<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. 7 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9 [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.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (DATE) pursuant to paragraph (b) of Rule 485
[X] 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
Caption in Prospectus and Statement of Additional Information and Other
Information
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
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
Deferred Variable Annuity Contracts
issued by
Nationwide Life and Annuity Insurance Company Through Its Nationwide VA
Separate Account-C
The date of this prospectus is April 1, 1999.
- --------------------------------------------------------------------------------
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
The following underlying mutual funds are available under the contracts:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- VIP Equity-Income Portfolio
- VIP Overseas Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
- Money Market Fund
- 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
Purchase payments not invested in the underlying mutual fund options of the
Nationwide VA Separate Account -C ("variable account") may be allocated to the
fixed account.
The Statement of Additional Information (May 1, 1998) which contains additional
information about the contracts and the variable account, is filed with the
Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. The table of contents for the Statement of Additional Information is
on page 35.
For general information or to obtain FREE copies of the:
- Statement of Additional Information
- prospectus for any underlying mutual fund;
- or required Nationwide forms,
call:
1-800-860-3946
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
This annuity is NOT:
- - a bank deposit - federally insured
- - endorsed by a bank or government agency - available in every state
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE> 4
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE - The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE - The date on which the annuity payments are scheduled
to begin. This date may be changed by the contract owner with Nationwide's
consent.
ANNUITY UNIT - An accounting unit used to calculate the variable payment annuity
payments.
CONTRACT VALUE - The total of all accumulation units in a contract, plus any
amount held in the fixed account.
CONTRACT YEAR - Each year the contract is in force beginning with the date the
contract is issued.
ERISA - The Employee Retirement Income Securities Act of 1974, as amended.
FIXED ACCOUNT- An investment option that is funded by the general account of
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT - An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
INDIVIDUAL RETIREMENT ANNUITY - An annuity contract that qualifies for favorable
tax treatment under Section 408 (b) of the Internal Revenue Code, but does not
include Roth IRAs or Simple IRAs.
NATIONWIDE - Nationwide Life and Annuity Insurance Company.
NON-QUALIFIED CONTRACT - A contract that does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
or Tax Sheltered Annuity.
QUALIFIED PLANS - Retirement plans that receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code.
ROTH IRA - An annuity contract that qualifies for favorable tax treatment under
Section 408A of the Internal Revenue Code.
SEP IRA - A retirement plan that receives favorable tax treatment under Section
408(k) of the Internal Revenue Code.
SUB-ACCOUNTS - Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
TAX SHELTERED ANNUITY - An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION DATE - Each day the New York Stock Exchange and Nationwide's home
office are open for business
VALUATION PERIOD - The period of time commencing at the close of business of a
valuation date and ending at the close on business on the next valuation date.
VARIABLE ACCOUNT - Nationwide VA Separate Account-C, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
2
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<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS ................................................. 2
SUMMARY OF STANDARD CONTRACT
EXPENSES .................................................................. 5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES .................................... 6
EXAMPLE ................................................................... 7
SYNOPSIS OF THE CONTRACTS ................................................. 8
CONDENSED FINANCIAL INFORMATION ........................................... 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY ............................. 11
NATIONWIDE ADVISORY SERVICES, INC ......................................... 11
INVESTING IN THE CONTRACT ................................................. 11
The Variable Account and Underlying MutualFunds
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS ........................................... 12
Administrative Charge
Mortality and Expense Risk Charges
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP ........................................................ 14
Annuitant
Joint Ownership
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT ................................................. 15
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Value of an Accumulation Unit
Net Investment Factor
Determining the Contract Value
Transfers
RIGHT TO REVOKE ........................................................... 18
SURRENDER (REDEMPTION) .................................................... 18
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE ............................................................ 19
Minimum & Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Interest
Loan Repayment
Distributions & Annuity Payments
Transferring the Contract
Grace Period & Loan Default
ASSIGNMENT ................................................................ 20
CONTRACT OWNER SERVICES ................................................... 21
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE ................................................. 21
ANNUITIZING THE CONTRACT .................................................. 22
Annuitization Date
Annuitization
Fixed Payment Annuity - First and Subsequent Payments
Variable Payment Annuity - First and Subsequent Payments
Variable Payment Annuity - Assumed Investment Rate
Variable Payment Annuity - Value of an Annuity Unit
Variable Payment Annuity - Exchanges among Underlying Mutual Funds
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS ............................................................ 23
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
Death Benefit Payment
REQUIRED DISTRIBUTIONS .................................................... 25
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
Required Distributions for Individual Retirement Annuities and SEP IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS ................................................ 28
Federal Income Taxes
Individual Retirement Annuities, Qualified Plans, SEP IRAs and Tax
Sheltered Annuities
Roth IRAs
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Puerto Rico
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS .................................................... 34
YEAR 2000 COMPLIANCE ISSUES ............................................... 34
LEGAL PROCEEDINGS ......................................................... 35
</TABLE>
3
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<PAGE> 6
<TABLE>
<S> <C>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION .................. 35
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS ........................ 36
APPENDIX B: ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY ............... 38
</TABLE>
4
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<PAGE> 7
SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contract owners unless the contract
owner meets an available exception.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
the lesser of purchase payments or
amounts surrendered)............................7%(1)
Range of CDSC Over Time:
<TABLE>
<CAPTION>
- ------------------------------------
Number of Completed
Years from CDSC
Date of Purchase Payment Percentage
- ------------------------------------
<S> <C>
0 7%
- ------------------------------------
1 6%
- ------------------------------------
2 5%
- ------------------------------------
3 4%
- ------------------------------------
4 3%
- ------------------------------------
5 2%
- ------------------------------------
6 1%
- ------------------------------------
7 0%
- ------------------------------------
</TABLE>
(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 Internal Revenue 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 under the Internal Revenue Code.
THIS FREE WITHDRAWAL PRIVILEGE IS CUMULATIVE. The CDSC is imposed only against
purchase payments. (see "Contingent Deferred Sales Charge").
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charges ............................ 1.25%
Administration Charge(3) ...................................... 0.05%
Total Variable Account Charges ........................... 1.30%
</TABLE>
(2) These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account. They are charged on an annual basis.
(3) The Administration Charge is deducted to reimburse Nationwide for expenses
related to the issue and maintenance of the contracts.
5
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<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE
REIMBURSEMENT)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Fees Total Mutual Fund
Fees Expenses Expenses
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 0.50% 0.07% 0.00% 0.57%
- ------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.75% 0.15% 0.00% 0.90%
- ------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 0.40% 0.08% 0.00% 0.48%
- ------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund 0.60% 0.07% 0.00% 0.67%
- ------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Asset 0.70% 0.30% 0.00% 1.00%
Allocation Fund
- ------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Equity 0.20% 0.35% 0.00% 0.55%
Index Fund
- ------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - 0.45% 0.30% 0.00% 0.75%
Government Bond Fund
- ------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Growth 0.65% 0.45% 0.00% 1.10%
Opportunities Fund
- ------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Large 0.65% 0.35% 0.00% 1.00%
Company Growth Fund
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio: Service Class 0.50% 0.08% 0.00% 0.58%
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.75% 0.17% 0.00% 0.92%
- ---------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust - Asset Allocation Fund 0.70% 0.45% 0.00% 1.15%
- ---------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust -Government Bond Fund 0.45% 0.43% 0.00% 0.88%
- ---------------------------------------------------------------------------------------------------------------------
The One Group(R)Investment Trust-Growth Opportunities 0.65% 0.46% 0.00% 1.11%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 9
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under this contract assuming a $1000 investment, 5% annual return, and
no change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown below.
The example reflects the expenses of both the variable account and the
underlying mutual funds. The example reflects the standard 7 year CDSC schedule
and the maximum amount of variable account charges that could be assessed to a
contract (1.30%).
The summary of contract expenses and example are to help contract owners
understand the expenses associated with the contract.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the Contract at the end of the at the end of the
applicable time period applicable time period applicable time period
- ------------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
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<PAGE> 10
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)."
The contracts can be categorized as:
- Non-Qualified
- Individual Retirement Annuities
- Roth IRAs
- SEP IRAs
- Tax Sheltered Annuities
- Qualified.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
- ------------------- ----------------- -----------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- ------------------- ----------------- -----------------
<S> <C> <C>
Non-Qualified $2,000 $10
- ------------------- ----------------- -----------------
IRA $2,000 $10
- ------------------- ----------------- -----------------
Roth IRA $2,000 $10
- ------------------- ----------------- -----------------
SEP IRA $2,000 $10
- ------------------- ----------------- -----------------
Tax Sheltered $0 $10
Annuity
- ------------------- ----------------- -----------------
Qualified $0 $10
- ------------------- ----------------- -----------------
</TABLE>
CHARGES AND EXPENSES
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a Contingent Deferred Sales
Charge if any amount is withdrawn from the contract. This CDSC reimburses
Nationwide for sales expenses. The amount of the CDSC will not exceed the lesser
of:
(1) 7% of the amount surrendered; or
(2) 7% of the total of all purchase payments made within 7 years of the
surrender date.
Nationwide deducts a mortality and expense risk charge equal to an annual rate
of 1.25% of the daily net assets of the variable account. Nationwide assesses
these charges in return for bearing certain mortality and administrative risks.
Nationwide deducts an Administration Charge equal to an annual rate of 0.05% of
the daily net assets of the variable account. This charge reimburses Nationwide
for administrative expenses related to issuance and maintenance of the
contracts.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
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<PAGE> 11
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 - 10.965501 11.392164 8.82% 502,861 1997
----------------- ----------------- ------------------ ------------------ -----------
NQ* 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 - 11.697239 12.921017 10.46% 404,004 1996
----------------- ----------------- ------------------ ------------------ -----------
Q 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
- --------------------------------- ----------------- ----------------- ------------------ ------------------ -----------
</TABLE>
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<PAGE> 12
<TABLE>
- --------------------------------- ----------------- ----------------- ------------------ ------------------ -----------
<S> <C> <C> <C> <C> <C>
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
- --------------------------------- ----------------- ----------------- ------------------ ------------------ -----------
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
- --------------------------------- ----------------- ----------------- ------------------ ------------------ -----------
</TABLE>
*The 7-day yield on the Money Market Fund as of December 31, 1997 was 4.05%.
The One Group(R) Investment Trust - Equity Index Fund was established May 1,
1998; therefore, no unit value information is available for this fund.
10
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<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law February,
1981. Nationwide is a member of the "Nationwide Insurance Enterprise," with its
home office at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is a
provider of life insurance products, annuities and retirement products.
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company. INVESTING IN THE
CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide VA Separate Account - C is a separate account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
separate account on July 24, 1991, pursuant to Ohio law. Although the separate
account is registered with the SEC as a unit investment trust pursuant to the
Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise the
management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions. There are two sub-accounts for each underlying mutual fund.
One sub-account contains shares attributable to accumulation units under
Non-Qualified Contracts. The other contains shares attributable to accumulation
units under Individual Retirement Accounts, Roth IRAs, SEP IRAs, Tax Sheltered
Annuities, and Qualified Contracts.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
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<PAGE> 14
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. Purchase payments will be
allocated to the fixed account by election of the contract owner.
The investment income earned by the fixed account will be allocated to the
contracts at varying rate(s) set by Nationwide. The guaranteed rate for any
purchase payment will be effective for not less than twelve months.
Nationwide guarantees that the rate will not be less than 3.0% per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
New purchase payments deposited to the contract which are allocated to the fixed
account may receive a different rate of interest than amounts transferred from
the sub-accounts to the fixed account and amounts maturing in the fixed account.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any applicable charges including
CDSC.
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGES
Nationwide deducts mortality and expense risk charges from the variable account.
This amount is computed on a daily basis, and is equal to an annual rate of
1.25% of the daily net assets of the variable account.
The mortality risk charges compensate Nationwide for guaranteeing the annuity
rate of the contracts. This guarantee ensures that the annuity rates will not
change regardless of the death rates of annuity payees or the general
population.
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<PAGE> 15
The expense risk charges compensate Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If these charges are insufficient to cover actual expenses, the loss is borne by
Nationwide.
ADMINISTRATION CHARGE
Nationwide deducts an Administration Charge equal on an annual basis to 0.05% of
the daily net assets of the variable account. This charge is designed to
reimburse Nationwide for administrative expenses related to the issuance and
maintenance of the contracts.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will deduct a CDSC, as described below.
The CDSC will not exceed the lesser of:
(1) 7% of the amount surrendered; or
(2) 7% of the total of all purchase payments made within 7 years of the
surrender date.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the lesser of the amount surrendered or the total of all purchase
payments made within 7 years of the surrender request.
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 as follows:
<TABLE>
<CAPTION>
- ---------------------------------- --------------------
Number of Years from Date of CDSC
Purchase Payment Percentage
- ---------------------------------- --------------------
<S> <C>
0 7%
- ---------------------------------- --------------------
1 7%
- ---------------------------------- --------------------
2 6%
- ---------------------------------- --------------------
3 5%
- ---------------------------------- --------------------
4 4%
- ---------------------------------- --------------------
5 3%
- ---------------------------------- --------------------
6 2%
- ---------------------------------- --------------------
7 0%
- ---------------------------------- --------------------
</TABLE>
The CDSC is used to cover sales expenses, including commissions (maximum of 8.5%
of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general account, which may indirectly include portions of the
Administration Charge and other variable account charges, since Nationwide may
generate a profit from these charges.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes (see "Non-Qualified Contracts - Natural Persons as Contract
Owners").
Waiver of Contingent Deferred Sales Charge
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 Internal Revenue Code.
Starting with the second year, the contract owner may withdraw without a CDSC
the greater of:
(a) 10% of all purchase payments; or
(b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This Free Withdrawal Privilege Is Cumulative.
In addition, no CDSC will be deducted:
(1) upon the annuitization of contracts which have been in force for at
least two years;
(2) upon payment of a death benefit; or
(3) from any values which have been held under a contract for at least 7
years.
No CDSC applies to transfers among sub-accounts, the fixed account, or the
variable account. Nationwide may waive the CDSC if a contract described in this
prospectus is exchanged for another Nationwide contract (or a contract of any of
its affiliated insurance companies). A CDSC may apply to the contract received
in the exchange.
Nationwide may waive or reduce the CDSC when sales are to employees of Bank One
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<PAGE> 16
Corporation or the employees of its affiliates, subsidiaries or holding
companies.
A contract held by a Charitable Remainder Trust may withdraw CDSC-free the
greater of (a) or (b), where:
(a) is the amount which would otherwise be available for withdrawal
without 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) 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,
Nationwide will waive the CDSC when:
a) the plan participant experiences a case of hardship (as provided in
Internal Revenue Code section 403(b) and as defined for purposes of
Internal Revenue Code section 401(k));
b) the plan participant becomes disabled (within the meaning of Internal
Revenue 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").
The CDSC for any type of contract issued will not be eliminated if to do so
would be unfairly discriminatory or prohibited by state law.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes.
CONTRACT OWNERSHIP
The contract owner has 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 Must Be Age 80 Or Younger At The Time Of
Contract Issuance. Purchasers who name someone other than themselves as the
contract owner will have no rights under the contract.
Contract owners of Non-Qualified Contracts may name a new contract owner at any
time before the annuitization date. Any change of contract owner automatically
revokes any prior contract owner designation. Changes in contract ownership may
result in federal income taxation and may be subject to state and federal gift
taxes.
A change in contract ownership must be submitted in writing and recorded at
Nationwide's home office. Once recorded, the change will be effective as of the
date signed. However, the change will not affect any payments made or actions
taken by Nationwide before it was recorded.
The contract owner may also request a change in the annuitant, beneficiary, or
contingent
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<PAGE> 17
beneficiary before the annuitization date. These changes must be:
- on a Nationwide form;
- signed by the contract owner; and
- received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. If the contract owner is
not a natural person and there is a change of the annuitant, distributions will
be made as if the contract owner died at the time of the change.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract. A joint owner will
receive a death benefit if a contract owner who is also the annuitant dies
before the annuitization date. If a contract owner who is NOT the annuitant dies
before the annuitization date, the joint owner becomes the contract owner.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
- Joint owners can only be named for Non-Qualified Contracts;
- Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint owners;
- The exercise of any ownership right in the contract will require a
written request signed by both joint owners;
- Nationwide will not be liable for any loss, liability, cost, or expense
for acting in accordance with the instructions of either joint owner.
ANNUITANT
The Annuitant Is The Person Designated To Receive Annuity Payments During
Annuitization Of The Contract And Upon Whose Continuation Of Life Any Annuity
Payment Involving Life Contingencies Depends. This Person Must Be Age 80 Or
Younger At The Time Of Contract Issuance, Unless Nationwide Approves A Request
For An Annuitant Of Greater Age. The Annuitant May Be Changed Prior To The
Annuitization Date With The Consent Of Nationwide.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person(s) who is entitled to the death benefit if the
annuitant who was not also a Joint Owner dies before the annuitization date. If
the annuitant was also a joint owner an dies before the annuitization date, the
death benefit will be paid to the surviving joint owner.
The contract owner can name more than one beneficiary. The beneficiaries will
share the death benefit equally, unless otherwise specified.
If no beneficiaries survive the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
- ------------------- ----------------- -----------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- ------------------- ----------------- -----------------
<S> <C> <C>
Non-Qualified $2,000 $10
- ------------------- ----------------- -----------------
IRA $2,000 $10
- ------------------- ----------------- -----------------
Roth IRA $2,000 $10
- ------------------- ----------------- -----------------
SEP IRA $2,000 $10
- ------------------- ----------------- -----------------
Tax Sheltered $2,000 $10
Annuity
- ------------------- ----------------- -----------------
Qualified $0 $10
- ------------------- ----------------- -----------------
</TABLE>
PRICING
Initial purchase payments allocated to sub-accounts will be priced no later than
2 business days after receipt of an order to purchase if the
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<PAGE> 18
application and all necessary information are complete. If the application is
not complete, Nationwide may retain a purchase payment for up to 5 business days
while attempting to complete it. If the application is not completed within 5
business days, the prospective purchaser will be informed of the reason for the
delay. The purchase payment will be returned unless the prospective purchaser
specifically allows Nationwide to hold the purchase payment until the
application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced on the following nationally recognized
holidays:
- - New Year's Day - Independence Day
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial Day
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts and/or the fixed account
as instructed by the contract owner. Shares of the sub-accounts are purchased at
net asset value, then converted into accumulation units. Contract owners can
change allocations or make exchanges among the sub-accounts or the fixed
account. Certain transactions may be subject to conditions imposed by the
underlying mutual funds, as well as those set forth in the contract.
VALUE OF AN ACCUMULATION UNIT
The accumulation unit value for a 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 for 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
Nationwide determines the net investment factor by dividing (a) by (b), and then
subtracting (c) from the result, where:
(a) is the net of:
(1) the net asset value of the underlying mutual fund as of the end
of the current valuation period; and
(2) the per share amount of any dividend or income distributions made
by the underlying mutual fund (if the ex-dividend date occurs
during the current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period.
(c) is a factor representing the daily variable account charges. The
factor is equal to an annual rate of 1.30% of the daily net assets of
the variable account.
Based on the net investment factor, the value of an accumulation unit may
increase or decrease. Changes in the net investment factor may not be directly
proportional to changes in the net asset value of underlying mutual fund shares
because of the deduction of variable account charges.
DETERMINING THE CONTRACT VALUE
Contract value is equal to the sum of the value of all accumulation units and
amounts allocated to the fixed account. Nationwide calculates the number of
accumulation units credited to each sub-account by dividing the amount allocated
to that sub-account by the accumulation unit value for that sub-account for the
valuation period the purchase payment was received.
If part or all of the contract value is surrendered, or charges are assessed
against the contract value, Nationwide will deduct a proportionate amount from
each of the sub-accounts and the fixed account based on current cash values.
TRANSFERS
Contract owners can transfer allocations without penalty or adjustment subject
to the following conditions:
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<PAGE> 19
- For any 12 month period, Nationwide may restrict transfers from the
variable account to the fixed account to 25% of the variable account
contract value.
- After annuitization, transfers may only be made on the anniversary of
the annuitization date.
- Contract owners who use Dollar Cost Averaging may transfer from the
fixed account to the variable account under the terms of that program
(see "Dollar Cost Averaging").
Transfer Requests
Nationwide will accept transfer requests in writing or, in those states that
allow them, over the telephone. Nationwide will use reasonable procedures to
confirm that telephone instructions are genuine. Nationwide's failure to follow
these procedures will result in its liability for fraudulent or unauthorized
transfers. However, Nationwide will not be liable for following telephone
instructions that it reasonably believed to be genuine. Nationwide may withdraw
the telephone exchange privilege upon 30 days written notice to contract owners.
For transfers involving the variable account, Nationwide determines contract
value as of the date the completed transfer request is received.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 45 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the variable account. Nationwide will determine the amount that may be
transferred and will declare this amount at the end of the guarantee period.
This amount will not be less than 10% of the amount in the fixed account that is
maturing.
For new purchase payments allocated to the fixed account or for transfers to the
fixed account from the variable account, this period begins on the date of
deposit or transfer and ends on the one year anniversary of the deposit or
transfer. The guaranteed interest rate period may last for up to 3 months beyond
the 1 year anniversary because guaranteed terms end on the last day of a
calendar quarter.
During an interest rate guarantee period, transfers cannot be made from the
fixed account, and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market-timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using
market-timing firms. To avoid this, Nationwide may modify transfer rights of
contract owners who use market timing firms (or other third parties) to transfer
funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse transfer requests:
- - submitted by any agent acting under a power of attorney on behalf of more
than one contract owner; or
- - submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing firms
(or other third parties) on behalf of more than one contract owner at the
same time.
Nationwide will not restrict transfer rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
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<PAGE> 20
RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by law. All IRA, SEP IRA and Roth IRA refunds will be a return of purchase
payments. State and/or federal law may provide additional free look privileges.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded to the contract owner will be paid by Nationwide.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
For partial surrenders, Nationwide will surrender accumulation units from the
sub-accounts and an amount from the fixed account to equal the requested dollar
amount, less any applicable CDSC. The amount withdrawn from each investment
option will be in proportion to the value in each option at the time of the
surrender request.
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when:
(1) the New York Stock Exchange is closed;
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency exists making disposal or valuation of securities held in the
variable account impracticable; or
(4) the SEC, by order, permits a suspension or postponement for the protection
of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. The contract value upon full surrender may be more or less
than the total of all purchase payments made to the contract. The contract value
will reflect variable account charges and the investment performance of the
underlying mutual funds.
SURRENDERS UNDER A QUALIFIED CONTRACT OR TAX SHELTERED ANNUITY
Contract owners of a Tax Sheltered Annuity may surrender part or all of their
contract value before the earlier of the annuitization date or the annuitant's
death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account
(described in Section 403(b)(7) of the Internal Revenue Code), may be
surrendered only:
1. when the contract owner reaches age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may
NOT include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year beginning
before January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except that
earnings and employer contributions as
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<PAGE> 21
of December 31, 1988 in such Custodial Accounts may be withdrawn in
the case of hardship).
C. Any distribution other than the above, including a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate
the restrictions above.
LOAN PRIVILEGE
The loan privilege is ONLY available to owners of Qualified Contracts or Tax
Sheltered Annuities. These contract owners can take loans from the contract
value beginning 30 days after the contract is issued up to the annuitization
date. Loans are subject to the terms of the contract, the plan, and the Internal
Revenue Code. Nationwide may modify the terms of a loan to comply with changes
in applicable law.
MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans.
The total of all outstanding loans must not exceed the following limits:
<TABLE>
<CAPTION>
- --------------- ------------ --------------------------
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
- --------------- ------------ --------------------------
<S> <C> <C>
NON-ERISA up to up to 80% of contract
PLANS $20,000 value (not more than
$10,000)
- --------------- ------------ --------------------------
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
- --------------- ------------ --------------------------
- --------------- ------------ --------------------------
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
- --------------- ------------ --------------------------
</TABLE>
*The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide reserves the right to assess a loan processing fee.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount, Nationwide next transfers contract value from the fixed account. No CDSC
will be deducted on transfers related to loan processing.
INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. It is guaranteed never to fall
below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
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Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
DISTRIBUTIONS & ANNUITY PAYMENTS
Distributions made from the contract while a loan is outstanding will be reduced
by the amount of the outstanding loan plus accrued interest if:
- the contract is surrendered;
- the contract owner/annuitant dies;
- the contract owner who is not the annuitant dies prior to annuitization;
or
- annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD & LOAN DEFAULT
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available (please refer to the terms of the loan agreement).
If a loan payment is not made by the end of the applicable grace period, the
entire loan will be treated as a deemed distribution and will be taxable to the
borrower. This deemed distribution may also be subject to an early withdrawal
tax penalty by the Internal Revenue Service.
After default, interest will continue to accrue on the loan. Defaulted amounts,
plus interest, are deducted from the contract value when the participant is
eligible for a distribution of at least that amount. Additional loans are not
available while a previous loan is in default.
ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent. IRAs, SEP IRAs, Roth IRAs, Qualified
Contracts, and Tax Sheltered Annuities may not be assigned, pledged or otherwise
transferred except where allowed by law.
A Non-Qualified Contract owner may assign some or all rights under the contract.
An assignment must occur before annuitization while the annuitant is alive. Once
proper notice of assignment is recorded by Nationwide's home office, the
assignment will become effective as of the date the written request was signed.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
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CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account. Requests for asset rebalancing
must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three-month period falls on a Saturday,
Sunday, recognized holiday, or any other day when the New York Stock Exchange is
closed, asset rebalancing will occur on the next business day.
Asset rebalancing may be subject to employer limitations or restrictions for
contracts issued to a Qualified Plan or Tax Sheltered Annuity plan. Contract
owners should consult a financial adviser to discuss the use of asset
rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar cost averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from certain sub-accounts into other sub-accounts or the fixed
account. Contract owners may participate in this program if their contract value
is $15,000 or more. Nationwide does not guarantee that this program will result
in profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account and the NSAT-Money Market Fund to any other underlying
mutual fund. The minimum monthly transfer is $100. Transfers from the fixed
account must be equal to 1/30th of the fixed account value at the time the
program is requested.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new dollar cost averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. A CDSC may apply (see
"Contingent Deferred Sales Charge").
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the ten-day
free look period (see "Right to Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
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ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a
Qualified Plan or Tax Sheltered Annuity plan, annuitization may occur during the
first 2 years subject to Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a fixed payment annuity is determined on the
annuitization date on an age last birthday basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a variable payment
annuity is determined on the annuitization date on an age last birthday basis
by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
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. If the actual net investment rate is equal
to the annual rate of 3.5%, annuity payments will be level. However, 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.
VARIABLE PAYMENT ANNUITY - VALUE OF AN ANNUITY UNIT
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the
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annuity unit is being calculated by the immediately preceding valuation period's
annuity unit value, and multiplying the result by an interest factor to
neutralize the assumed investment rate of 3.5% per annum built into the variable
payment annuity purchase rate basis in the contracts.
VARIABLE PAYMENT ANNUITY - EXCHANGES AMONG UNDERLYING MUTUAL FUNDS
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- the amount to be distributed is less than $500, in which case
Nationwide may make one lump sum payment of the contract value; or
- an annuity payment would be less than $20, in which case Nationwide
can change the frequency of payments to intervals that will result in
payments of at least $20. Payments will be made at least annually.
ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for Non-Qualified Contracts will be made until an annuity
payment option has been elected. IRAs, SEP IRAs, Qualified Contracts and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the plan, contract, and the Internal Revenue Code.
DEATH BENEFITS
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
If the contract owner who is not the annuitant dies before the annuitization
date, the joint owner becomes the contract owner. If no joint owner is named,
the annuitant becomes the contract owner.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary or contingent beneficiary.
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If two or more beneficiaries are named, the benefit will be paid to the
surviving beneficiaries in equal shares, unless the contract provides otherwise.
If no beneficiary or contingent beneficiary survives the annuitant, the contract
owner (or his or her estate if the annuitant was also the contract owner) will
receive the benefit.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
Non-Qualified Contracts" provision.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
HOW THE DEATH BENEFIT VALUE IS DETERMINED
The death benefit value is determined as of the 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.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the
selected annuity payment option.
DEATH BENEFIT PAYMENT
For any type of contract issued on or after the later of April 1, 1999 or a date
on which state insurance authorities approve applicable contract modifications:
- - If the annuitant dies on or after his or her 85th birthday and prior to the
annuitization date, the dollar amount of the death benefit will be equal to
the contract value.
- - If the annuitant dies prior to his or her 85th 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 any type of contract issued on or after the later of May 1, 1998 or a date
on which state insurance authorities approve applicable contract modifications
and prior to May 1, 1999 or a date on which state insurance authorities approve
applicable contract modifications:
- - If the annuitant dies after his or her 75th birthday and prior to the
annuitization date, the dollar amount of the death benefit will be equal to
the contract value.
- - 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
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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 any type of contract issued prior to May 1, 1998 or a date on which state
insurance authorities approve applicable contract modifications:
- - If the annuitant dies after his or her 75th birthday and prior to the
annuitization date, the dollar amount of the death benefit will be equal to
the contract value.
- - 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.
REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
1) If any contract owner dies on or after the annuitization date and
before the entire interest in the contract has been distributed, then
the remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
2) If any contract owner dies before the annuitization date, then the
entire interest in the contract (consisting of either the death
benefit or the contract value reduced by charges set forth elsewhere
in the contract) will be distributed within 5 years of the contract
owner's death, provided however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over a
period not longer than the life expectancy of the designated
beneficiary.
Payments must begin within one year of the contract owner's death
unless otherwise permitted by federal income tax regulations;
b) if the designated beneficiary is the surviving spouse of the
deceased contract owner, the spouse can choose to become the
contract owner instead of receiving a death benefit. Any
distributions required under these distribution rules will be
made upon that spouse's death.
In the event that the contract owner is NOT a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a
contract owner;
b) any change of annuitant will be treated as the death of a
contract owner; and
c) in either case, the appropriate distribution will be made upon
the death or change, as the case may be. The annuitant is the
primary annuitant as defined in Section 72(s)(6)(B) of the
Internal Revenue Code.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
REQUIRED DISTRIBUTIONS FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
Distributions from Qualified Contracts or Tax Sheltered Annuities will be made
according to the Minimum Distribution and Incidental
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Benefit provisions of Section 401(a)(9) of the Internal Revenue Code.
Distributions will be made to the annuitant according to the selected annuity
payment option over a period not longer than:
a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
b) a period not longer than the life expectancy of the annuitant or the
joint life expectancies of the annuitant and the annuitant's
designated beneficiary.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a Qualified Plan or Tax Sheltered Annuity
will be distributed in equal or substantially equal payments over a period
described in a) or b), the payments will begin on the required beginning date.
The required beginning date is the later of:
a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70 1/2; or
b) the annuitant's retirement date.
Provision b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70 1/2.
Payments beginning 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 annuitant's life expectancy or the joint life expectancies of the
annuitant and the annuitant's designated beneficiary (if the annuitant dies
before 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 using
return multiples contained in Section 1.72-9 of the Treasury Regulations.
If the annuitant dies before distributions begin, 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 the annuitant's death occurs
unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no later than
December 31 of the year in which the annuitant would have attained age
70 1/2; or
b) the annuitant names a beneficiary other than his or her surviving
spouse and the beneficiary elects to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the annuitant
dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES AND SEP IRAS
Distributions from an Individual Retirement Annuity or SEP IRA must begin no
later than April 1 of the calendar year following the calendar year in which the
contract owner reaches age 70 1/2. Distribution may be paid in a lump sum or in
substantially equal payments over:
a) the contract owner's life or the lives of the contract owner and his
or her spouse or designated beneficiary; or
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b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity or SEP IRA must be distributed by December 31 of
the calendar year in which the fifth anniversary of the contract owner's death
occurs, unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and such spouse chooses to:
1) treat the contract as an Individual Retirement Annuity
established for his or her benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year in which the contract owner would have reached age 70
1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract
owner's death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity, SEP IRA or
Individual Retirement Account of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a surviving spouse who is the beneficiary under
the annuity payment option may treat the contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The owner of an Individual Retirement
Annuity 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 Individual Retirement Annuities.
Individual Retirement Annuity and SEP IRA distributions will not receive the
favorable tax treatment of a lump sum distribution from a Qualified Plan. If the
contract owner dies before the entire interest in the contract has been
distributed, the balance will also be included in his or her gross estate.
Simplified Employee Pensions (SEPs) and Salary Reduction Simplified Employee
Pensions (SAR SEPs), described in Internal Revenue Code Section 408(k) are taxed
similarly to IRAs, and are subject to similar distribution requirements. SAR
SEPs cannot be established after 1996.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and the spouse chooses to:
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1) treat the contract as a Roth IRA established for his or her
benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year following the year in which the contract owner would
have reached age 70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the contract
owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "nonqualified distributions" (see
"Federal Income Taxes").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
Contract owners should consult a financial consultant, legal counsel or tax
adviser to discuss in detail the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Section 72 of the Internal Revenue Code governs federal income taxation of
annuities in general. That section sets forth different rules for: (1)
Individual Retirement Annuities and Individual Retirement Accounts; (2) Roth
IRAs; (3) SEP IRAs; (4) Qualified Contracts; (5) Tax Sheltered Annuities; and
(6) Non-Qualified Contracts. Each type of annuity is discussed below.
Individual Retirement Annuities, SEP IRAs and Individual Retirement Accounts
Distributions from Individual Retirement Annuities, SEP IRAs and contracts owned
by Individual Retirement Accounts are generally taxed when received. The
excludable portion of each payment is based on the ratio between the amount by
which non-deductible purchase payments to all the contracts exceeds prior
non-taxable distributions from the contracts, and the total account balances in
the contracts at the time of the distribution. The owner of these Individual
Retirement Annuities, SEP IRAs or the annuitant under contracts held by
Individual Retirement Accounts must annually report to the Internal Revenue
Service:
- the amount of nondeductible purchase payments;
- the amount of any distributions;
- the amount by which nondeductible purchase payments for all years
exceed non-taxable distributions for all years; and
- the total balance in all Individual Retirement Annuities, SEP IRAs and
Individual Retirement Accounts.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "nonqualified distributions."
A "qualified distribution" is one that satisfies the five-year rule and meets
one of the following requirements:
(i) it is made on or after the date on which the contract owner attains
age 59 1/2;
(ii) it is made to a beneficiary (or the contract owner's estate) on or
after the death of the contract owner;
(iii) it is attributable to the contract owner's disability; or
(iv) it is a qualified first-time homebuyer distribution (as defined in
Section 72(t)(2)(F) of the Internal Revenue Code).
If the Roth IRA does not have any qualified
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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 contains qualified rollover contributions from a
retirement plan other than a Roth IRA (or income allocable thereto), the five
year rule is satisfied if the distribution is not made within the five taxable
year period commencing with the taxable year in which the qualified rollover
contribution was made.
A 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 the distribution, when added to all previous distributions, does not
exceed that total 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 same favorable tax treatment of a
lump sum distribution from a Qualified Plan. If the contract owner dies before
the contract is completely distributed, the balance will also be included in the
contract owner's gross estate for tax purposes.
A change of the annuitant or contingent annuitant may be treated by the Internal
Revenue Service as a taxable transaction.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
required by the Internal Revenue Code. The formula excludes from income the
amount invested in the contract divided by the number of anticipated payments
(as determined pursuant to Section 72(d) of the Internal Revenue Code) until the
full investment in the contract is recovered.
Thereafter all distributions are fully taxable.
Non-Qualified Contracts - Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment is excludable from taxable income based on the ratio between the
contract owner's investment in the contract and the expected return on the
contract until the investment has been recovered. Thereafter the entire amount
is includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income, it may be included on his or her
final tax return.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, dividends, loans, or any portion of the contract
that is assigned or pledged; or for contracts issued after April 22, 1987, any
portion of the contract transferred by gift. For these purposes, a transfer by
gift may occur upon annuitization if the contract owner and the annuitant are
not the same individual. In determining the taxable amount of a distribution,
all annuity contracts issued after October 21, 1988 by the same company to the
same contract owner during any 12-month period will be treated as one annuity
contract. Additional limitations on the use of multiple contracts may be imposed
by Treasury Regulations.
Distributions before the annuitization date allocable to a portion of the
contract invested prior to August 14, 1982, are treated first as a recovery of
the investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on earnings from contributions made to the contract after
February
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28, 1986. There are exceptions for immediate annuities and certain contracts
owned for the benefit of an individual. An immediate annuity, for purposes of
this discussion, is a single premium contract on which payments begin within one
year of purchase. If this contract is issued as the result of an exchange
described in Section 1035 of the Internal Revenue Code, for purposes of
determining whether the contract is an immediate annuity, it will generally be
considered to have been purchased on the purchase date of the contract given up
in the exchange.
Internal Revenue Code Section 72 also assesses a penalty tax if a distribution
is made before the contract owner reaches age 59 1/2. The amount of the penalty
is 10% of the portion of any distribution that is includible in gross income.
The penalty tax does not apply if the distribution
1) is the result of a contract owner's death;
2) is the result of a contract owner's disability;
3) is one of a series of substantially equal periodic payments made over
the life or life expectancy of the contract owner (or the joint lives
or joint life expectancies of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner),
4) is for the purchase of an immediate annuity;
5) is allocable to an investment in the contract before August 14, 1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death.
If a contract owner dies before the annuitization date, then the joint owner,
the contingent owner or other named recipient must receive the distribution
within 5 years of the contract owner's death. However, the recipient may elect
to receive payments over his or her life or life expectancy as long as the
payments begin within one year of the contract owner's death. If the joint
owner, contingent owner or other named recipient is the surviving spouse, the
spouse may choose to take over the contract as contract owner and the contract
will be continued throughout the life of the surviving spouse.
If the contract owner dies on or after the annuitization date and before the
entire interest has been distributed, the remainder must be distributed at least
as rapidly as under the method being used on the date of the contract owner's
death (see "Required Distributions for Tax Sheltered Annuities and Qualified
Contracts").
If the contract owner is not a natural person, the death of the annuitant (or a
change in the annuitant) will result in a distribution pursuant to these rules,
regardless of whether a contingent annuitant is named.
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code,
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deemed to be owned) by individuals. Different rules apply if the contract owner
is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities ("non-natural persons") are not treated as annuity contracts under the
Internal Revenue Code. Specifically, they are not treated as annuity contracts
for purposes of Section 72. Therefore, income earned under a Non-Qualified
Contract that is owned by a non-natural person is taxed as ordinary income
during the taxable year that it is earned. Taxation is not deferred, even if the
income is not distributed out of the contract to the contract owner.
This non-natural person rule does not apply to all entity-owned contracts. A
contract that is owned by a non-natural person for the benefit of an individual
is treated as owned by the individual. This would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred compensation arrangement for one or more employees.
The non-natural person rule also does not apply to contracts that are:
a) acquired by the estate of a decedent by reason of the death of the
decedent;
b) issued in connection with certain qualified retirement plans and
individual retirement plans;
c) used in connection with certain structured settlements;
d) purchased by an employer upon the termination of certain qualified
retirement plans; or
e) an immediate annuity.
INDIVIDUAL RETIREMENT ANNUITIES , QUALIFIED PLANS SEP IRAS AND TAX SHELTERED
ANNUITIES
Contract owners looking for information on eligibility, limitations on
permissible amounts of purchase payments, and the tax consequences of
distributions from Individual Retirement Annuities, Qualified Plans, SEP IRAs
and Tax Sheltered Annuities should contact a qualified adviser. The terms of
each plan may limit the rights available under the contracts.
Section 403(b)(1)(E) of the Internal Revenue Code requires a contract issued as
a Tax Sheltered Annuity to limit purchase payments for any year to an amount
that does not exceed the limit set forth in Section 402(g) of the Internal
Revenue Code. This limit is increased from time to time to reflect increases in
the cost of living. This limit may be reduced by deposits, contributions or
payments made to another Tax Sheltered Annuity or other plan, contract or
arrangement by or on behalf of the contract owner.
The Internal Revenue Code allows most distributions from Qualified Plans to be
rolled into other Qualified Plans, SEP IRAs or Individual Retirement Annuities.
Most distributions from Tax Sheltered Annuities may be rolled into another Tax
Sheltered Annuity, SEP IRA, Individual Retirement Annuity, or an Individual
Retirement Account.
Distributions that may NOT be rolled over are those that are:
a) one of a series of substantially equal annual (or more frequent)
payments made:
1) over the life (or life expectancy) of the contract owner;
2) over the joint lives (or joint life expectancies) of the contract
owner and the contract owner's designated beneficiary;
3) for a specified period of ten years or more; or
b) a required minimum distribution.
Any distribution that is eligible for rollover will be subject to federal tax
withholding of 20% if the distribution is not rolled into an appropriate plan as
described above.
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).
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Individual Retirement Accounts, SEP IRAs and Individual Retirement Annuities may
not provide life insurance benefits. If the death benefit exceeds the greater of
the contract's cash value or the sum of all purchase payments (less any
surrenders), the contract could be considered life insurance. Consequently, the
Internal Revenue Service could determine that the Individual Retirement Account,
SEP IRA or Individual Retirement Annuity does not qualify for the desired tax
treatment.
ROTH IRAS
The contract may be purchased as a Roth IRA. For detailed information on
purchasing and holding this contract as a Roth IRA, the contract owner should
contact a financial adviser.
The Internal Revenue Code allows distributions from Individual Retirement
Accounts and Individual Retirement Annuities to be rolled into Roth IRAs. The
rollovers are subject to federal income tax as distributions from the Individual
Retirement Account or Individual Retirement Annuity.
For rollovers that take place in 1998, the contract owner may either:
1) elect to include the income from rollovers in income ratably over the
four year period commencing in 1998; or
2) include the entire amount in income in 1998.
For rollovers in subsequent years, all of the income from the rollover will be
required to be included in income in the year of the rollover distribution from
the Individual Retirement Account or Individual Retirement Annuity.
A distribution from a Roth IRA that contains the proceeds of a rollover from an
Individual Retirement Account or Individual Retirement Annuity within the
preceding five years could be subject to a 10% penalty, even if the distribution
is not taxable. In addition, if the rollover from the Individual Retirement
Account or Individual Retirement Annuity was made in 1998, and the income from
that rollover was included in income ratably over a four year period, a
distribution from the Roth IRA within four years of the rollover may result in
the loss of the four year spread, subject to the amount deferred under the four
year election to be taxed immediately.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required).
Mandatory back-up withholding rates are 31% of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
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2) the distribution is includible in the non-resident alien's gross income
for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- who would be required to include the contract, death benefit,
distribution, or other payment in his or her federal gross estate at
his or her death; or
- who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
PUERTO RICO
Under the Puerto Rico tax code, distributions from a Non-Qualified Contract
before annuitization are treated as nontaxable return of principal until the
principal is fully recovered. Thereafter all distributions are fully taxable.
Distributions after annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
annuitization is equal to the amount of the distribution in excess of 3% of the
total purchase payments paid, until an amount equal to the total purchase
payments paid has been excluded. Thereafter, the entire distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
distributions of income. A personal adviser should be consulted in these
situations.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless
- the failure to diversify was accidental;
- the failure is corrected; and
- a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
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diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
adviser.
STATEMENTS AND REPORTS
Nationwide will mail contract owners all statements and reports required by law.
Therefore, contract owners should promptly notify Nationwide of any address
change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., dollar cost averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
- semi-annual reports as of June 30 containing financial statements for
the variable account; and
- annual reports as of December 31 containing financial statements for
the variable account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999.
Like many organizations, Nationwide is required to renovate or replace computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has developed a plan to renovate or replace all applications that were
identified as not Year 2000 compliant.
Nationwide has renovated all applications that required renovation. Testing of
the renovated programs is in process, including running each application with
the date moved forward to Year 2000. Nationwide expects to complete the testing
of all renovated applications by the end of 1998. For applications being
replaced, Nationwide anticipates all replacement systems to be in place and
functioning by the end of 1998. Contingency plans are substantially completed
which identify actions to be taken if Nationwide's renovation and replacement
strategies fall behind schedule.
Nationwide has completed an inventory and assessment of all vendor products. As
of the end of September 1998, 76% of products had been assessed and were
certified as Year 2000 compliant. Nationwide anticipates having all vendor
products assessed and certified by the end of 1998. Any vendor products that
cannot be certified as Year 2000 compliant will be replaced or eliminated.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
working with all business partners to assess Year 2000 issues associated with
the exchange of electronic data. Nationwide has completed an inventory and
assessment of all interfaces with business
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partners and is in the process of testing those interfaces. Nationwide has also
initiated plans to survey producer business partners to ascertain their Year
2000 readiness.
Operating expenses in 1997 and in the first nine months of 1998 included
approximately $32.7 million and $33.5 million, respectively, for technology
projects, including costs related to Year 2000. In the fourth quarter of 1998,
Nationwide anticipates spending approximately $8 million on technology projects,
including Year 2000. At this time, no significant Year 2000 costs are
anticipated in 1999. Management does not anticipate that the completion of Year
2000 renovation and replacement activities will result in a reduction in
operating expenses. Rather, personnel and resources currently allocated to Year
2000 issues will be assigned to other technology-related projects. 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 Nationwide and the variable account are
parties or to which any of their property is the subject.
The general distributor, Nationwide Advisory Services, Inc., is not engaged in
any litigation of any material nature.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<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>
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
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.
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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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APPENDIX B: ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT-Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT-Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT-Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- precious metals;
- real estate;
- stocks and bonds;
- closed-end funds;
- bank money market deposit accounts and passbook savings;
- CDs; and
- the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- S&P 500;
- Shearson/Lehman Intermediate Government/Corporate Bond Index;
- Shearson/Lehman Long-Term Government/Corporate Bond Index;
- Donoghue Money Fund Average;
- U.S. Treasury Note Index;
- Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
- Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- Lipper Analytical Services, Inc.,
- CDA/Wiesenberger,
- Morningstar,
- Donoghue's,
- magazines such as:
Money;
Forbes;
Kiplinger's Personal Finance Magazine;
Financial World
Consumer Reports
Business Week;
Time;
Newsweek;
National Underwriter;
News and World Report;
- LIMRA;
- Value;
- Best's Agent Guide;
- Western Annuity Guide;
- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
- Variable Annuity Research & Data Service (The VARDS Report)
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The
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ratings are not intended to reflect the investment experience or financial
strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total return shows the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year periods (or for a period covering the time the underlying mutual fund has
been available in the variable account if it has not been available for one of
the prescribed periods). This calculation reflects the standard 7-year CDSC
schedule and the deduction of all charges that could be made to the contracts if
all available options were chosen, except for the premium taxes, which may be
imposed by certain states.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," shows the percentage rate of return of a hypothetical
initial investment of $10,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been in
existence). For those underlying mutual funds which have not been available for
one of the prescribed periods, the nonstandardized total return illustrations
will show the investment performance the underlying mutual funds would have
achieved (reduced by the same charges except the CDSC) had they been available
in the variable account for one of the periods. The CDSC is not reflected
because the contracts are designed for long term investment. The CDSC, if
reflected, would decrease the level of performance shown. An initial investment
of $10,000 is assumed because that amount is closer to the size of a typical
contract than $1,000, which was used in calculating the standardized average
annual total return.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1997.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
39
41 of 85
<PAGE> 42
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
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>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12/31/97
40
42 of 85
<PAGE> 43
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1999
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 April
1, 1999. The prospectus may be obtained from Nationwide Life and Annuity
Insurance Company by writing P.O. Box 182008, Columbus, Ohio 43218-2008, or
calling 1-800-860-3946, TDD 1-800-238-3035.
TABLE OF CONTENTS
<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"). Nationwide is a
member of the Nationwide Insurance Enterprise and all of Nationwide's common
stock is owned by Nationwide Life Insurance Company which is owned by Nationwide
Financial Services, Inc. ("NFS"), a holding company. NFS has two classes of
common stock outstanding with different voting rights enabling Nationwide
Corporation (the holder of all of the outstanding Class B Common Stock) to
control NFS. Nationwide Corporation is a holding company, as well. All of 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
Nationwide, which has responsibility for administration of the Contracts and the
Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of Contract issued to each such contract owner and
records with respect to the Contract Value of each Contract.
The custodian of the assets of the Variable Account is Nationwide. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds. Nationwide, or affiliates of Nationwide, may have
entered into agreements with either the investment adviser or distributor for
several of the underlying mutual funds. The agreements relate to administrative
services furnished by Nationwide or an affiliate of Nationwide and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of Nationwide or life insurance company
subsidiaries of Nationwide) invested in particular underlying mutual funds.
These fees in no way affect the net asset value of the underlying mutual funds
or fees paid by the contract owner.
1
43 of 85
<PAGE> 44
The audited financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states where the
Contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
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,
Nationwide, 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 Nationwide 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 Nationwide may transfer from the Fixed
Account under the terms of that agreement.
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 Nationwide. No underwriting commissions were paid by Nationwide
to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT-Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of 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.
2
44 of 85
<PAGE> 45
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. 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 85
<PAGE> 46
<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> 47
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS 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
</TABLE>
66 of 85
<PAGE> 48
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 (File No.
33-66496) 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 (File No. 33-66496)
and hereby incorporated by reference.
(4) The form of the variable annuity contract -
attached hereto.
(5) Variable Annuity Application - Filed
previously with this Registration
Statement (File No. 33-66496) and hereby
incorporated herein by reference.
(6) Articles of Incorporation of Depositor
Filed previously with this Registration
Statement (File No. 33-66496) and hereby
incorporated herein by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
this Registration Statement (File No.
33-66496) 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 (File No. 33-66496) and hereby
incorporated herein by reference.
67 of 85
<PAGE> 49
<TABLE>
<CAPTION>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
</TABLE>
68 of 85
<PAGE> 50
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
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
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
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>
69 of 85
<PAGE> 51
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
70 of 85
<PAGE> 52
<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>
71 of 85
<PAGE> 53
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<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>
72 of 85
<PAGE> 54
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (see Attached
OF ORGANIZATION Chart) unless
COMPANY otherwise PRINCIPAL BUSINESS
indicated
<S> <C> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio 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
</TABLE>
73 of 85
<PAGE> 55
<TABLE>
<CAPTION>
* NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Investing Foundation III Ohio Investment Company
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
</TABLE>
74 of 85
<PAGE> 56
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Neckura Life Insurance Company Germany Life Insurance Company
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>
75 of 85
<PAGE> 57
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART)
OF ORGANIZATION UNLESS OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-C Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account -D Separate Account
</TABLE>
76 of 85
<PAGE> 58
<TABLE>
<S> <C> <C> <C>
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account -5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
77 of 85
<PAGE> 59
<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> 60
<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> 61
<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> 62
<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> 63
<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> 64
<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> 65
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 Nationwide's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by Nationwide of any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of Nationwide, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 ("Act") may be permitted
to directors, officers or persons controlling Nationwide pursuant
to the foregoing provisions, Nationwide has been informed that in
the opinion of the 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 VL
Separate Account -C, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, Nationwide VLI Separate
Account -4, Nationwide VLI Separate Account -5, 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
Separate Account Trust, Nationwide Asset Allocation Trust
and Nationwide Mutual Funds which are open-end management
investment companies.
80 of 85
<PAGE> 66
<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
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
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>
81 of 85
<PAGE> 67
<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>
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
Nationwide 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.
Nationwide represents that the fees and charges deducted under
the Contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
risks assumed by Nationwide.
82 of 85
<PAGE> 68
Offered by Nationwide Life and Annuity
Insurance Company
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
Nationwide VA Separate Account-C
Deferred Variable Annuity Contracts
PROSPECTUS
April 1, 1999
83 of 85
<PAGE> 69
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
84 of 85
<PAGE> 70
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VA SEPARATE ACCOUNT-C certifies that it meets
the requirements of Securities Act Rule 485(a) for effectiveness of this
Registration Statement and has caused this Post-Effective Amendment to be signed
on its behalf in the City of Columbus, and State of Ohio, on this 27th day of
January, 1999.
NATIONWIDE VA SEPARATE ACCOUNT-C
-------------------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
-------------------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
-------------------------------------------------------
Joseph P. Rath
Vice President -Office of Product and Market Compliance
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 27th day
of January, 1999.
<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
- -------------------------------------------------
Joseph J. Gasper Operating Office and Director
DIMON R. McFERSON Chairman and Chief Executive Officer
- -------------------------------------------------
Dimon R. McFerson Nationwide Insurance Enterprise and Director
DAVID O. MILLER Chairman of the Board and Director
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President-
- -------------------------------------------------
Robert A. Oakley Chief Financial Officer
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director Attorney-in-Fact
- -------------------------------------------------
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>
85 of 85
<PAGE> 1
EXHIBIT NO.4
FORM OF THE VARIABLE ANNUITY CONTRACT
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY INSURANCE CO.
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008
Dear Policyowner:
PLEASE READ YOUR CONTRACT CAREFULLY
This is a legal contract between the Owner and Us.
This Contract is provided in return for:
(1) the application, which is a part of this Contract; and
(2) receipt of the Initial Purchase Payment.
To be sure the Owner is satisfied with this Contract, he/she has ten days to
examine it and return it for any reason. This ten day period begins when the
Owner receives the Contract. If the Owner returns this Contract to the Home
Office of the Company during this ten day period, the Company will return the
Purchase Payment Value (as of the date of cancellation) without deduction for
any sales charges or administration fees. (The Company reserves the right to
return Contract Value where permitted by state law).
Thank you for relying on Us.
If you have any questions about your Contract or need more assistance contact
your agent or our home office.
Executed for the Company on the Date of Issue.
READ YOUR CONTRACT CAREFULLY
PLEASE NOTE - ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN
BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT ARE VARIABLE, MAY
INCREASE OR DECREASE IN ACCORDANCE WITH THE NET INVESTMENT FACTOR, AND ARE NOT
GUARANTEED AS TO A FIXED DOLLAR AMOUNT.
NOTICE: Details for the variable provisions in the contract may be found on
pages 10, 14, and 15.
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE ANNUITY,
NON-PARTICIPATING
<PAGE> 3
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Cover Page.....................................................................1
Table of Contents..............................................................2
Data Page......................................................................3
Definitions....................................................................4
General Provisions.............................................................6
Required Distributions and Death Benefit.......................................8
Accumulation Provisions........................................................9
Surrender Provisions..........................................................13
Annuitization Provisions......................................................15
Annuity Payment Options.......................................................16
Annuity Tables................................................................19
</TABLE>
- --------------------------------------------------------------------------------
2
<PAGE> 4
DATA PAGE
OWNER STACEY BOWEN
JOINT OWNER (if any)
ANNUITANT STACEY BOWEN
BENEFICIARY AS REFERENCED ON APPLICATION
UNLESS CHANGED
CONTINGENT BENEFICIARY (if any) AS REFERENCED ON APPLICATION
UNLESS CHANGED
CONTRACT NUMBER 07881811
AGE AND SEX OF ANNUITANT 17
FEMALE
ISSUE DATE JULY 27, 1994
INITIAL PURCHASE PAYMENT $1,050.00
ANNUITY COMMENCEMENT DATE AUGUST 01, 2052
Contract Owners may have Purchase Payments applied to the general Account
of Nationwide Life and Annuity Insurance Company or towards the purchase of
shares at net asset value of the following funds:
FIDELITY VARIABLE INS. PRODUCTS FUND -
*Equity-Income Portfolio (FEIP)
*Overseas Portfolio (FOP)
NATIONWIDE SEPARATE ACCOUNT TRUST -
*Money Market Fund (MMF)
*Total Return Fund (TRF)
THE ONE GROUP INVESTMENT TRUST -
*Asset Allocation Fund (OGAA)
*Government Bond Fund (OGGB)
*Large Company Growth Fund (OGLG)
*Small Company Growth Fund (OGSG)
FOR USE WITH NATIONWIDE LIFE AND ANNUITY VA SEPARATE ACCOUNT 3
A SEPARATE INVESTMENT ACCOUNT SPECIALLY
ESTABLISHED FOR INVESTMENT IN THE ABOVE FUNDS
3
<PAGE> 5
DEFINITIONS
THE COMPANY The Company is Nationwide Life and
Annuity Insurance Company.
ACCUMULATION UNIT An accounting unit of
measure used to calculate the Variable
Account Contract Value prior to the
Annuity Commencement Date.
ANNUITANT The person named on the Data Page on
whose life this Contract is issued and
who will receive annuity payments
beginning within 10 working days of the
Annuity Commencement Date. The
Annuitant, if someone other than the
Owner, becomes the Owner of the Contract
on the Annuity Commencement Date. The
Company reserves the right to reject any
change of the Annuitant which has been
made without the prior consent of the
Company.
ANNUITY COMMENCEMENT DATE The date on which
annuity payments are scheduled to
commence. The Annuity Commencement Date
is shown on the Data Page. This date may
be changed by the Owner prior to the
date annuity payments actually commence.
Annuity Payments will begin no later
than 10 working days after the Annuity
Commencement Date.
ANNUITY PAYMENT OPTION The method for making
annuity payments. The Annuity Payment
Option selected on the application may
be changed by the Owner prior to the
Annuity Commencement Date.
ANNUITY UNIT An accounting unit of measure used
to calculate the value of Variable
Annuity payments.
BENEFICIARY The Beneficiary named in the application
to receive certain benefits under this
Contract when the Annuitant dies.
CONTINGENT BENEFICIARY The person named in the
application to be the Beneficiary if the
named Beneficiary is not living when the
Annuitant dies.
CONTRACT ANNIVERSARY An anniversary of the
Contract Issue Date as shown on the
Data Page.
CONTRACT OWNER (OWNER) The Contract Owner is the person who
possesses all rights under the Contract,
including the right to designate and
change any designations of the
Beneficiary, Contingent Beneficiary,
Annuity Payment Option, and the Annuity
Commencement Date. The Owner is the
person named in the application, unless
changed. Please see "Contract Ownership"
and "Joint Ownership" on pages 6 and 7.
CONTRACT VALUE The sum of the Variable Account Contract
Value and the Fixed Account Contract
Value.
CONTRACT YEAR Each year starting with either the
Date of Issue or a Contract Anniversary.
DATE OF ISSUE The Date shown as the Date of Issue on
the Data Page of the Contract.
DISTRIBUTION Any payment of part or all of the
Contract Value.
FIXED ACCOUNT All assets of the Company other than
those in any segregated asset account.
FIXED ANNUITY An annuity providing for payments which
are guaranteed by the Company as to
dollar amount during the annuity payment
period.
HOME OFFICE The main office of the Company located
in Columbus, Ohio.
4
<PAGE> 6
JOINT OWNER The Joint Owner, if any, possesses an
undivided interest in the entire
Contract in conjunction with the Owner.
Please see "Contract Ownership" and
"Joint Ownership" on pages 6 and 7.
NON-QUALIFIED CONTRACT A Contract issued to fund a
Non-Qualified Plan.
NON-QUALIFIED PLAN A retirement program which does not
receive favorable tax treatment under
the provisions of the Internal Revenue
Code.
PURCHASE PAYMENT ANNIVERSARY An anniversary of the date a purchase
payment is made under the Contract.
PURCHASE PAYMENT YEAR Any year commencing with the date a
purchase payment is made.
QUALIFIED CONTRACT A Contract issued to fund a
Qualified Plan.
QUALIFIED PLAN A retirement program which receives
favorable tax treatment under the
provisions of the Internal Revenue Code.
VALUATION DATE Each day the New York Stock Exchange and
the Company's Home Office are open for
business or any other day during which
there is a sufficient degree of trading
of the Variable Account's mutual fund
shares that the current net asset value
of its Accumulation Units might be
materially affected.
VALUATION PERIOD The period of time commencing at
the close of business of the New York
Stock Exchange and ending at the close
of business for the next succeeding
Valuation Date.
VARIABLE ACCOUNT A separate investment account of the
Company into which Variable Account
purchase payments are allocated.
VARIABLE ANNUITY An annuity providing for payments which
vary in amount with the investment
experience of the Variable Account.
5
<PAGE> 7
GENERAL PROVISIONS
CHARGES The Company deducts a charge for the
administration of the Contract. This charge
is designed only to reimburse the Company
for any expense incurred that relates to the
administration of the Contract. The Company
will monitor this charge to ensure that it
does not exceed any accumulated expense. The
Contract Administration Charge is assessed
daily through the unit value calculation,
equal to an annual rate of [0.05%].
DEDUCTIONS FOR PREMIUM TAXES The Company will deduct from the Contract
Value the amount of any premium taxes levied
by a state or any other governmental entity.
At present, premium taxes imposed by certain
states range from .50% to 3.0%. The Company
currently deducts from the Contract Value
the applicable amount of premium taxes
levied at the time the Contract is
annuitized, except in those states which
require such taxes to be paid when incurred.
EXPENSE RISK CHARGE The Company will not increase charges for
administration of the Contract regardless of
its actual expenses. For assuming this
expense risk, the Company assesses an
Expense Risk Charge through the daily unit
value calculation which is equal to an
annual rate of [0.45%].
MORTALITY RISK CHARGE The Company assumes a "mortality risk" that
variable annuity payments will not be
affected by the death rates of persons
receiving such payments or of the general
population by virtue of annuity rates
incorporated in the Contract which cannot by
changed. For assuming this mortality risk,
the Company deducts a Mortality Risk Charge
through the daily unit value calculation,
which is equal to an annual rate of [0.80%].
BENEFICIARY PROVISIONS The Beneficiary and any Contingent
Beneficiary are named in the application,
unless changed. If the Beneficiary dies
prior to the Annuitant, the Contingent
Beneficiary becomes the Beneficiary. Unless
the Owner has provided otherwise, when there
are two or more Beneficiaries, they will
receive equal shares. If there is no named
Beneficiary or Contingent Beneficiary upon
the Annuitant's death, the Owner (or the
estate of the Owner, if the Annuitant is the
Owner) will be deemed to be the Beneficiary.
The Company may pay the commuted value of
any remaining unpaid payments to the estate.
Subject to the terms of any existing
assignment, the Owner may name a new
Beneficiary or a new Contingent Beneficiary
at any time during the lifetime of the
Annuitant. Any new choice of Beneficiary or
Contingent Beneficiary will automatically
revoke any prior choice of Beneficiary or
Contingent Beneficiary. Any change must be
made in writing and recorded at the Home
Office. The change will become effective as
of the date the written request is signed,
whether or not the Annuitant is living
6
<PAGE> 8
at the time of recording. A new choice of
Beneficiary or Contingent Beneficiary will
not apply to any payment made or action
taken by the Company prior to the time it
was received.
CONTRACT OWNERSHIP The Owner has all rights under the Contract,
unless otherwise provided. If the purchaser
names someone other than himself as Owner,
the purchaser would have no rights under the
Contract. The Owner is the person named in
the application, unless changed. The
Annuitant, if someone other than the Owner,
becomes the Owner on the Annuity
Commencement Date. If the Owner dies, a
Distribution will be made in accordance with
the Death of Contract Owner provision,
unless the recipient of the Distribution is
the Owner's spouse, in which case a
Distribution may be paid or the Contract may
continue, depending on the election of the
surviving spouse.
The Owner may name a new Owner at any time.
Any new choice of Owner will automatically
revoke any prior choice of Owner. Any
request for change must be made in writing
and received at the Home Office. The request
for change must be a "Proper Written
Application". The change will become
effective as of the date the written request
is signed. A new choice of Owner or
Contingent Owner will not apply to any
payment made or action taken by the Company
prior to the time it was received.
A request for change in the Annuitant,
Beneficiary, or Contingent Beneficiary must
be made by the Owner in writing on a form
acceptable to the Company. Any such change
is subject to approval by the Company.
JOINT OWNERSHIP If a Joint Owner is named in the
application, then the Owner and Joint Owner
will share an undivided interest in the
entire Contract. If the Owner and Joint
Owner wish to exercise Ownership rights in
the Contract independently of each other, it
must be so indicated in the application.
Otherwise, when an Owner and Joint Owner
have been named, the Company will only honor
requests for changes and the exercise of
other ownership rights that are made by both
the Owner and Joint Owner. When a Joint
Owner has been named, all references to
"Owner" or "Contract Owner" throughout this
Contract should be construed to mean both
the Owner and Joint Owner, unless otherwise
provided.
Where the Contract is issued to fund a
retirement plan entered into pursuant to
Section 408 of the Internal Revenue Code,
all the terms of this Contract and the
rights of the Owner, Joint Owner and
Annuitant may be subject to the Plan
Document.
ALTERATION OR MODIFICATION All changes to the terms of this Contract
must be made in writing and must be signed
by the President or Secretary of the
Company. No other person may change or alter
any of the terms or conditions of the
Contract.
ASSIGNMENT Unless otherwise provided, the Owner may
assign all rights under this Contract at any
time during the lifetime of the Annuitant,
prior to the Annuity Commencement Date. The
Company will not be bound by any assignment
until written notice is received and
recorded at the Home Office. The Company is
not responsible for the validity of any
assignment. An assignment will not apply to
any payment made or action taken by the
Company prior to the time it was recorded.
If this Contract is a Non-Qualified
Contract, the value of any portion of the
Contract which is assigned or pledged, may
be treated like a cash withdrawal for
federal tax purposes.
7
<PAGE> 9
If this Contract is issued to fund a
retirement plan pursuant to Internal Revenue
Code Section 408, it may not be assigned,
pledged or otherwise transferred except as
allowable by applicable law.
ENTIRE CONTRACT This document is an annuity contract between
the Owner and the Company. This Contract,
Annuity Application, Data Page, and
Supplementary Agreement (if applicable) make
up the Entire Contract.
MISSTATEMENT OF AGE OR SEX If the age or sex of the Annuitant has been
misstated, all payments and benefits under
this Contract will be adjusted. Payments and
benefits will be made, based on the correct
information. Proof of age of an Annuitant
may be required at any time, on a form
satisfactory to the Company. When the age or
sex of an Annuitant has been misstated, the
dollar amount of any overpayment will be
deducted from the next payment or payments
due under this Contract. The dollar amount
of any underpayment made by the Company as a
result of any such misstatement will be paid
in full with the next payment due under this
Contract.
EVIDENCE OF SURVIVAL Where any payments under this Contract
depend on the recipient being alive on a
given date, proof that such person is living
may be required by the Company.
PROTECTION OF PROCEEDS Payments under this Contract are not
assignable by any Beneficiary prior to the
time they are due. Payments are not subject
to the claims of creditors or to legal
process, except as mandated by applicable
laws.
REPORTS At least once each year prior to the Annuity
Commencement Date, a Report showing the
Contract Value will be provided to the
Owner.
INCONTESTABILITY This Contract will not be contested.
CONTRACT SETTLEMENT The Company may require this Contract to be
returned to the Home Office prior to making
any payments. All sums payable to or by the
Company under this Contract are payable at
the Home Office.
NUMBER AND GENDER Unless otherwise provided, all references in
this Contract which are in the singular form
will include the plural; all references in
the plural form will include the singular;
and all references in the male gender will
include the female gender.
NON-PARTICIPATING This Contract is non-participating. It will
not share in the surplus of the Company.
CONTRACT VALUE All values equal or exceed those required
under state law.
8
<PAGE> 10
REQUIRED DISTRIBUTIONS AND DEATH BENEFIT
Rules applicable for Contracts not issued in connection with a qualified plan or
individual retirement account.
DEATH OF CONTRACT OWNER If the Contract Owner (or Joint Owner): (a)
has named someone other than himself as
Annuitant, and (b) dies prior to the Annuity
Commencement Date, a Distribution made in
accordance with Section 72(s) of the
Internal Revenue Code will be paid.
The recipient of the Distribution will be
any surviving Joint Owner. If there is no
Joint Owner, the distribution will be paid
to the Annuitant. If the deceased Owner or
Joint Owner is also the Annuitant, the
Distribution will be paid to the Beneficiary
(see "Death of Annuitant").
The Distribution will be paid within 5 years
of the Owner's death, unless: (a) the
recipient of the Distribution elects, within
one year of the Owner's death, to receive
the Distribution in the form of a life
annuity or an annuity for a period certain
not exceeding the recipient's life
expectancy; or (b) the recipient of the
Distribution is the Owner's spouse, in which
case, the Contract may be continued by the
surviving spouse as Contract Owner.
DEATH OF ANNUITANT If the Annuitant dies prior to the Annuity
Commencement Date, a Death Benefit will be
paid to the Beneficiary upon receipt of
proof of death of the Annuitant. The death
benefit will be paid as rapidly as under the
Annuity Payment Option elected by the Owner
and in effect at the time of the Annuitant's
death.
If the Owner or Joint Owner is also the
Annuitant, the death of such person will be
treated as the death of the Annuitant. If
such person dies prior to the Annuity
Commencement Date, the death benefit payable
to the Beneficiary will be paid in
conformance with the distribution provisions
set forth in the "Death of Contract Owner"
section of the contract.
GENERAL DEATH BENEFIT PROVISION The value of the Death Benefit will be
determined as of the Valuation Date on or
next following the date both proof of death,
and an election of single sum settlement or
Annuity Payment Option, are received in good
order by the Company.
The amount of the Death Benefit will be the
greater of: (1) the sum of all purchase
payments, less surrenders, or (2) the
Contract Value. The amount of the Death
Benefit will be limited to the Contract
Value if the Annuity Commencement Date is
deferred beyond age 75 of the Annuitant and
the Annuitant dies after attaining such age.
If a single sum settlement is requested,
payment will be made in accordance with any
applicable laws and regulations governing
the payment of Death Benefits. If an Annuity
Payment Option is desired, election may be
made by the Beneficiary during the 90 day
period beginning on the date written notice
is received by the Company. If no election
has been made by the end of such 90 day
period, the Death Benefit will be paid to
the Beneficiary in a single sum.
Contracts issued in connection with
Qualified Plans or individual retirement
accounts will be subject to specific rules
set forth in the Plan or Contract concerning
distributions upon death of the Annuitant.
9
<PAGE> 11
ACCUMULATION PROVISIONS
FLEXIBLE PURCHASE PAYMENTS This Contract is bought for: (1) the Initial
Purchase Payment; and (2) purchase payments
made after the first, if any. The cumulative
total of all purchase payments under this
and any other annuity contract(s) issued by
the Company having the same Annuitant may
not exceed $1,000,000 without the prior
consent of the Company.
INITIAL PURCHASE PAYMENT The Initial Purchase Payment is due on the
Date of Issue. The Initial Purchase Payment
may not be less than $5,000 for
Non-Qualified Contracts. However, if
periodic payments are expected by the
Company, this Initial Purchase Payment may
be satisfied by purchase payments made on an
annualized basis. For Qualified Contracts
issued pursuant to a retirement plan which
receives favorable tax treatment under the
provisions of Section 408 of the Internal
Revenue Code; the minimum purchase payment
is $2,000. However, if periodic payments are
expected by the Company, the Company will
accept purchase payments which, on an
annualized basis, are at least $2,000 for
the first Contract Year. Purchase Payments,
if any, after the first Contract Year must
be at least $10 each. The Company reserves
the right to reject any Purchase Payment
which does not meet this minimum payment
requirement.
NO DEFAULT There are no penalties for failure to
continue Purchase Payments. Unless
surrendered for the full Contract Value, the
Contract will continue in full force until
the Annuity Commencement Date. This Contract
will not be in default, even if no
additional purchase payments are made after
the first.
CHANGE IN PURCHASE PAYMENTS The Owner is not obligated to continue
Purchase Payments. The Owner may: (1)
increase or decrease the amount of Purchase
Payments, subject to any minimum payment
requirements; (2) change the frequency of
Purchase Payments. A change in the frequency
or amount of Purchase Payments does not have
to be made by written request.
ALLOCATION OF PURCHASE PAYMENTS The Owner elects to have the Purchase
Payments allocated among the Fixed Account
and the Sub-Accounts of the Variable Account
at the time of application.
CONTRACT VALUE The Contract Value at any time will be the
sum of: (1) the Variable Account Contract
Value; and (2) the Fixed Account Contract
Value.
FIXED ACCOUNT The Fixed Account Contract Value at any time
will be: (1) the sum of all amounts credited
to the Fixed Account under this Contract;
plus (2) interest credited to the Fixed
Account; less (3) any amounts canceled or
withdrawn for charges, deductions, or
Surrenders.
INTEREST TO BE CREDITED The Company will credit interest to the
Fixed Account Contract Value. Such interest
will be credited at such rate or rates as
the Company prospectively declares from time
to time. Such rates will be declared to the
Owner in writing prior to each quarterly
period. Any such rate or rates so
determined, for which deposits are received,
will remain in effect for a period of not
less than 12 months. However, the Company
guarantees that it will credit interest at
not less than 3.0% per year.
VARIABLE ACCOUNT CONTRACT VALUE The Variable Account Contract Value is the
sum of the value of all Variable Account
Accumulation Units under this Contract. If:
(1) part or all of the Variable Account
Contract Value is surrendered, or (2) when
charges or deductions are made against the
Variable Account Contract Value then, an
appropriate number of Accumulation Units
will be canceled or surrendered to equal
such amount.
10
<PAGE> 12
THE VARIABLE ACCOUNT The Variable Account is a separate
investment account of the Company. It is
named on the Data Page. The Company has
allocated a part of its assets for this
Contract and certain other contracts to the
Variable Account. Such assets of the
Variable Account remain the property of the
Company. However, they may not be charged
with the liabilities from any other business
in which the Company may take part.
INVESTMENTS OF THE VARIABLE ACCOUNT The purchase payments applied to the
Variable Account will be invested at net
asset value in one or more of the mutual
funds shown on the Data Page.
SUB-ACCOUNTS The Variable Account is divided into
Sub-Accounts which invest in shares of
mutual funds. Purchase payments are
allocated among one or more of these
Sub-Accounts, as designated by the Owner.
VALUATION OF ASSETS Mutual fund
shares in the Variable
Account will be valued at
their net asset value.
VARIABLE ACCOUNT ACCUMULATION UNITS The number of Accumulation Units for each
Sub-Account of the Variable Account is found
by dividing: (1) the net amount allocated to
the Sub-Account; by (2) the Accumulation
Unit value for the Sub-Account for the
Valuation Period during which the Company
received the Purchase Payments.
VARIABLE ACCOUNT The value of an Accumulation Unit for each
Sub-Account of the Variable Account was
arbitrarily set at $10 when the first mutual
fund shares were bought. The value for any
later Valuation Period is found as follows:
The Accumulation Unit value for each
Sub-Account for the last prior Valuation
Period is multiplied by the Net Investment
Factor for the Sub-Account for the next
following Valuation period. The result is
the Accumulation Unit Value. The value of an
Accumulation Unit may increase or decrease
from one Valuation Period to the next. The
number of Accumulation Units will not change
as a result of investment experience.
NET INVESTMENT FACTOR The Net Investment Factor is an index
applied to measure the investment
performance of a Sub-Account from one
Valuation Period to the next. The Net
Investment Factor may be greater or less
than one; therefore, the value of an
Accumulation Unit may increase or decrease.
The Net Investment Factor for any
Sub-Account for any Valuation period is
determined by: dividing (1) by (2) and
subtracting (3) from the result, where:
1. is the net result of:
a. the net asset value per share of the
mutual fund held in the Sub-Account,
determined at the end of the current
Valuation Period; plus
b. the per share amount of any dividend
or capital gain distributions made by
the mutual fund held in the Sub-
Account, if the "ex-dividend" date
occurs during the current Valuation
Period; plus or minus
c. a per share charge or credit for any
taxes reserved for, which is determined
by the Company to have resulted from the
investment operations of the
Sub-Account.
2. is the net result of:
a. the net asset value per share of the
mutual fund held in the Sub-Account,
determined at the end of the last prior
Valuation period; plus or minus
11
<PAGE> 13
b. the per share charge or credit for
any taxes reserved for the last prior
Valuation Period.
3. is a factor representing the Mortality
and Expense Risk Charge and the
Administration Charge deducted from the
Variable Account. Such factor is equal, on
an annual basis, to 1.30% of the daily net
asset value of the Variable Account.
For funds that credit dividends on a daily
basis and pay such dividends once a month,
the Net Investment Factor allows for the
monthly reinvestment of these daily
dividends.
FIXED ACCOUNT PROVISIONS The Fixed Account is the general account of
the Company. It is made up of all assets of
the Company other than: (1) those in the
Variable Account; and (2) those in any other
segregated asset account.
TRANSFER PROVISIONS The Owner may annually transfer a portion of
the value of the Fixed Account to the
Variable Account and a portion of the
Variable Account to the Fixed Account
without penalty or adjustment. Transfers
from the Fixed Account to the Variable
Account will be determined by the Company,
but will not be less than 10%, and will be
declared before the termination date of the
then current interest rate guarantee period.
(The Company will always allow 10% of the
Fixed Account value to be transferred to the
Variable Account.) Transfers from the Fixed
Account must be made within 30 days after
the termination date of the guaranteed
period.
The Owner may request a transfer of up to
100% of the Contract Value from the Variable
Account to the Fixed Account. Such transfers
must be made prior to the Annuity
Commencement Date or the death of the
Annuitant. No such transfers will be
permitted prior to the first Contract
Anniversary or within 12 months of any
previous transfer. The Owner's value of each
sub-account will be determined as of the day
the written request for transfer is received
in good order at the Home Office of the
Company. The Company reserves the right to
restrict transfers to the Fixed Account to
25% of the Contract Value, depending on
market conditions at the time of transfer.
Transfers from the Fixed Account may not be
made prior to the first Contract Anniversary
or within 12 months of any prior Transfer.
Transfers must also be made prior to the
Annuity Commencement Date.
DISTRIBUTION PROVISIONS The following events will give rise to a
Distribution:
1. Reaching the Annuity Commencement
Date -- Distribution will be made
pursuant to the Annuity Payment
Option selected.
2. Death of the Annuitant prior to the
Annuity Commencement Date --
Distribution to be made in accordance
with the options available under the
Death of Annuitant provision of this
Contract.
3. Death of the Contract Owner --
Distribution to be made in a manner
consistent with the "Death of
Contract Owner" provisions of this
Contract.
4. Surrender -- Distribution to be made
in accordance with the Surrender
provisions of the Contract.
5. In accordance with Section 72 of the
Federal Internal Revenue Code, if a
non-natural person is the Owner, any
change in the primary annuitant will
be treated as the death of the Owner.
12
<PAGE> 14
EXCHANGE PRIVILEGES The Contract Owner may exchange this
Contract for an annuity contract which:
(1) is issued by the Company; and (2) is
determined by the Company to be the type
and class eligible for such exchange. In
determining which contracts may be of
the same type and class as this
Contract, the Company shall apply its
rules and regulations applicable
thereto.
The Contract Owner must request an
exchange: (1) in writing; and (2) at
least 45 days prior to the Annuity
Commencement Date. Any such exchange
shall be made free from any Contingent
Deferred Sales Charge provided for in
this Contract.
SURRENDER PROVISIONS
GENERAL SURRENDER PROVISIONS The Owner may Surrender part or all of
the Contract Value at any time this
Contract is in force and prior to the
earlier of the Annuity Commencement Date
or the death of the Annuitant. For the
purpose of calculating the Contingent
Deferred Sales Charge, and in order to
minimize the applicable Contingent
Deferred Sales Charge, all amounts
withdrawn are deemed to be withdrawn on
the first-in first-out basis i.e., all
withdrawals are deemed to come from the
oldest Purchase Payments first.
(Note--for tax purposes, withdrawals may
be treated differently.) All Surrenders
will have the following conditions:
1. The request for Surrender must be in
writing.
2. The Surrender Value will be paid to
the Owner when proper written
application and the Contract are
received at the Home Office.
3. Payment of the Variable Account
Contract Value will be made within
seven days of receipt of both proper
written application and the Contract.
Payment of the Fixed Account Contract
Value may be deferred up to six
months following receipt of
application.
4. When written application and the
Contract are received, the Company
will Surrender a number of Variable
Account Accumulation Units and an
amount from the Fixed Account needed
to equal: (a) the dollar amount
requested; plus (b) any Contingent
Deferred Sales Charge which applies.
5. Unless the Owner has instructed
otherwise, if a partial Surrender is
requested, the Surrender will be made
as follows: (a) from the Variable
Account Contract Value; and (b) from
the Fixed Account Contract Value. The
amounts surrendered from the Fixed
Account and Variable Account, will be
in the same proportion that the
Owner's interest in the Fixed Account
and Variable Account bears to the
total Contract Value.
CONTINGENT DEFERRED If part or all of the Contract Value is
surrendered, a Contingent Deferred Sales
Charge may be applied at the time of a
surrender. The Contingent Deferred Sales
Charge will be equal to no more than 7%
of the lesser of: (1) the total of all
purchase payments made within 84 months
prior to the date of the request for
Surrender; or (2) the amount
surrendered.
In no event will the cumulative total of
all Contingent Deferred Sales Charges
exceed 7% of the total purchase payments
made within 84 months prior to the date
of the request for Surrender.
13
<PAGE> 15
The Contingent Deferred Sales Charge applies to purchase payments as follows:
<TABLE>
<CAPTION>
Years From Date Of Sales Charge
Purchase Payment Percentage
---------------- ----------
<S> <C>
[0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%]
</TABLE>
A Contingent Deferred Sales Charge will
not be assessed against any values which
have been held under the Contract for at
least 84 months or any values applied to
purchase an annuity.
REDUCTION OF CONTINGENT The amount of Contingent Deferred Sales
DEFERRED SALES CHARGE Charges on the Contracts may be reduced
when sales of the Contracts are made to
a trustee, employer or similar entity
pursuant to a retirement plan or when
sales are made in a similar arrangement
where offering the Contracts to a group
of individuals under such a program
results in savings of sales expenses.
The entitlement to such a reduction in
Contingent Deferred Sales Charges will
be determined exclusively by the
Company.
SURRENDERS WITHOUT CHARGE Once each year, starting with the second
Purchase Payment Year of a Purchase
Payment, the Owner may Surrender,
without a Contingent Deferred Sales
Charge, an amount equal to 10% of the
purchase payment at the time of
surrender. This free withdrawal
privilege is non-cumulative and must be
used in the year available.
After a Purchase Payment's seventh
Purchase Payment Anniversary, the Owner
may surrender without charge: (1) 100%
of the purchase payment amount, less (2)
any amount of the purchase payment
previously surrendered.
SURRENDER VALUE The Surrender Value is the amount that
will be paid if the full Contract Value
is surrendered. The Surrender Value at
any time will be:
1. The Contract Value; less
2. Any Contingent Deferred Sales Charge
which applies.
PARTIAL SURRENDERS In the event of a Partial Surrender, the
Company will, unless instructed to the
contrary, surrender Accumulation Units
from all Sub-Accounts in which the
Contract Owner has an interest and from
the Fixed Account. The number of
Accumulation Units surrendered from each
such Sub-Account and the amount
surrendered from the Fixed Account will
be in the same proportion that the
Contract Owner's interest in these
Sub-Accounts and Fixed Account bears to
the total Contract Value.
DELAY IN PAYMENT OR SURRENDER The Company has the right to suspend or
delay the date of any Surrender payment
from the Variable Account for any
period:
1. When the New York Stock Exchange is
closed;
2. When trading on the New York Stock
Exchange is restricted;
3. When an emergency exists as a result
of which: (a) disposal of securities
held in the Variable Account is not
reasonably practicable; or (b) it is
not reasonable practicable to fairly
determine the value of the net assets
of the Variable Account;
14
<PAGE> 16
4. During any other period when the
Securities and Exchange Commission,
by order, so permits for the
protection of security holders; or
5. When the request for Surrender is not
made in writing.
Rules and regulations of the Securities
and Exchange Commission will govern as
to whether the conditions set forth in
numbers 2, 3, and 4 above exist.
The Company further reserves the right
to delay payment of a total surrender of
Fixed Account Contract Value for up to
six months in those states where
applicable law requires the Company to
reserve such right.
ANNUITIZATION PROVISIONS
GENERAL All of the provisions within this
section are subject to the restrictions
set forth in the Section entitled "Death
of Contract Owner", and "Death of
Annuitant".
ANNUITIZATION This is the process of purchasing an
annuity according to the option
selected, during the payout phase of the
Contract. As of the Annuity Commencement
Date, the Contract Value is surrendered
and applied to the purchase rate then in
effect for the option selected. The
purchase rates for options set forth
under this Contract will be determined
on a basis not less favorable than the
1971 Individual Annuity Mortality Table
(set back one year) with minimum
interest at 3.5%. The purchase rates
will not be less favorable than those
offered by the Company at the time of
Annuitization on a Single Premium
Immediate Annuity for the same age, sex,
and Annuity Payment Option. The rates
shown in the Annuity Tables are
calculated on this guaranteed basis.
Annuitization is irrevocable once
payments have begun.
ANNUITY COMMENCEMENT DATE Such date: (1) must be the first day of
a calendar month; and (2) must be at
least two years after the Date of Issue.
The Annuity Commencement Date may not be
later than the first day of the first
calendar month after the Annuitant's
75th birthday, unless a later date has:
(1) been requested by the Contract
Owner; and (2) approved by the Company.
This date is selected by the Owner at
the time of application. Any applicable
premium taxes not already deducted will
be deducted from the Contract Value at
this time. The remaining Contract Value
will then be applied to the Annuity
Payment Option selected by the Owner.
CHANGE OF ANNUITY COMMENCEMENT DATE The Owner may change the Annuity
Commencement Date. A change of Annuity
Commencement Date must be made prior to
the Annuity Commencement Date and by
written request. The request must be
received at the Home Office prior to the
new Annuity Commencement Date. The date
to which such a change may be made must
be the first day of a calendar month.
CHANGE OF ANNUITY PAYMENT OPTION The Owner may change the Annuity Payment
Option prior to the Annuity Commencement
Date. A change of the Annuity Payment
Option must be made by written request
and must be received at the Home Office
prior to the Annuity Commencement Date.
After a change of Annuity Payment Option
is received at the Home Office, it will
become effective as of the date it was
requested. A change of Annuity Payment
Option will not apply to any payment
made or action taken by the Company
before it was received.
15
<PAGE> 17
ANNUITY PAYMENT OPTIONS One Annuity Payment Option or a
combination of Annuity Payment Options
may be selected. Any Annuity Payment
Option not set forth in the Contract
which is satisfactory to both the
Company and the Annuitant may be
selected.
SUPPLEMENTARY AGREEMENT A Supplementary Agreement will be issued
within 30 days following the Annuity
Commencement Date. The Supplementary
Agreement will set forth the terms of
the Annuity Payment Option selected.
FREQUENCY/AMOUNT OF PAYMENTS Payments will be made based on the
payment option selected and frequency
selected. However, if the net amount to
be applied at the Annuity Commencement
Date is less than $500, the Company has
the right to pay such amount in one lump
sum.
If any payment provided for would be or
becomes less than $20, the Company has
the right to change the frequency of
payment to an interval that will result
in payments of at least $20.
FIXED ANNUITY PROVISIONS A Fixed Annuity is an annuity with
level payments which are guaranteed by
the Company as to dollar amount during
the annuity payment period. At the
Annuity Commencement Date, the Contract
Value will be applied to the applicable
Annuity Table. This will be done in
accordance with the Annuity Payment
Option selected.
VARIABLE ANNUITY A Variable Annuity is an annuity with
payments which: (1) are not
pre-determined or guaranteed as to
dollar amount; and (2) vary in amount
with the investment experience of the
Variable Account.
DETERMINATION OF FIRST VARIABLE At the Annuity Commencement Date, the
ANNUITY PAYMENT Variable Account Contract Value will be
applied to the applicable Annuity Table.
This will be done in accordance with the
Annuity Payment Option selected. The
Annuity Tables are based on the 1971
Individual Annuity Mortality Table (set
back one year) with interest at 3.5%.
ANNUITY UNIT VALUE An Annuity Unit is used to calculate the
value of annuity payments. The value of
an Annuity Unit for each Sub-Account was
arbitrarily set at $10 when the first
mutual funds were bought. The value for
any later Valuation Period is found as
follows:
1. The Annuity Unit Value for each
Sub-Account for the last prior
Valuation Period is multiplied by the
Net Investment Factor for the
Sub-Account for the Valuation Period
for which the Annuity Unit Value is
being calculated.
2. The result is multiplied by an
interest factor. This is done to
neutralize the Assumed Investment
Rate of 3.5% per year, which is built
into the Annuity Table.
VARIABLE ANNUITY PAYMENTS Variable Annuity payments after the
AFTER THE FIRST first vary in amount. The payment amount
changes with the investment performance
of the Sub-Accounts within the Variable
Account. The dollar amount of such
payments is determined as follows:
1. The dollar amount of the first
annuity payment is divided by the
value of an Annuity Unit as of the
Annuity Commencement Date. This
result establishes the fixed number
of Annuity Units for each monthly
annuity payment after the first. This
number of Annuity Units remains fixed
during the annuity payment period.
2. The fixed number of Annuity Units is
multiplied by the Annuity Unit Value
for the Valuation Period for which
the payment is due. This result
establishes the dollar amount of the
payment.
16
<PAGE> 18
The Company guarantees that the dollar
amount of each payment after the first
will not be affected by variations in
expenses or mortality experience.
ANNUITY PAYMENT OPTIONS
GENERAL All annuity payments will be mailed
within 10 working days of the first of
the month in which they are scheduled to
be made.
LIFE ANNUITY The amount to be paid under this option
will be paid during the lifetime of the
Annuitant. Payments will cease with the
last payment due prior to the death of
the Annuitant.
JOINT AND LAST SURVIVOR ANNUITY The amount to be paid under this option
will be paid and continued during the
lifetimes of the Annuitant and
designated second person. Payments will
continue as long as either is living.
LIFE ANNUITY WITH 120 OR 240 PAYMENTS The amount to be paid under this option
GUARANTEED will be paid during the lifetime of the
Annuitant. A guaranteed period of 120 or
240 months may be selected. If the
Annuitant dies prior to the end of this
guaranteed period, the Beneficiary may
choose to continue receiving payments
until the end of the guaranteed period,
or receive the commuted value of the
remaining guaranteed payments in a lump
sum. Such lump sum payment will be equal
to the present value of the remaining
guaranteed payments to which the
Annuitant would have been entitled had
he not died. Any lump sum payment will
be computed as of the date on which
proof of the death of the Annuitant is
received at the Home Office and computed
at an assumed investment rate which is
equal to the rate used to determine
annuity payments, according to the
Annuity Tables, in effect on the Annuity
Commencement Date.
17
<PAGE> 19
ANNUITY TABLES
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS PER $1,000 APPLIED
ANNUITANT'S AGE LAST BIRTHDAY
<TABLE>
<CAPTION>
FEMALE AGE
50 55 60 65 70
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
MALE AGE 50 $3.91 $4.07 $4.21 $4.34 $4.44
55 4.00 4.20 4.41 4.59 4.76
60 4.08 4.32 4.59 4.86 5.12
65 4.42 4.75 5.12 5.50
</TABLE>
LIFE ANNUITY MONTHLY ANNUITY PAYMENTS PER $1,000 APPLIED
<TABLE>
<CAPTION>
MALE FEMALE
GUARANTEED PERIOD GUARANTEED PERIOD
ANNUITANT'S ANNUITANT'S
ATTAINED ATTAINED
AGE LAST 120 240 AGE LAST 120 240
BIRTHDAY NONE MONTHS MONTHS BIRTHDAY NONE MONTHS MONTHS
-------- ---- ------ ------ -------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
40 $3.99 $3.98 $3.91 40 $3.73 $3.72 $3.70
41 4.05 4.03 3.95 41 3.77 3.76 3.73
42 4.11 4.08 4.00 42 3.81 3.80 3.77
43 4.16 4.14 4.04 43 3.86 3.85 3.81
44 4.23 4.20 4.09 44 3.91 3.89 3.85
45 4.29 4.26 4.14 45 3.96 3.94 3.89
46 4.36 4.32 4.19 46 4.01 3.99 3.94
47 4.44 4.39 4.24 47 4.06 4.05 3.98
48 4.51 4.46 4.29 48 4.12 4.10 4.03
49 4.59 4.53 4.35 49 4.18 4.16 4.08
50 4.67 4.60 4.40 50 4.25 4.23 4.13
51 4.76 4.68 4.46 51 4.32 4.29 4.19
52 4.85 4.76 4.51 52 4.39 4.36 4.24
53 4.95 4.85 4.57 53 4.47 4.43 4.30
54 5.05 4.93 4.63 54 4.55 4.51 4.36
55 5.15 5.03 4.69 55 4.64 4.59 4.43
56 5.26 5.12 4.75 56 4.73 4.67 4.49
57 5.38 5.22 4.81 57 4.82 4.76 4.55
58 5.50 5.33 4.87 58 4.93 4.85 4.62
59 5.63 5.44 4.93 59 5.03 4.95 4.69
60 5.77 5.55 4.99 60 5.15 5.05 4.76
61 5.91 5.67 5.05 61 5.27 5.16 4.83
62 6.07 5.80 5.11 62 5.39 5.27 4.90
63 6.23 5.93 5.17 63 5.53 5.39 4.97
64 6.41 6.06 5.23 64 5.67 5.52 5.04
65 6.60 6.21 5.28 65 5.83 5.66 5.11
66 6.81 6.36 5.34 66 6.00 5.80 5.18
67 7.03 6.51 5.38 67 6.19 5.95 5.24
68 7.26 6.67 5.43 68 6.39 6.12 5.30
69 7.51 6.84 5.47 69 6.61 6.29 5.36
70 7.79 7.01 5.51 70 6.85 6.46 5.41
71 8.08 7.19 5.54 71 7.11 6.65 5.46
72 8.40 7.36 5.57 72 7.39 6.85 5.50
73 8.74 7.54 5.60 73 7.70 7.05 5.54
74 9.10 7.73 5.62 74 8.03 7.25 5.57
75 9.50 7.91 5.64 75 8.40 7.46 5.59
</TABLE>
18
<PAGE> 20
(THIS PAGE LEFT BLANK INTENTIONALLY)
<PAGE> 21
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
- --------------------------------------------------------------------------------
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE ANNUITY,
NON-PARTICIPATING.
- --------------------------------------------------------------------------------
<PAGE> 22
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(FORMERLY FINANCIAL HORIZONS LIFE INSURANCE COMPANY)
ENDORSEMENT
THIS ENDORSEMENT IS ATTACHED TO AND MADE A PART OF CONTRACT FHL-23-7
AND ANY STATE SPECIFIC VERSION OF THE CONTRACT.
The name of the Separate Investment Account referenced on the Data Page is
changed to Nationwide VA Separate Account-C.
The "Death of Contract Owner" section of the Contract is modified by adding the
following sentence to the last paragraph of the section:
"If the Contract Owner is not an individual, the death of the
Annuitant (or a change of the Annuitant) will result in a
distribution pursuant to these rules, regardless of whether a
Contingent Annuitant was named."
The "General Death Benefit Provision" section of the Contract is modified. The
first sentence of the second paragraph is modified to read:
"The amount of the Death Benefit will be the greatest of: (1) the
sum of all purchase payments, less surrenders, (2) the Contract
Value, or (3) the Contract Value as of the most recent five year
Contract Anniversary, less any amounts surrendered since the most
recent five-year Contract Anniversary."
<PAGE> 23
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
TWO NATIONWIDE PLAZA
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008
ENDORSEMENT
The Contract to which this Endorsement is attached and made a part of is hereby
modified with the revisions of any "Contract Maintenance Charge" provisions
specified below. Nothing contained herein shall be construed as superseding any
provisions of the Contract to which this Endorsement is attached, unless
specifically indicated to the contrary.
General Provisions
- ------------------
To the extent that the Charge section under the GENERAL PROVISIONS is
inconsistent with the provision set forth below, the provision is hereby
modified in accordance with the following:
CHARGES
-------
The Company deducts a charge for the administration of the Contract. This
charge is designed only to reimburse the Company for any expense incurred
that relates to the administration of the Contract. The Company will
monitor this charge to ensure that it does not exceed any accumulated
expense. The Contract Administration Charge is assessed daily through the
unit value calculation, equal to an annual rate of [0.05%].
Surrender Provisions
- --------------------
To the extent that the "General Surrender Provisions" and "Surrender Value"
sections under the SURRENDER PROVISIONS are inconsistent with the provisions set
forth below, such provisions are hereby modified in accordance with the
following:
GENERAL SURRENDER PROVISIONS
----------------------------
4. When written application and the Contract are received, the Company
will surrender a number of Variable Account Accumulation Units and an
amount from the Fixed Account needed to equal: (a) the dollar amount
requested; plus (b) any Contingent Deferred Sales Charge which applies.
SURRENDER VALUE
---------------
The Surrender Value is the amount that will be paid if the full Contract
Value is surrendered. The Surrender Value at any time will be:
1. The Contract Value; less
2. Any Contingent Deferred Sales Charge which applies.
- --- ---
| Secretary President |
| |
| |
<PAGE> 24
AMENDATORY ENDORSEMENT
Attached to and made a part of this Contract issued by
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ONE NATIONWIDE PLAZA COLUMBUS, OHIO 43216
PO BOX 16609
COLUMBUS, OHIO 43216-6609
This Endorsement restates and clarifies provisions of the Contract to which it
is attached. Notwithstanding any provisions of the Contract to the contrary, the
following provisions shall apply:
1. THE FOLLOWING IS HEREBY ADDED TO THE DEFINITION OF ANNUITANT:
"The Annuitant must be age [80] or younger at the time of Contract issuance
unless the Company has approved a request for an Annuitant of a greater age."
2. THE FOLLOWING IS HEREBY ADDED TO THE DEFINITION OF CONTRACT OWNER:
"The Contract Owner must be age [80] or younger at the time of Contract issuance
unless the Company has approved a request for a Contract Owner of a greater
age."
3. THE SECOND SENTENCE OF THE INITIAL PURCHASE PAYMENT SECTION IS HEREBY DELETED
AND REPLACED WITH THE FOLLOWING:
"The Initial Purchase Payment may not be less than [$2,000] for Non-Qualified
Contracts."
4. THE FIRST PARAGRAPH OF THE SURRENDERS WITHOUT CHARGE SECTION IS HEREBY
DELETED AND REPLACED WITH THE FOLLOWING:
"Once each year, starting with the first Purchase Payment Year, the Contract
Owner may surrender without a Contingent Deferred Sales Charge, an amount equal
to [10%] of the Purchase Payments at the time of surrender. This free withdrawal
privilege is cumulative; that is, free amounts not taken during any given
contract year can be taken as free amounts in subsequent years."
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5. THE SECOND PARAGRAPH DESCRIBING THE AMOUNT OR THE VALUE OF THE DEATH BENEFIT
UNDER THE GENERAL DEATH BENEFIT PROVISIONS IS HEREBY DELETED AND REPLACED WITH
THE FOLLOWING:
"If the Annuitant dies prior to his [85] th birthday, the amount of the Death
Benefit will be the greater of 1. the Contract Value, 2. the total of all
purchase payments made to the contract, 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 five year
anniversary. The amount of the Death Benefit will be limited to the Contract
Value if the Annuity Commencement Date is deferred beyond age [85] of the
Annuitant and the Annuitant dies after attaining such age."
Any adjustment for amounts surrendered will reduce 2 and 3 in the same
proportion that the Contract Value was reduced on the date(s) of the partial
surrender.
Except for the above mentioned amendments nothing else is changed in the
Contract.
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/s/ /s/
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SECRETARY PRESIDENT
