
Equity Index Fund
- ------------------------------------------------------------------------------------------------------------------------
The One Group(R) 92 111 141 245 22 66 114 245 * 66 114 245
Investment Trust -
Government Bond Fund
- ------------------------------------------------------------------------------------------------------------------------
The One Group(R) 95 121 156 276 25 76 129 276 * 76 129 276
Investment Trust -
Growth Opportunities Fund
- ------------------------------------------------------------------------------------------------------------------------
The One Group(R) 94 118 152 267 24 73 125 267 * 73 125 267
Investment Trust - Large
Company Growth Fund
- ------------------------------------------------------------------------------------------------------------------------
<FN>
*The Contracts sold under this prospectus do not permit Annuitization during the
first two Contract Years.
</FN>
</TABLE>
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, Purchase Payments, and Other
Deductions." For more complete information regarding expenses paid out 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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<PAGE> 12
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; (6) Qualified.
The initial first year Purchase Payment must be at least $5,000 for
Non-Qualified Contracts and at least $2,000 for IRAs. However, if periodic
payments are expected by the Company, this initial first year minimum may be
satisfied by Purchase Payments made on an annualized basis. The cumulative total
of all purchase payments under contracts issued by the Company on the life of
any one Annuitant may not exceed $1,000,000 without the prior consent of the
Company. No minimum first year Purchase Payments apply to Qualified Contracts
(see "Allocation of Purchase Payments and Contract Value").
The Company does not deduct a sales charge from Purchase Payments made for these
Contracts. However, if any part of the Contract Value is surrendered, the
Company will, with certain exceptions, deduct from the Contract Value a CDSC not
to exceed 7% of the lesser of the total of all Purchase Payments made within 84
months prior to the date of the request to surrender or the amount surrendered.
This charge, when applicable, is imposed to permit the Company to recover sales
expenses which have been advanced by the Company (see "Contingent Deferred Sales
Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of 0.80% of
the daily net assets of the Variable Account for mortality risks assumed by the
Company (see "Mortality Risk Charge"). The Company deducts an Expense Risk
Charge equal to an annual rate of 0.45% of the daily net assets of the Variable
Account as compensation for the Company's risk in undertaking not to increase
administrative charges on the Contracts regardless of the actual administrative
costs (see "Expense Risk Charge").
The Company will assess an Administration Charge equal to an annual rate of
0.05% of the daily net assets of the Variable Account. This charge is to
reimburse the Company for administrative expenses related to the issuance and
maintenance of the Contracts (see "Administration Charge").
Upon Annuitization, the selected Annuity Payment Option will begin (see "Annuity
Payment Options"). However, if the net amount to be applied to any Annuity
Payment Option at the Annuitization Date is less than $500, the Contract Value
may be distributed in one lump sum in lieu of annuity payments. If any annuity
payment would be less than $20, the Company will have the right to change the
frequency of payments to such intervals as will result in payments of at least
$20. In no event, however, will annuity payments be made less frequently than
annually (see "Frequency and Amount of Annuity Payments").
Taxation of the Contracts will depend on the type of Contract issued (see
"Federal Tax Considerations"). In addition, the Company will charge against the
Purchase Payments or the Contract Value the amount of any premium taxes levied
by a state or any other governmental entity (see "Premium Taxes").
The Contract Owner has a ten day free look to examine the Contract. Within ten
days of the date the Contract is received, it may be returned for any reason to
the Home Office at the address shown on page 1 of this prospectus. If the
Contract is returned to the Company in a timely manner, the Company will void
the Contract and refund the Contract Value in full unless otherwise required by
law. State and/or federal law may provide additional free look privileges. All
IRA, Roth IRA and SEP IRA refunds will be return of Purchase Payments (see
"Right to Revoke").
10
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<PAGE> 13
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Equity- 15.239003 19.268781 26.44% 1,663,574 1997
-------------------------------------------------------------------------------------
Income Portfolio - Q 13.510928 15.239003 12.79% 972,607 1996
-------------------------------------------------------------------------------------
10.132457 13.510928 33.34% 324,280 1995
-------------------------------------------------------------------------------------
10.000000 10.132457 1.32% 48,709 1994
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity- 15.239003 19.268781 26.44% 2,829,983 1997
-------------------------------------------------------------------------------------
Income Portfolio - NQ 13.510928 15.239003 12.79% 1,623,389 1996
-------------------------------------------------------------------------------------
10.132457 13.510928 33.34% 525,735 1995
-------------------------------------------------------------------------------------
10.000000 10.132457 1.32% 79,134 1994
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 11.543398 12.709885 10.11% 360,753 1997
-------------------------------------------------------------------------------------
Portfolio -Q 10.330773 11.543398 11.74% 194,098 1996
-------------------------------------------------------------------------------------
9.542958 10.330773 8.26% 87,650 1995
-------------------------------------------------------------------------------------
10.000000 9.542958 -4.57% 37,588 1994
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 11.543398 12.709885 10.11% 826,716 1997
-------------------------------------------------------------------------------------
Portfolio -NQ 10.330773 11.543398 11.74% 470,134 1996
-------------------------------------------------------------------------------------
9.542958 10.330773 8.26% 180,868 1995
-------------------------------------------------------------------------------------
10.000000 9.542958 -4.57% 66,350 1994
- -----------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund - Q* 10.965501 11.392164 8.82% 269,586 1997
-------------------------------------------------------------------------------------
10.569801 10.965501 3.74% 174,349 1996
-------------------------------------------------------------------------------------
10.135415 10.569801 4.29% 99,809 1995
-------------------------------------------------------------------------------------
10.000000 10.135415 1.35% 16,557 1994
- -----------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund - NQ* 10.965501 11.392164 8.82% 502,861 1997
-------------------------------------------------------------------------------------
10.569801 10.965501 3.74% 299,032 1996
-------------------------------------------------------------------------------------
10.135415 10.569801 4.29% 120,754 1995
-------------------------------------------------------------------------------------
10.000000 10.135415 1.35% 31,027 1994
- -----------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund - Q 14.965912 19.118736 27.75% 1,003,531 1997
-------------------------------------------------------------------------------------
12.445719 14.965912 20.25% 527,663 1996
-------------------------------------------------------------------------------------
9.767528 12.445719 27.42% 188,348 1995
-------------------------------------------------------------------------------------
10.000000 9.767528 -2.32% 35,204 1994
- -----------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund - NQ 14.965912 19.118736 27.75% 1,742,657 1997
-------------------------------------------------------------------------------------
12.445719 14.965912 20.25% 907,271 1996
-------------------------------------------------------------------------------------
9.767528 12.445719 27.42% 317,092 1995
-------------------------------------------------------------------------------------
10.000000 9.767528 -2.32% 53,945 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 12.921017 15.674014 21.31% 882,338 1997
-------------------------------------------------------------------------------------
Trust - Asset Allocation Fund - Q 11.697239 12.921017 10.46% 404,004 1996
-------------------------------------------------------------------------------------
9.819156 11.697239 19.13% 149,620 1995
-------------------------------------------------------------------------------------
10.000000 9.819156 -1.81% 33,312 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 12.921017 15.674014 21.31% 1,619,845 1997
-------------------------------------------------------------------------------------
Trust - Asset Allocation Fund - 11.697239 12.921017 10.46% 602,084 1996
-------------------------------------------------------------------------------------
NQ 9.819156 11.697239 19.13% 178,905 1995
-------------------------------------------------------------------------------------
10.000000 9.819156 -1.81% 38,193 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 13.329211 16.381936 22.90% 97,500 1997
-------------------------------------------------------------------------------------
Trust - Asset Allocation Fund - 11.909104 13.329211 11.92% 97,500 1996
-------------------------------------------------------------------------------------
Initial Funding by Depositor 9.867500 11.909104 20.69% 97,500 1995
-------------------------------------------------------------------------------------
10.000000 9.867500 -1.32% 97,500 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 11.511652 12.460216 8.24% 488,790 1997
-------------------------------------------------------------------------------------
Trust - Government Bond 11.358330 11.511652 1.35% 337,711 1996
-------------------------------------------------------------------------------------
Fund - Q 9.861504 11.358330 15.18% 139,391 1995
-------------------------------------------------------------------------------------
10.000000 9.861504 -1.38% 13,330 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 11.511652 12.460216 8.24% 785,214 1997
-------------------------------------------------------------------------------------
Trust - Government Bond 11.358330 11.511652 1.35% 419,072 1996
-------------------------------------------------------------------------------------
Fund - NQ 9.861504 11.358330 15.18% 152,273 1995
-------------------------------------------------------------------------------------
10.000000 9.861504 -1.38% 11,348 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 11.875401 13.023184 9.67% 500,000 1997
-------------------------------------------------------------------------------------
Trust - Government Bond 11.564087 11.875401 2.69% 500,000 1996
-------------------------------------------------------------------------------------
Fund - Initial Funding by 9.910061 11.564087 16.69% 500,000 1995
-------------------------------------------------------------------------------------
Depositor 10.000000 9.910061 -0.90% 500,000 1994
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
11
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<PAGE> 14
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The One Group(R) Investment 13.492662 17.286833 28.12% 969,427 1997
-------------------------------------------------------------------------------------
Trust - Growth Opportunities 11.819338 13.492662 14.16% 569,164 1996
-------------------------------------------------------------------------------------
Fund - Q 9.652463 11.819338 22.45% 182,690 1995
-------------------------------------------------------------------------------------
10.000000 9.652463 -3.48% 37,250 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 13.492662 17.286833 28.12% 1,967,681 1997
-------------------------------------------------------------------------------------
Trust - Growth Opportunities 11.819338 13.492662 14.16% 1,083,660 1996
-------------------------------------------------------------------------------------
Fund - NQ 9.652463 11.819338 22.45% 385,700 1995
-------------------------------------------------------------------------------------
10.000000 9.652463 -3.48% 57,644 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 13.919060 18.067840 29.81% 2,500 1997
-------------------------------------------------------------------------------------
Trust - Growth Opportunities 12.033480 13.919060 15.67% 2,500 1996
-------------------------------------------------------------------------------------
Fund - Initial Funding by 9.700000 12.033480 24.06% 2,500 1995
-------------------------------------------------------------------------------------
Depositor 10.000000 9.700000 -3.00% 2,500 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 14.112701 18.376907 30.22% 1,752,117 1997
-------------------------------------------------------------------------------------
Trust - Large Company Growth 12.255940 14.112701 15.15% 1,008,706 1996
-------------------------------------------------------------------------------------
Fund - Q 10.003154 12.255940 22.52% 388,897 1995
-------------------------------------------------------------------------------------
10.000000 10.003154 0.03% 43,062 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 14.112701 18.376907 30.22% 3,368,336 1997
-------------------------------------------------------------------------------------
Trust - Large Company Growth 12.255940 14.112701 15.15% 1,721,371 1996
-------------------------------------------------------------------------------------
Fund - NQ 10.003154 12.255940 22.52% 632,427 1995
-------------------------------------------------------------------------------------
10.000000 10.003154 0.03% 76,916 1994
- -----------------------------------------------------------------------------------------------------------------------
The One Group(R) Investment 14.558482 19.206744 31.93% 300,000 1997
-------------------------------------------------------------------------------------
Trust - Large Company Growth 12.477892 14.558482 16.67% 300,000 1996
-------------------------------------------------------------------------------------
Fund - Initial Funding by 10.052392 12.477892 24.13% 300,000 1995
-------------------------------------------------------------------------------------
Depositor 10.000000 10.052392 0.52% 300,000 1994
- -----------------------------------------------------------------------------------------------------------------------
<FN>
*The 7-day yield on the Money Market Fund as of December 31, 1997 was 4.05%.
</FN>
</TABLE>
The One Group(R) Investment Trust - Equity Index Fund was established May 1,
1998; therefore, no unit value information is available for this fund.
12
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<PAGE> 15
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. The Company is a
provider of life insurance products, annuities and retirement products.
NATIONWIDE ADVISORY SERVICES, INC.
The Contracts are distributed by the General Distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
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 of the Company by the SEC.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with liabilities arising out of any other business the
Company may conduct. The Company does not guarantee the investment performance
of the Variable Account. Obligations under the Contracts, however, are
obligations of the Company. Income, gains and losses of the Variable Account,
whether or not realized, are credited to or charged against the Variable Account
without regard to other income, gains, or losses of the Company.
Purchase Payments are allocated among one or more Sub-Accounts corresponding to
one or more of the Underlying Mutual Funds designated by the Contract Owner.
There are two Sub-Accounts within the Variable Account for each of the
Underlying Mutual Fund options which may be designated by the Contract Owner.
One such Sub-Account contains the Underlying Mutual Fund shares attributable to
Accumulation Units for 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 for Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
A Contract Owner may choose from among a number of different Underlying Mutual
Fund options. A summary of investment objectives is contained in the
descriptions of each Underlying Mutual Fund option below. 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 Fund options 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 any
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
13
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<PAGE> 16
companies. In the event of conflict, the Company will take any steps necessary
to protect Contract Owners and variable annuity payees, including withdrawal of
the Variable Account from participation in the Underlying Mutual Fund(s)
involved in the conflict.
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.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP")
The Fidelity Variable Insurance Products Fund ("VIP") is an open-end,
diversified management investment company organized as a Massachusetts business
trust on November 13, 1981. Shares of VIP are purchased by insurance companies
to fund benefits under variable insurance and annuity policies. Fidelity
Management & Research Company ("FMR") is the manager for the VIP Fund and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR
also will consider the potential for capital appreciation. The
Portfolio's goal is to achieve a yield which exceeds the composite
yield on the securities comprising the Standard & Poor's 500 Composite
Stock Price Index.
VIP OVERSEAS PORTFOLIO
Investment Objective: Long term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in
companies and economies outside of the United States.
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
Nationwide Separate Account Trust ("NSAT") is a diversified, open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the Underlying Mutual Funds listed below, each with its own investment
objectives. Shares of NSAT will be sold primarily to life insurance company
separate accounts to fund the benefits under variable life insurance policies
and variable annuity contracts. The assets of NSAT are managed by Nationwide
Advisory Services, Inc. ("NAS"), a wholly-owned subsidiary of Nationwide Life
Insurance Company.
NSAT - MONEY MARKET FUND
Investment Objective: As high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
NSAT - TOTAL RETURN FUND
Investment Objective: Capital growth by investing in common stocks of
companies that NAS believes will have above-average earnings or
otherwise provide investors with above-average potential for capital
appreciation. To maximize this potential, NAS may also utilize, from
time to time, securities convertible into common stocks, warrants and
options to purchase such stocks.
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 four 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 The One Investors 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.
THE ONE GROUP(R) INVESTMENT TRUST - ASSET ALLOCATION FUND
Investment Objective: To seek total return while preserving capital.
THE ONE GROUP(R) INVESTMENT TRUST - EQUITY INDEX FUND
Investment Objective: To seek investment results that correspond to the
aggregated price and dividend performance of securities in the
Standard & Poor's 500 Composite Stock Price 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.
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<PAGE> 17
THE ONE GROUP(R) INVESTMENT TRUST - GOVERNMENT BOND FUND
Investment Objective: To seek a high level of current income with
liquidity and safety of principal.
THE ONE GROUP(R) INVESTMENT TRUST - 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.
THE ONE GROUP(R) INVESTMENT TRUST - LARGE COMPANY GROWTH FUND
Investment Objective: To seek long-term capital appreciation and growth
of income by investing primarily in equity securities. The weighted
average capitalization of the companies in which the Fund invests will
always be in excess of the market median capitalization of the S & P
500 Index.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to amounts allocated
to the Sub-Accounts.
In accordance with its view of applicable law, the Company will vote the shares
of the Underlying Mutual Funds at regular and special meetings of the
shareholders. These shares will be voted in accordance with instructions
received from Contract Owners. If the 1940 Act or any regulation thereunder
should be amended or if the present interpretation changes permitting the
Company to vote the shares of the Underlying Mutual Funds in its own right, it
may elect to do so.
The Contract Owner is the person who has the voting interest under the Contract.
The number of Underlying Mutual Fund shares attributable to each Contract Owner
is determined by dividing the Contract Owner's interest in each respective
Sub-Account by the Net Asset Value of the Underlying Mutual Fund corresponding
to the Sub-Account. The number of shares which may be voted will be determined
as of the date 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 Funds are no longer be 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)
administrative expenses relating to the issuance and maintenance of the
Contracts; (2) mortality risk charge associated with guaranteeing the annuity
purchase rates at issue for the life of the Contracts; and (3) expense risk
charge associated with guaranteeing that the Mortality Risk Charge, Expense Risk
Charge and Administration Charge 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.
All of the charges described in this section apply to Variable Account
allocations. Allocations to the Fixed Account are subject to CDSC and premium
tax deductions, if applicable, but are not subject to charges exclusive to the
Variable Account; i.e., the Mortality Risk Charge, the Expense Risk Charge, and
the Administration Charge.
15
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<PAGE> 18
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 through
assessing this charge.
EXPENSE RISK CHARGE
The Company deducts an Expense Risk Charge from the Variable Account. This
amount is computed on a daily basis and is equal to an annual rate of 0.45% of
the daily net assets of the Variable Account. The Company expects to generate a
profit through assessing this charge.
ADMINISTRATION CHARGE
The Company deducts an Administration Charge equal on an annual basis to 0.05%
of the daily net assets of the Variable Account. The Administration Charge is
designed to reimburse the Company for administrative expenses.
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
No deduction for a sales charges are made from the Purchase Payments for these
Contracts. However, if any part of the Contract Value is surrendered, the
Company will, with certain exceptions, deduct a CDSC (see "Waiver of CDSC"). The
CDSC will not to exceed the lesser of:
(1) 7% of the total of all Purchase Payments made within 84 months prior to
the date of the request to surrender; or
(2) 7% of the amount surrendered.
The CDSC, when it is applicable, will be used to cover expenses relating to the
sale of the Contracts, including commissions paid to sales personnel, the costs
of preparation of sales literature and other promotional activity. The Company
attempts to recover its distribution costs relating to the sale of the Contracts
from the CDSC. Any shortfall will be made up from the general account of the
Company, which may indirectly include portions of the Mortality and Expense Risk
Charges, since the Company expects to generate a profit from these charges. The
maximum amount that may be paid to a selling agent on the sale of these
Contracts is 8.5% of Purchase Payments.
The CDSC is calculated by multiplying the applicable CDSC percentages noted
below by the Purchase Payments that are surrendered. For purposes of calculating
the CDSC, surrenders are considered to come first from the oldest Purchase
Payment made to the Contract, then the next oldest Purchase Payment and so
forth. For tax purposes, a surrender is usually treated as a withdrawal of
earnings first.
The CDSC applies to Purchase Payments as follows:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE OF SALES CHARGE
PURCHASE PAYMENT PERCENTAGE
<S> <C> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
16
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<PAGE> 19
WAIVER OF CDSC
During the first Contract Year, the Contract Owner may withdraw, without a CDSC,
any amount in order for the Contract to meet minimum distribution requirements
under the Code. Starting with the second year after a Purchase Payment has been
made, the Contract Owner may withdraw without a CDSC, the greater of: (a) an
amount equal to 10% of that Purchase Payment; or (b) any amount in order for the
Contract to meet minimum distribution requirements under the Code. This
CDSC-free withdrawal privilege is non-cumulative; that is, free amounts not
taken during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year.
In addition, no CDSC will be deducted:
(1) upon annuitization of Contracts which have been in force for at
least two years;
(2) upon payment of a Death Benefit; or
(3) from any values which have been held in a Contract for at least 84
months.
No CDSC applies upon the transfer of value among the Sub-Accounts or between the
Fixed Account and the Variable Account. When a Contract described in this
prospectus is exchanged for another contract issued by the Company or any of its
affiliated insurance companies, of the type and class which the Company
determined is eligible for such exchange, the Company may waive the CDSC on the
first Contract. A CDSC may apply to the contract received in the exchange.
The Company may waive or reduce the CDSC when sales are to employees of Bank One
Corporation or the employees of its affiliates, subsidiaries or holding
companies.
When a Contract is held by a Charitable Remainder Trust, the amount which may be
withdrawn from this Contract without application of a CDSC, shall be the larger
of (a) or (b), where:
(a) is the amount which would otherwise be available for withdrawal
without application of a CDSC; and
(b) is the difference between the total Purchase Payments made to the
Contract as of the date of the withdrawal (reduced by previous
withdrawals of such Purchase Payments), and the Contract Value at
the close of the day prior to the date of the withdrawal.
For Tax Sheltered Annuity Contracts, Qualified Contracts, and SEP IRA Contracts,
the Company will waive the CDSC when:
A. the Plan Participant experiences a case of hardship (as provided in
Code Section 403(b) and as defined for purposes of Code Section
401(k));
B. the Plan Participant becomes disabled (within the meaning of Code
Section 72(m)(7));
C. the Plan Participant attains age 59 1/2 and has participated in the
Contract for at least 5 years, as determined from the Contract
Anniversary date immediately preceding the Distribution;
D. the Plan Participant has participated in the Contract for at least
15 years as determined from the Contract Anniversary date
immediately preceding the Distribution;
E. the Plan Participant dies; or
F. the Contract is annuitized after 2 years from the inception of the
Contract.
The Contract Owner may be subject to income tax on all or a portion of any such
withdrawals and to a tax penalty if the Contract Owner takes withdrawals prior
to age 59 1/2 (See "Non-Qualified Contracts - Natural Persons as Contract
Owners").
Sales without commissions or other standard distribution expenses can result in
the waiver or reduction of the CDSC. In no event will elimination of CDSC be
permitted where such elimination will be unfairly discriminatory to any person,
or where it is prohibited by law.
PREMIUM TAXES
The Company will charge against the Contract Value any premium taxes levied by a
state or any other governmental entity upon Purchase Payments received by the
Company. Premium taxes 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.
17
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<PAGE> 20
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 are subject to the terms and 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 the Fixed Account or 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 Purchase Payment must be at least $5,000 for Non-Qualified Contracts
and $2,000 for IRAs. However, if periodic payments are expected by the Company,
the initial first year minimum may be satisfied by Purchase Payments made on an
annualized basis. Purchase Payments, if any, after the first Contract Year must
be at least $10 each. 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 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 Mortality Risk Charge, Expense Risk
Charge and Administration Charge. Such factor is equal to an
annual rate of 1.30% 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 Mortality Risk Charge, Expense Risk Charge and Administration
Charge.
DETERMINING THE CONTRACT VALUE
The Contract Value is the sum of the value of all Accumulation Units and amounts
allocated and credited to the Fixed Account. 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 and
an appropriate amount from the Fixed Account will be deducted in the same
proportion that the Contract Owner's interest in the Sub-Accounts and the Fixed
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
The Contract Owner may request a transfer of up to 100% of the Variable Account
value to the Fixed Account without penalty or adjustment. However, the Company
reserves the right to restrict transfers from the Variable Account to the Fixed
Account to 25% of the Contract Value for any 12 month period. All amounts
transferred to the Fixed Account must remain on deposit in the Fixed Account
until the expiration of the Interest Rate Guarantee Period. In addition,
transfers from the Fixed Account may not be made prior to the end of the then
current Interest Rate Guarantee Period. The Interest Rate Guarantee Period for
any amount allocated to the Fixed Account expires on the final day of a calendar
quarter during which the one year anniversary of the allocation to the Fixed
Account occurs. Transfers to or from 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 the Home Office in good order. Once the Contract has annuitized,
transfers may only be made on each anniversary of the Annuitization Date.
The Contract Owner may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The amount that may be transferred from the Fixed Account to the Variable
Account will be determined by the Company, at its sole discretion, but will not
be less than 10% of the total value of the portion of the Fixed Account that is
maturing. The amount that may be transferred will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. Transfers
from the Fixed Account must be made within 45 days after the expiration date of
the guarantee period. Contract Owners who have entered into a Dollar Cost
Averaging agreement with the Company (see "Dollar Cost Averaging") may transfer
from the Fixed Account to the Variable Account under the terms of that
agreement.
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 of the following: requesting
identifying information, such as name, contract number, Social Security Number,
and/or personal identification number; tape recording all telephone
transactions; providing written confirmation to both the Contract Owner and any
agent 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 losses due to unauthorized or fraudulent telephone
transfers, the Company will not be liable for following instructions
communicated by telephone which it reasonably believes
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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 on the
basis of perceived market trends. Because of the unusually large transfers of
funds associated with some of these transactions, the ability of the Company or
Underlying Mutual Funds to process such transactions may be compromised, and the
execution of such transactions may possibly disadvantage or work to the
detriment of other Contract Owners not utilizing market timing services.
Accordingly, the right to exchange Contract Values among the Sub-Accounts may be
subject to modification if such rights are exercised by a market timing firm or
any other third party authorized to initiate transfer or exchange transactions
on behalf of multiple Contract Owners. THE RIGHTS OF INDIVIDUAL CONTRACT OWNERS
TO EXCHANGE CONTRACT VALUES, WHEN INSTRUCTIONS ARE SUBMITTED DIRECTLY BY THE
CONTRACT OWNER, OR BY THE CONTRACT OWNER'S REPRESENTATIVE OF RECORD AS
AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF ATTORNEY
FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the Company
may, among other things, not accept:
(1) the transfer or exchange instructions of any agent acting under a
power of attorney on behalf or more than one Contract Owner; or
(2) the transfer or exchange instructions of individual Contract
Owners who have executed preauthorized transfer or exchange forms
which are submitted by market timing firms or other third parties
on behalf of more than one Contract Owner at the same time.
The Company will not impose any such restrictions or otherwise modify exchange
rights unless such action is reasonably intended to prevent the use of such
rights in a manner that will disadvantage or potentially impair the contract
rights of other Contract Owners.
CONTRACT OWNERSHIP
Unless the Contract otherwise provides, the Contract Owner has all rights under
the Contract. PURCHASERS NAMING SOMEONE OTHER THAN THEMSELVES AS OWNER WILL HAVE
NO RIGHTS UNDER THE CONTRACT. Prior to the Annuitization Date, the Contract
Owner may name a new Contract Owner in Non-Qualified Contracts. Such change may
be subject to state and federal gift taxes and may also result in federal income
taxation. Any change of Contract Owner designation will automatically revoke any
prior Contract Owner designation. Once proper notice of the change is recorded
by the Home Office, the change will become effective as of the date the written
request was signed. A change of Contract Owner will not apply and will not be
effective with respect to any payment made or action taken by the Company prior
to the time that the change was received and recorded by the Home Office.
Prior to the Annuitization Date, the Contract Owner may request a change in the
Annuitant, Beneficiary, or Contingent Beneficiary. Such a request must be made
in writing on a form acceptable to the Company and must be signed by the
Contract Owner. Such request must be received at the Home Office prior to the
Annuitization Date. Any such change is subject to review and approval by the
Company. If the Contract Owner is not a natural person and there is a change of
the Annuitant, Distributions will be made as if the Contract Owner died at the
time of 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.
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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 there is no named or surviving Beneficiary or Contingent
Beneficiary upon the Annuitant's death, all rights and interest of the
Contingent Beneficiary will vest with the Contract Owner or the estate or 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 a 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 and an amount from the Fixed Account necessary to equal the
gross dollar amount requested, less any applicable CDSC (see "Contingent
Deferred Sales Charge"). The number of Accumulation Units surrendered from each
Sub-Account and the amount surrendered from the Fixed Account will be in the
same proportion that the Contract Owner's interest in the Sub-Accounts and Fixed
Account bears to the total Contract Value.
The Company will pay any amounts surrendered from the Sub-Account within 7 days.
However, the Company reserves the right to suspend or postpone the date of any
payment or values for any Valuation Period when:
(1) the New York Stock Exchange ("Exchange") is closed;
(2) trading on the Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities
held in the Variable Account is not reasonably practicable or it
is not reasonably practicable to determine the value of the
Variable Account's net assets; or
(4) when the SEC, by order, so permits for the protection of security
holders.
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.
Certain redemption restrictions also apply to Contracts issued under the Texas
Optional Retirement Program or the Louisiana Optional Retirement Plan. With
respect to Contracts issued under the Texas Optional Retirement Program, the
Texas Attorney General has ruled that withdrawal benefits are available only in
the event of a participant's death, retirement, termination of employment due to
total disability, or other termination of employment in a Texas public
institution of higher education. Retirement benefits made pursuant to the
Louisiana Optional Retirement Plan are to be paid in the form of lifetime income
and, except for Death Benefits, lump sum cash payments are not permitted. A
participant under the Louisiana Optional Retirement Plan may take a Distribution
from the Contract only in the event of retirement or termination of employment.
A participant under either the Texas Optional Retirement Program or the
Louisiana Optional Retirement Plan will not, therefore, be entitled to receive
the right of withdrawal in order to receive the cash values credited to such
participant under the Contract unless one of the foregoing conditions has been
satisfied. The value of such Contracts may, however, be transferred to other
contracts or other carriers during the participation in these retirement
programs, subject to any applicable CDSC. The Company issues this Contract to
participants in the Texas Optional Retirement Program in reliance upon, and in
compliance with, Rule 6c-7 of the Investment
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Company Act of 1940 and to participants in the Louisiana Optional Retirement
Plan in reliance upon, and in compliance with, an exemptive order the Company
obtained from the SEC on August 22, 1990.
SURRENDERS UNDER A QUALIFIED CONTRACT OR TAX SHELTERED ANNUITY
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 Code Section 403(b)(7) may be executed only:
1. when the Contract Owner attains age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of Code Section 72(m)
(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case of
hardship may not include any income attributable to salary reduction
contributions.
B. The surrender limitations described in 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 in 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
above. For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value.
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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. Any additional requested collateral will be transferred from the
Fixed Account. No 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.
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. 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 of the
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
sufficiency 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.
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Any portion of 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 assigned or pledged. 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, Qualified Contracts and Tax Sheltered Annuity
Contracts are not eligible for assignment.
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 period falls on a Saturday, Sunday,
recognized holiday or any other day when the New York Stock Exchange is closed,
the Asset Rebalancing reallocation will occur on the first business day after
that day. Asset Rebalancing requests must be in writing on a form provided by
the Company. The Contract Owner may want to contact a financial adviser to
discuss the use of Asset Rebalancing.
Asset Rebalancing may be subject to employer imposed limitations or restrictions
for Contracts issued to a Qualified Plan or Tax Sheltered Annuity Plan.
The Company reserves the right to discontinue establishing new Asset Rebalancing
programs. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING - If the Contract Value is $15,000 or more, the Contract
Owner may direct the Company to automatically transfer a specified amount from
the NSAT Money Market Fund or the Fixed Account to any other Sub-Account. Dollar
Cost Averaging will occur on a monthly basis or on another frequency permitted
by the Company. Dollar Cost Averaging 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. Monthly transfers from the Fixed Account must
be equal to or less than 1/30th of the Fixed Account when the program is
requested. Transfers will be processed monthly 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 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").
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ANNUITY PAYMENT PERIOD, DEATH BENEFIT, AND OTHER DISTRIBUTIONS
ANNUITY COMMENCEMENT DATE
An Annuity Commencement Date will 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, a Variable Payment Annuity, or an
available combination.
If a Variable Payment Annuity is elected, all amounts in the Fixed Account must
be transferred to the Sub-Accounts prior to the Annuitization Date.
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 Fixed Annuity 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 as of the Annuitization Date to establish the number of Annuity
Units representing each monthly annuity payment. This number of Annuity Units
remains fixed during the annuity payment period. The dollar amount of the second
and subsequent payments is not predetermined and may change from month to month.
The dollar amount of each subsequent payment is determined by multiplying the
fixed number of Annuity Units by the Annuity Unit value for the Valuation Period
in which the payment is due. The Company guarantees that the dollar amount of
each payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
VARIABLE PAYMENT ANNUITY - ASSUMED INVESTMENT RATE
A 3.5% assumed investment rate is built into the variable payment annuity
purchase rate basis in the Contracts. A higher assumption would mean a higher
initial payment but more slowly rising or more rapidly falling subsequent
payments. A lower assumption would have the opposite effect. If the actual net
investment rate is at the annual rate of 3.5%, the annuity payments will be
level.
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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 $500, 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 $20, the Company will have the right to change the frequency
of payments to such intervals as will result in payments of at least $20. In no
event will the Company make payments under an annuity option less frequently
than annually.
ANNUITY PAYMENT OPTIONS
The Contract Owner may, upon prior written notice to the Company, at any time
prior to the Annuitization Date, elect one of the following Annuity Payment
Options:
(1) Life Annuity - An annuity payable periodically, but at least annually
during the lifetime of the Annuitant, ending with the last payment due
prior to the death of the Annuitant. FOR EXAMPLE, IF THE ANNUITANT DIES
BEFORE THE SECOND ANNUITY PAYMENT DATE, THE ANNUITANT WILL 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 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 Annuitant becomes the Contract Owner. The entire interest in the
Contract Value, less any applicable deductions (which may include a CDSC), must
be distributed in accordance with the "Required Distributions for Non-Qualified
Contracts" provision.
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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 or the Contingent Beneficiary. Unless the Contract Owner has
provided otherwise, when there are two or more named Beneficiaries, the Death
Benefit will be paid to each Beneficiary in equal shares. If there is no named
or surviving Beneficiary or Contingent Beneficiary upon the Annuitant's death,
the Contract Owner (or the estate of the Contract Owner, if the Contract Owner
and the Annuitant were the same) will be deemed to be the Beneficiary of the
Death Benefit.
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 Annuity Payment Option selected.
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 or
the Contingent Beneficiary, as specified in the Beneficiary provision and in
accordance with the appropriate "Required Distributions" provision.
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable will be paid according to the Annuity Payment Option selected.
DEATH BENEFIT PAYMENT
For Contracts issued on or after the later of May 1, 1998 or a date on which
state insurance authorities approve applicable Contract modifications, if the
Annuitant dies prior to his or her 75th birthday and prior to the Annuitization
Date, the dollar amount of the Death Benefit will be the greatest of:
(1) the Contract Value;
(2) the sum of all Purchase Payments, less an adjustment for amounts
surrendered; or
(3) the Contract Value as of the most recent five year Contract
Anniversary, less an adjustment for amounts surrendered since
that 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 a date prior to approval of
applicable Contract modifications by state insurance authorities, if the
Annuitant dies prior to his or her 75th birthday and prior to the Annuitization
Date, the dollar amount of the Death Benefit will be the greatest of:
(1) the Contract Value;
(2) the sum of all Purchase Payments, less any amounts surrendered;
or
(3) the Contract Value as of the most recent five year Contract
anniversary, less any amounts surrendered since that most recent
five year Contract Anniversary.
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 forms(s).
If the Annuitant dies after the Annuitization Date, payment will be determined
according to the selected Annuity Payment Option.
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REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Upon the death of any Contract Owner or Joint Owner (including an Annuitant who
becomes the Contract Owner on the Annuitization Date), certain distributions for
Non-Qualified Contracts are required by Section 72(s) of the Code.
Notwithstanding any provision of the Contract to the contrary, the following
Distributions will be made in accordance with such requirements:
1. If any Contract Owner dies on or after the Annuitization Date and
before the entire interest under the Contract has been
distributed, then the remaining interest will be distributed at
least as rapidly as under the method of distribution in effect as
of the date of the Contract Owner's death.
2. If any Contract Owner dies prior to the Annuitization Date, then
the entire interest in the Contract (consisting of either the
Death Benefit or the Contract Value reduced by certain charges as
set forth elsewhere in the Contract) will be distributed within 5
years of the death of the Contract Owner, provided however:
(a) any interest payable to or for the benefit of a natural
person (referred to herein as a "designated beneficiary"),
may be distributed over the life of the designated
beneficiary or over a period not extending beyond the life
expectancy of the designated beneficiary. Payments must
begin within one year of the date of the Contract Owner's
death unless otherwise permitted by federal income tax
regulations; and
(b) if the designated beneficiary is the surviving spouse of the
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 the death or
change, as the case may be.
The Annuitant is the primary annuitant as defined in Section 72(s)(6)(B) of the
Code.
These distribution provisions will not be applicable to any Contract that is not
required to be subject to the provisions of Section 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 Payment Option selected, over a
period not exceeding:
A. the life of the Annuitant or the joint lives of the Annuitant and
the Annuitant's designated beneficiary under the selected Annuity
Payment Option; or
B. a period not extending beyond the life expectancy of the
Annuitant or the joint life expectancies of the Annuitant and the
Annuitant's designated beneficiary under the selected Annuity
Payment Option.
For Tax Sheltered Annuity Contracts, no Distributions will be required from this
Contract if Distributions otherwise required from this Contract are being
withdrawn from another Tax Sheltered Annuity Contract of the Annuitant.
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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, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the required beginning date will not be less than the
lesser of the quotient obtained by dividing the entire interest of the Annuitant
by the life expectancy of the Annuitant, or the joint life expectancies of the
Annuitant and the Annuitant's designated beneficiary (if the Annuitant dies
prior to the required beginning date) or the beneficiary under the selected
Annuity Payment Option (if the Annuitant dies after the required beginning
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 not 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 expectancies 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
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(b) The Contract Owner names a Beneficiary other than his or her
surviving spouse and the Beneficiary elects to receive a
Distribution of the Contract in substantially equal payments over
his or her life (or a period not exceeding his or her life
expectancy) commencing not later than December 31 of the year
following the year in which the Contract Owner dies.
No Distribution will be required from this Contract if Distributions otherwise
required from this Contract are being withdrawn from another IRA or SEP IRA of
the Contract Owner.
If the Contract Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse who is the beneficiary under the
Annuity Payment Option may treat the Contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If the amounts distributed to the Contract Owner are less than those mentioned
above, a penalty tax of 50% is levied on the excess of the amount that should
have been distributed for that year over the amount that actually was
distributed for that year.
A pro-rata portion of all Distributions will be included in the gross income of
the person receiving the Distribution and taxed at ordinary income tax rates.
The portion of the Distribution which is taxable is based on the ratio between
the amount by which non-deductible Purchase Payments exceed prior non-taxable
Distributions and total account balances at the time of the Distribution. The
Owner of an IRA or SEP IRA must annually report the amount of non-deductible
Purchase Payments, the amount of any Distribution, the amount by which
non-deductible Purchase Payments for all years exceed non-taxable Distributions
for all years, and the total balance of all IRAs.
IRA and SEP IRA Distributions will not receive the benefit of the tax treatment
of a lump sum Distribution from a Qualified Plan. If the Owner dies prior to the
time Distribution of his or her interest in the annuity is completed, the
balance will also be included in his or her gross estate.
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").
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FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts. Contract Owners should
consult a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the Contracts.
Section 72 of the Code governs federal income taxation of annuities in general.
That section sets forth different rules for: (1) Qualified Contracts; (2) IRAs,
including SEP IRAs; (3) Roth IRAs; (4) Tax Sheltered Annuities; and (5)
Non-Qualified Contracts. Each type of annuity is discussed below.
Distributions to participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on a formula required by the Code. The formula
required by the Code excludes from income an amount equal to the investment in
the contract by the number of anticipated payments, as determined pursuant to
Section 72(d) of the Code.
Distributions from IRAs and SEP IRAs and Contracts owned by Individual
Retirement Accounts are also generally taxed when received. The portion of each
such 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 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 may be treated by the IRS as a taxable transaction.
PUERTO RICO
Under the Puerto Rico tax code, Distributions from a Non-Qualified Contract
prior to Annuitization are treated as nontaxable return of principal until the
principal is fully recovered; thereafter, all Distributions are fully taxable.
Distributions after Annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
Annuitization is equal to the amount of the Distribution in excess of 3% of the
total Purchase Payments paid, until an amount equal to the total Purchase
Payments paid has been excluded; thereafter, the entire Distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
Distributions of income. A personal adviser should be consulted.
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NON-QUALIFIED CONTRACTS - NATURAL PERSONS AS CONTRACT OWNERS
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment received is excludable from taxable income based on the ratio
between the Contract Owner's investment in the Contract and the expected return
on the Contract until the investment has been recovered; thereafter the entire
amount is includable in income. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are taxable
to the Contract Owner to the extent that the cash value of the Contract exceeds
the Contract Owner's investment at the time of the Distribution. Distributions,
for this purpose, include partial surrenders, dividends, loans, or any portion
of the Contract which is assigned or pledged; or for Contracts issued after
April 22, 1987, any portion of the Contract transferred by gift. For these
purposes, a transfer by gift may occur upon Annuitization if the Contract Owner
and the Annuitant are not the same individual. In determining the taxable amount
of a Distribution, all annuity contracts issued after October 21, 1988, by the
same company to the same contract owner during any 12 month period, will be
treated as one annuity contract. Additional limitations on the use of multiple
contracts may be imposed by Treasury Regulations. Distributions prior to the
Annuitization Date with respect to that portion of the Contract invested prior
to August 14, 1982, are treated first as a recovery of the investment in the
Contract as of that date. A Distribution in excess of the amount of the
investment in the Contract as of August 14, 1982 will be treated as taxable
income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for immediate annuities and certain Contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium Contract on which payments begin within one year of purchase. If this
Contract is issued as the result of an exchange described in Section 1035 of the
Code, for purposes of determining whether the Contract is an immediate annuity,
it will generally be considered to have been purchased on the purchase date of
the contract given up in the exchange.
Code Section 72 also provides for a penalty tax, equal to 10% of the portion of
any Distribution that is includable in gross income, if such Distribution is
made prior to attaining age 59 1/2. The penalty tax does not apply if the
Distribution is one of a series of substantially equal periodic payments made
over the life or life expectancy of the Contract Owner (or the joint lives or
joint life expectancies of the Contract Owner and the beneficiary selected by
the Contract Owner to receive payment under the Annuity Payment Option selected
by the Contract Owner) 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, such 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 as of the date of the Contract
Owner's death (see "Required Distribution For Qualified Plans and Tax Sheltered
Annuities"). If the Contract Owner is not an individual, the death of the
Annuitant (or a change in the Annuitant) will result in a Distribution pursuant
to these rules.
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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.
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:
1. one of a series of substantially equal annual (or more frequent)
payments made:
(a) over the life (or life expectancy) of the Contract Owner ;
(b) over the joint lives (or joint life expectancies) of the Contract
Owner and the Contract Owner's designated Beneficiary; or
(c) for a specified period of ten years or more; or
2. 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.
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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.
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."
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<PAGE> 37
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 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 such direct skip, the Company is required to reduce the
amount of the Death Benefit, Distribution, or other payment by the tax
liability, and pay the tax liability directly to the IRS.
Federal estate, gift and generation skipping transfer tax consequences, and
state and local estate, inheritance, succession, generation skipping transfer,
and other tax consequences, of owning or transferring a Contract, and of
receiving a Distribution, Death Benefit, or other payment, depend on the
circumstances of the person owning or transferring the Contract, or 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.
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 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.
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<PAGE> 38
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 43216, or calling
1-800-860-3946, TDD 1-800-238-3035.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address, any
statements and reports required by law. Contract Owners should promptly notify
the Company of any address change. Statements are mailed detailing the
Contract's quarterly activity. The Company will also send a confirmation
statement to Contract Owners each time a transaction is made affecting the
Contract Value. However, instead of receiving an immediate confirmation of
transactions made pursuant to some types of recurring payment plans (such as a
dollar cost averaging program or salary reduction arrangement), the Contract
Owner may receive confirmation of such transactions in their quarterly
statements. The Contract Owner should review the information in these statements
carefully. All errors or corrections must be reported to the Company immediately
to assure proper crediting to the Contract. The Company will assume all
transactions are accurately reported on quarterly statements or confirmation
statements unless the Contract Owner notifies the Home Office within 30 days
after receipt of the statement. The Company will also send to Contract Owners a
semi-annual report as of June 30 and an annual report as of December 31,
containing financial statements for the Variable Account.
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT-Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT-Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT-Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of a
Sub-Account relative to the performance of other variable annuity sub-accounts
or underlying mutual funds 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.
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<PAGE> 39
The Sub-Accounts may also be compared to certain market indices, 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 or other charges.
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 contract. 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.
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the Sub-Account's
standardized "average annual total return," calculated in a manner prescribed by
the SEC, and nonstandardized "total return." "Average annual total return"
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 has been available in the Variable
Account if the Underlying Mutual Fund option has not been available for the
prescribed periods. THIS CALCULATION REFLECTS THE DEDUCTION OF ALL APPLICABLE
CHARGES MADE TO THE CONTRACTS EXCEPT FOR PREMIUM TAXES, WHICH MAY BE IMPOSED BY
CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $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 the same
charges except the CDSC) had such Underlying Mutual Fund options been available
in the Variable Account for the periods quoted. THE CDSC IS NOT REFLECTED
BECAUSE THE CONTRACTS ARE DESIGNED FOR LONG TERM INVESTMENT. THE CDSC, IF
REFLECTED, WOULD DECREASE THE LEVEL OF PERFORMANCE SHOWN. AN INITIAL INVESTMENT
OF $10,000 IS ASSUMED BECAUSE THAT AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF
A TYPICAL CONTRACT THAN DOES THE $1,000 ASSUMPTION USED IN CALCULATING THE
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS.
The standardized average annual total return and nonstandardized total return
quotations reflected below 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.
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<PAGE> 40
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------------------------------------------------------------------------
10 years or Date Fund Date Fund
1 Year to 5 Years to Available in Variable Added to
Sub-Account Options 12/31/97 12/31/97 Account to 12/31/97 Variable Account
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 21.04% NA 20.50% 08/01/94
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 4.71% NA 6.37% 08/01/94
- ----------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund -1.51% NA 2.92% 08/01/94
- ----------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund 22.35% NA 20.21% 08/01/94
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 15.91% NA 13.28% 08/01/94
Asset Allocation Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 2.84% NA 5.74% 08/01/94
Government Bond Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 24.82% NA 18.80% 08/01/94
Large Company Growth Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 22.72% NA 16.65% 08/01/94
Growth Opportunities Fund
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------------------------------------------------------------------------
1 Year to 5 Years to 10 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>
Fidelity VIP Equity-Income Portfolio 26.44% 18.58% 15.23%* 10/09/86
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 10.11% 12.62% 8.20%* 01/28/87
- ----------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 3.89% 3.17% 4.25%* 11/10/81
- ----------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund 27.75% 16.41% 14.13%* 11/08/82
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 21.31% NA 14.06% 08/01/94
Asset Allocation Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 8.24% NA 6.65% 08/01/94
Government Bond Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 30.22% NA 19.49% 08/01/94
Large Company Growth Fund
- ----------------------------------------------------------------------------------------------------------------
The One Group(R) Investment Trust - 28.12% NA 17.37% 08/01/94
Growth Opportunities Fund
- ----------------------------------------------------------------------------------------------------------------
<FN>
*Represents 10 years to 12/31/97
</FN>
</TABLE>
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<PAGE> 41
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>
<CAPTION>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
<S> <C>
General Information and History.......................................................................................1
Services..............................................................................................................1
Purchase of Securities Being Offered..................................................................................2
Underwriters..........................................................................................................2
Calculations of Performance...........................................................................................2
Annuity Payments......................................................................................................3
Financial Statements..................................................................................................4
</TABLE>
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APPENDIX
Purchase Payments under the Fixed Account of the Contract and transfers to the
Fixed Account become part of the general account of the Company, which support
insurance and annuity obligations. Because of exemptive and exclusionary
provisions, interests in the general account have not been registered under the
1933 Act, nor is the general account registered as an investment company under
the 1940 Act. Accordingly, neither the general account nor any interest therein
are generally subject to the provisions of the 1933 or 1940 Acts, and we have
been advised that the staff of the SEC has not reviewed the disclosures in this
prospectus which relate to the Fixed Account. Disclosures regarding the Fixed
Account and the general account may be subject to certain provisions of the
federal securities law relating to the accuracy and completeness of statements
made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company, other
than those in the Variable Account and any other segregated asset account.
Purchase Payments will be allocated to the Fixed Account by election of the
Contract Owner.
The Company will invest the assets of the Fixed Account in those assets chosen
by the Company and allowed by applicable law. Investment income from such assets
will be allocated by the Company between itself and the contracts participating
in the Fixed Account.
Investment income from the Fixed Account includes compensation for mortality and
expense risks borne by the Company in connection with Fixed Account contracts.
The amount of such investment income allocated to the contracts will vary at the
sole discretion of the Company at such rate(s) as the Company prospectively
declares. The guaranteed rate for any Purchase Payment will remain effective for
a period of not less than twelve months. However, the Company guarantees that it
will credit interest at not less than 3.0% per year. ANY INTEREST CREDITED TO
AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE
DETERMINED IN THE SOLE DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE
RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
MINIMUM GUARANTEE OF 3.0% FOR ANY GIVEN YEAR. New Purchase Payments deposited to
the Contract which are allocated to the Fixed Account may receive a different
rate of interest than money transferred from the Sub-Accounts to the Fixed
Account and amounts maturing in the Fixed Account at the expiration of an
Interest Rate Guarantee Period.
The Company guarantees that the Fixed Account Contract Value will not be less
than the amount of the Purchase Payments allocated to the Fixed Account, plus
interest credited as described above, less any applicable charges, including
CDSC.
TRANSFERS
For transfers from the Fixed Account to the Variable Account, refer to the
"Transfers" provision of the prospectus.
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<PAGE> 43
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS NATIONWIDE VA SEPARATE ACCOUNT- 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 May
1, 1998. The prospectus may be obtained from Nationwide Life and Annuity
Insurance Company by writing P. O. Box 182008, Columbus, Ohio 43216, or calling
1-800-860-3946, TDD 1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History...............................................................................1
Services......................................................................................................1
Purchase of Securities Being Offered..........................................................................2
Underwriters..................................................................................................2
Calculations of Performance...................................................................................2
Annuity Payments..............................................................................................3
Financial Statements..........................................................................................4
</TABLE>
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 its
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 affiliates 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.
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<PAGE> 44
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").
The Contract Owner may transfer up to 100% of the Contract Value from the
Variable Account to the Fixed Account, without penalty or adjustment. However,
the Company, at its sole discretion, reserves the right to limit such transfers
to 25% of the Contract Value for any 12 month period. Contract Owners may at the
maturity of an Interest Rate Guarantee Period transfer a portion of the Contract
Value of the Fixed Account to the Variable Account. Such portion will be
determined by the Company at its sole discretion (but will not be less than 10%
of the total value of the portion of the Fixed Account that is maturing), and
will be declared upon the expiration date of the then current Interest Rate
Guarantee Period. The Interest Rate Guarantee Period expires on the final day of
a calendar quarter. Transfers under this provision must be made within 45 days
after the termination date of the guarantee period. Owners who have entered into
a Dollar Cost Averaging agreement with the Company may transfer from the Fixed
Account under the terms of that agreement.
Transfers from the Fixed and Variable Accounts may not be made prior to the
first Contract Anniversary. Transfers from the Fixed Account may not be made
within 12 months of any prior Transfer. Transfers must also be made prior to the
Annuitization Date.
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 were paid by the
Company to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT-Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of hypothetical pre-existing account having a balance of one Accumulation
Unit at the beginning of the base period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the net change
in account value by the value of the account at the beginning of the period to
obtain a base period return, and multiplying the base period return by (365/7)
or (366/7) in a leap year. At December 31, 1997, the NSAT-Money Market Fund's
seven-day current unit value yield was 4.05%. The NSAT-Money Market Fund's
seven-day effective yield is computed similarly but includes the effect of
assumed compounding on an annualized basis of the current unit value yield
quotations of the Fund. At December 31, 1997 the seven-day effective yield for
the NSAT-Money Market Fund was 4.13%.
The NSAT- Money Market Fund yield and effective yield will fluctuate daily.
Actual yields will depend on factors such as the type of instruments in the
Underlying Mutual Fund's portfolio, portfolio quality and average maturity,
changes in interest rates, and the Underlying Mutual 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 in "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 or
another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with 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.
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<PAGE> 45
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 1.30% Mortality, Expense Risk and
Administration Charge. The redeemable value also reflects the effect of any CDSC
that may be imposed at the end of the period (see "Contingent Deferred Sales
Charge" located in the prospectus). No deduction is made for premium taxes which
may be assessed by certain states. Nonstandardized total return may also be
advertised, and is calculated in a manner similar to standardized average annual
total return except the nonstandardized total return is based on a hypothetical
initial investment of $10,000 and does not reflect the deduction of any
applicable CDSC. Reflecting the CDSC would decrease the level of the performance
advertised. The CDSC is not reflected because the Contract is designed for
long-term investment. An assumed initial investment of $10,000 will be used
because that figure more closely approximates the size of a typical Contract
than does the $1,000 figure used in calculating the standardized average annual
total return quotations.
The 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.
3
45 of 97
<PAGE> 46
<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> 47
<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> 48
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page
<S> <C>
(a) To be filed by Financial Statements:
(1) Financial statements included in Prospectus
(Part A):
Condensed Financial Information. 13
(2) Financial statements included
in Part B:
Those financial statements required by Item 23
to be included in Part B have been incorporated
therein by reference to the Statement of
Additional Information
(Part A).
Nationwide VA Separate Account-C:
Independent Auditors' Report. 46
Statements of Assets, Liabilities
and Contract Owners' Equity as of
December 31, 1997. 47
Statements of Operations and Changes in
Contract Owners' Equity for the years ended
December 31, 1996 and 1995. 49
Notes to Financial Statements. 52
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report. 54
Balance Sheets as of December 31, 1997 and
1996. 55
Statements of Income for the years ended
December 31, 1997, 1996 and 1995. 56
Statements of Shareholder's Equity for the
years ended December 31, 1997, 1996 and 1995. 57
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995. 58
Notes to Financial Statements. 59
Schedule I - Summary of Investments - Other
Than Investments in Related Parties. 93
Schedule III - Supplementary Insurance Information 94
Schedule IV - Reinsurance 95
Schedule V - Valuation and Qualifying Accounts 96
</TABLE>
74 of 97
<PAGE> 49
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with
this Registration Statement and hereby
incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution contracts
between the Registrant and Principal
Underwriter - Filed previously with this
Registration Statement and hereby
incorporated by reference.
(4) The form of the variable annuity contract -
Filed previously with this Registration
Statement and hereby incorporated
herein by reference.
(5) Variable Annuity Application - Filed
previously with this Registration
Statement and hereby incorporated herein
by reference.
(6) Articles of Incorporation of Depositor
Filed previously with this Registration
Statement and hereby incorporated herein
by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
this Registration Statement and hereby
incorporated herein by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Filed previously with this
Registration Statement and hereby
incorporated herein by reference.
75 of 97
<PAGE> 50
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
76 of 97
<PAGE> 51
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
77 of 97
<PAGE> 52
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
78 of 97
<PAGE> 53
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
79 of 97
<PAGE> 54
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<C> <S> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
</TABLE>
80 of 97
<PAGE> 55
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<C> <S> <C> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio 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>
81 of 97
<PAGE> 56
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<C> <S> <C> <C> <C>
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
82 of 97
<PAGE> 57
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<C> <S> <C> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
Public Employees Benefit Services Delaware Markets and Administers Deferred Compensation
Corporation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
83 of 97
<PAGE> 58
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<C> <S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-A Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-B Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-C Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
84 of 97
<PAGE> 59
<TABLE>
<C> <S> <C> <C> <C>
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
85 of 97
<PAGE> 60
<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> 61
<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> 62
<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> 63
<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> 64
<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> 65
<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> 66
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of January 31, 1998 was 4,046 and 5,781,
respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by the Company of
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of the Company, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the SEC 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 VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VL Separate Account-B,
Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, NACo Variable Account and 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.
<TABLE>
<CAPTION>
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
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>
88 of 97
<PAGE> 67
<TABLE>
<CAPTION>
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
POSITIONS AND OFFICES
<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) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide
Advisory N/A N/A N/A N/A
Services,
Inc.
</TABLE>
89 of 97
<PAGE> 68
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
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 are issued by the
Company through the Registrant in reliance upon, and in compliance
with a no-action letter issued by the staff of the SEC 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 the
risks assumed by the Company.
90 of 97
<PAGE> 69
Offered by Nationwide Life and Annuity
Insurance Company
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
Nationwide VA Separate Account-C
Individual Deferred Variable Annuity Contracts
PROSPECTUS
May 1, 1998
91 of 97
<PAGE> 70
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
financial statements taken as a whole, present fairly in all material respects
the information set forth herein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 24, 1998
92 of 97
<PAGE> 71
<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> 72
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VA SEPARATE ACCOUNT-C has caused this
Post-Effective Amendment to be signed on its behalf in the City of Columbus, and
State of Ohio, on this 24th day of April, 1998.
<TABLE>
<S> <C>
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
</TABLE>
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 24th day
of April, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ------------------------------------
A. I. Bell
KEITH W. ECKEL Director
- ------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- ------------------------------------ Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ------------------------------------ Nationwide Insurance Enterprise and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- ------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- ------------------------------------
Yvonne L. Montgomery
C. RAY NOECKER Director
- ------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------------ Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------ ----------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- ------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ------------------------------------
Harold W. Weihl
</TABLE>
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