<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. 8 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10 [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 and Statement of Additional Information.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[X] on (September 1, 1999) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
===============================================================================
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NATIONWIDE VA SEPARATE ACCOUNT-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 .............................................. 11
Item 4. Condensed Financial Information ..................................... 12
Item 5. General Description of Registrant, Depositor, and Portfolio Companies 16
Item 6. Deductions and Expenses ............................................. 18
Item 7. General Description of Variable Annuity Contracts ................... 20
Item 8. Annuity Period ...................................................... 29
Item 9. Death Benefit and Distributions ..................................... 30
Item 10. Purchases and Contract Value ....................................... 22
Item 11. Redemptions ........................................................ 24
Item 12. Taxes .............................................................. 35
Item 13. Legal Proceedings .................................................. 41
Item 14. Table of Contents of the Statement of Additional Information ....... 45
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page ......................................................... 48
Item 16. Table of Contents .................................................. 48
Item 17. General Information and History .................................... 48
Item 18. Services ........................................................... 48
Item 19. Purchase of Securities Being Offered ............................... 49
Item 20. Underwriters ....................................................... 49
Item 21. Calculation of Performance Information ............................. 49
Item 22. Annuity Payments ................................................... 50
Item 23. Financial Statements ............................................... 51
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits .................................. 80
Item 25. Directors and Officers of the Depositor ............................ 82
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant ............................................ 84
Item 27. Number of Contract Owners .......................................... 95
Item 28. Indemnification .................................................... 95
Item 29. Principal Underwriter .............................................. 95
Item 30. Location of Accounts and Records ................................... 97
Item 31. Management Services ................................................ 97
Item 32. Undertakings ....................................................... 97
</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 September 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:
NATIONWIDE SEPARATE ACCOUNT TRUST
- - Money Market Fund
- - Total Return Fund
ONE GROUP(R) INVESTMENT TRUST
- - One Group Investment Trust Bond Portfolio
- - One Group Investment Trust Balanced Portfolio (formerly Asset Allocation
Fund)
- - One Group Investment Trust Equity Index Portfolio
- - One Group Investment Trust Government Bond Portfolio
- - One Group Investment Trust Mid Cap Growth Portfolio (formerly Growth
Opportunities Fund)
- - One Group Investment Trust Large Cap Growth Portfolio (formerly Large
Company Growth Fund)
- - One Group Investment Trust Diversified Equity Portfolio
- - One Group Investment Trust Diversified Mid Cap Portfolio
- - One Group Investment Mid Cap Value Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity VIP Funds are not available to new contracts issued on or
after September 1, 1999.
- - VIP Equity-Income Portfolio
- - VIP Overseas Portfolio
Purchase payments not invested in the underlying mutual fund options of the
Nationwide VA Separate Account - C may be allocated to the fixed account.
The Statement of Additional Information (dated September 1, 1999) which contains
additional information about the contracts and the variable account has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The table of contents for the Statement of Additional
Information is on page 44.
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
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<PAGE> 4
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
- - ENDORSED BY A BANK OR GOVERNMENT AGENCY
- - FEDERALLY INSURED
- - 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> 5
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 PERIOD - Each day the New York Stock Exchange is open for business.
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.
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<PAGE> 6
<TABLE>
<S> <C>
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS .............................................. 3
SUMMARY OF CONTRACT EXPENSES ........................................... 6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES ................................. 7
EXAMPLE ................................................................ 8
SYNOPSIS OF THE CONTRACTS .............................................. 9
FINANCIAL STATEMENTS ................................................... 9
CONDENSED FINANCIAL INFORMATION ........................................ 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY .......................... 14
NATIONWIDE ADVISORY SERVICES, INC ...................................... 14
INVESTING IN THE CONTRACT .............................................. 14
The Variable Account and Underlying
Mutual Funds
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS......................................... 16
Mortality and Expense Risk Charge
Administrative Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP ..................................................... 18
Joint Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT .............................................. 19
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE ........................................................ 22
SURRENDER (REDEMPTION) ................................................. 22
Surrenders Under a Texas Optional Retirement Program and Louisiana
Optional Retirement Plan
Surrenders Under a Qualified Contract or Tax Sheltered Annuity
LOAN PRIVILEGE ......................................................... 24
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 ............................................................. 25
CONTRACT OWNER SERVICES ................................................ 26
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE .............................................. 27
ANNUITIZING THE CONTRACT ............................................... 27
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Assumed Investment Rate
Value of an Annuity Unit
Exchanges among Underlying Mutual Funds
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS ......................................................... 29
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
How the Death Benefit Value is Determined
Death Benefit Payment
REQUIRED DISTRIBUTIONS ................................................. 30
Required Distributions for Non-Qualified Contracts
Required Distributions for Qualified Plans or Tax Sheltered Annuities
Required Distributions for Individual Retirement Annuities and SEP
IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS ............................................. 33
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 ................................................. 39
YEAR 2000 COMPLIANCE ISSUES ............................................ 39
LEGAL PROCEEDINGS ...................................................... 40
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY ........................ 40
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION ............... 44
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS ..................... 45
</TABLE>
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<PAGE> 8
SUMMARY OF 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 purchase
payments 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) For contracts issued before September 1, 1999, or a date on which state
insurance authorities approve applicable contract modifications, the
contract owner may withdraw, during the first contract year, 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 non-cumulative.
For contracts issued on or after September 1, 1999, or a date on which state
insurance authorities approve applicable contract modifications, each contract
year the contract owner may withdraw without a CDSC the greater of:
a) 10% of purchase payments made to the contract; or
b) any amount withdrawn to meet the minimum distribution requirements under
the Internal Revenue Code.
This free withdrawal privilege is cumulative. The CDSC is imposed only against
purchase payments (see "Waiver of 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 a daily basis
at the annual rate noted above.
(3) The Administration Charge is deducted to reimburse Nationwide for expenses
related to the issuance and maintenance of the contracts.
LOAN PROCESSING FEE
Nationwide may charge a Loan Processing Fee at the time each new loan is
processed. Loans are only available for contracts issued as Qualified Contracts
or Tax Sheltered Annuities. Loans are not available in all states. In addition,
some states may not allow Nationwide to assess a Loan Processing Fee (see "Loan
Privilege").
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<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 0.49% 0.08% 0.00% 0.57%
Fidelity VIP Overseas Portfolio 0.74% 0.15% 0.00% 0.89%
NSAT - Money Market Fund 0.34% 0.21% 0.00% 0.55%
NSAT - Total Return Fund 0.57% 0.21% 0.00% 0.78%
One Group Investment Trust Bond Portfolio 0.54% 0.21% 0.00% 0.75%
One Group Investment Trust Balanced Portfolio (formerly
Asset Allocation Fund) 0.70% 0.30% 0.00% 1.00%
One Group Investment Trust Equity Index Portfolio 0.00% 0.55% 0.00% 0.55%
One Group Investment Trust Government Bond Portfolio 0.42% 0.33% 0.00% 0.75%
One Group Investment Trust Mid Cap Growth Portfolio
(formerly Growth Opportunities Fund) 0.65% 0.32% 0.00% 0.97%
One Group Investment Trust Large Cap Growth Portfolio
(formerly Large Company Growth Fund) 0.65% 0.28% 0.00% 0.93%
One Group Investment Diversified Equity Portfolio 0.67% 0.28% 0.00% 0.95%
One Group Investment Trust Diversified Mid Cap Portfolio 0.17% 0.78% 0.00% 0.95%
One Group Investment Trust Mid Cap Value Portfolio 0.42% 0.53% 0.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 0.50% 0.08% 0.00% 0.58%
Fidelity VIP Overseas Portfolio 0.74% 0.17% 0.00% 0.91%
NSAT - Money Market Fund 0.40% 0.21% 0.00% 0.61%
NSAT - Total Return Fund 0.59% 0.21% 0.00% 0.80%
One Group Investment Trust Bond Fund 0.60% 0.21% 0.00% 0.81%
One Group Investment Trust Equity Index Portfolio 0.30% 0.83% 0.00% 1.13%
One Group Investment Trust Government Bond Portfolio 0.45% 0.33% 0.00% 0.78%
One Group Investment Trust Diversified Equity Portfolio 0.74% 0.28% 0.00% 1.02%
One Group Investment Trust Diversified Mid Cap Portfolio 0.74% 0.78% 0.00% 1.52%
One Group Investment Trust Mid Cap Value Portfolio 0.74% 0.53% 0.00% 1.27%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 10
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 If you do not surrender your If you annuitize your contract
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 Equity-Income 90 106 131 225 20 61 104 225 * 61 104 225
Portfolio
Fidelity VIP Overseas 93 116 148 260 23 71 121 260 * 71 121 260
Portfolio
NSAT - Money Market Fund 89 105 130 223 19 60 103 223 * 60 103 223
NSAT - Total Return Fund 92 112 143 248 22 67 116 248 * 67 116 248
One Group Investment Trust 94 119 154 272 24 74 127 272 * 74 127 272
Balanced Portfolio (formerly
Asset Allocation Fund)
One Group Investment Trust 92 111 141 245 22 66 114 245 * 66 114 245
Bond Portfolio
One Group Investment Trust 89 105 130 223 19 60 103 223 * 60 103 223
Equity Index Portfolio
One Group Investment Trust 92 111 141 245 22 66 114 245 * 66 114 245
Government Bond Portfolio
One Group Investment Trust 94 118 153 268 24 73 126 268 * 73 126 268
Mid Cap Growth Portfolio
(formerly Growth
Opportunities Fund)
One Group Investment Trust 93 117 150 264 23 72 123 264 * 72 123 264
Large Cap Growth Portfolio
(formerly Large Company
Growth Fund)
One Group Investment Trust 94 118 152 266 24 73 125 266 * 73 125 266
Diversified Equity Portfolio
One Group Investment Trust 94 118 152 266 24 73 125 266 * 73 125 266
Diversified Mid Cap Portfolio
One Group Investment Trust 94 118 152 266 24 73 125 266 * 73 125 266
Mid Cap Value Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The contracts sold under this prospectus do not permit annuitization
during the first two contract years.
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<PAGE> 11
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are flexible 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)."
References to "contract owner" will mean "participant" unless the plan otherwise
permits or requires the contract owner to exercise contract rights under the
plan terms.
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 SUBSEQUENT
TYPE PAYMENT 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 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.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained without charge by contacting Nationwide's home
office at the telephone number listed on page 1 of this prospectus.
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<PAGE> 12
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
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Equity- 19.268781 21.229680 10.18% 1,945,917 1998
Income Portfolio - Q 15.239003 19.268781 26.44% 1,663,574 1997
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- 19.268781 21.229680 10.18% 3,679,860 1998
Income Portfolio - NQ 15.239003 19.268781 26.44% 2,829,983 1997
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 12.709885 14.144224 11.29% 360,308 1998
Portfolio -Q 11.543398 12.709885 10.11% 360,753 1997
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 12.709885 14.144224 11.29% 983,989 1998
Portfolio -NQ 11.543398 12.709885 10.11% 826,716 1997
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* 11.392164 11.836880 3.90% 318,412 1998
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 - 11.392164 11.836880 3.90% 503,644 1998
NQ* 10.965501 11.392164 8.82% 502,861 1997
10.569801 10.965501 3.74% 299,032 1996
10.135415 10.569801 4.29% 120,754 1995
10.000000 10.135415 1.35% 31,027 1994
- ------------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund - Q 19.118736 22.281011 16.54% 1,225,858 1998
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
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 13
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT - Total Return Fund - NQ 19.118736 22.281011 16.54% 2,363,345 1998
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
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 15.674014 18.423578 17.54% 1,717,800 1998
Trust Balanced Portfolio - Q 12.921017 15.674014 21.31% 882,338 1997
(formerly Asset Allocation Fund) 11.697239 12.921017 10.46% 404,004 1996
9.819156 11.697239 19.13% 149,620 1995
10.000000 9.819156 -1.81% 33,312 1994
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 15.674014 18.423578 17.54% 3,772,445 1998
Trust Balanced Portfolio - NQ 12.921017 15.674014 21.31% 1,619,845 1997
(formerly Asset Allocation Fund) 11.697239 12.921017 10.46% 602,084 1996
9.819156 11.697239 19.13% 178,905 1995
10.000000 9.819156 -1.81% 38,193 1994
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 16.381936 19.509120 19.09% 97,500 1998
Trust Balanced Portfolio 13.329211 16.381936 22.90% 97,500 1997
(formerly 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
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 10.000000 10.955610 9.56% 252,427 1998(1)
Equity Index Portfolio-Q
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 10.000000 10.955610 9.56% 746,119 1998(1)
Equity Index Portfolio-NQ
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 10.000000 11.051791 10.52% 250,000 1998(1)
Equity Index Portfolio-Initial
Funding by Depositor
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 12.460216 13.199019 5.93% 955,478 1998
Trust Government Bond 11.511652 12.460216 8.24% 488,790 1997
Portfolio - Q 11.358330 11.511652 1.35% 337,711 1996
9.861504 11.358330 15.18% 139,391 1995
10.000000 9.861504 -1.38% 13,330 1994
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 14
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Group Investment 12.460216 13.199019 5.93% 1,715,256 1998
Trust Government Bond 11.511652 12.460216 8.24% 785,214 1997
Portfolio - NQ 11.358330 11.511652 1.35% 419,072 1996
9.861504 11.358330 15.18% 152,273 1995
10.000000 9.861504 -1.38% 11,348 1994
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 13.023184 13.977022 7.32% 500,000 1998
Trust Government Bond 11.875401 13.023184 9.67% 500,000 1997
Portfolio - Initial Funding by 11.564087 11.875401 2.69% 500,000 1996
Depositor 9.910061 11.564087 16.69% 500,000 1995
10.000000 9.910061 -0.90% 500,000 1994
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 17.286833 23.685874 37.02% 1,184,086 1998
Trust Mid Cap Growth Portfolio - 13.492662 17.286833 28.12% 969,427 1997
Q (formerly Growth Opportunities 11.819338 13.492662 14.16% 569,164 1996
Fund) 9.652463 11.819338 22.45% 182,690 1995
10.000000 9.652463 -3.48% 37,250 1994
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 17.286833 23.685874 37.02% 2,752,495 1998
Trust Mid Cap Growth Portfolio - 13.492662 17.286833 28.12% 1,967,681 1997
NQ (formerly Growth 11.819338 13.492662 14.16% 1,083,660 1996
Opportunities Fund) 9.652463 11.819338 22.45% 385,700 1995
10.000000 9.652463 -3.48% 57,644 1994
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 18.067840 25.081612 38.82% 2,500 1998
Trust Mid Cap Growth Portfolio 13.919060 18.067840 29.81% 2,500 1997
(formerly 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
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 18.376907 25.623274 39.43% 2,360,235 1998
Trust Large Cap Growth Portfolio 14.112701 18.376907 30.22% 1,752,117 1997
- Q (formerly Large Company 12.255940 14.112701 15.15% 1,008,706 1996
Growth Fund) 10.003154 12.255940 22.52% 388,897 1995
10.000000 10.003154 0.03% 43,062 1994
- ------------------------------------------------------------------------------------------------------------------------
One Group Investment 18.376907 25.623274 39.43% 5,213,039 1998
Trust Large Cap Growth Portfolio 14.112701 18.376907 30.22% 3,368,336 1997
- NQ (formerly Large Company 12.255940 14.112701 15.15% 1,721,371 1996
Growth Fund) 10.003154 12.255940 22.52% 632,427 1995
10.000000 10.003154 0.03% 76,916 1994
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 15
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One Group Investment 19.206744 27.132525 41.27% 300,000 1998
Trust Large Cap Growth Portfolio 14.558482 19.206744 31.93% 300,000 1997
(formerly 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>
(1) The unit value information shown reflects the period from May 1, 1998 to
December 31, 1998.
* The 7-day yield on the NSAT Money Market Fund as of December 31, 1998 was
3.52%.
The One Group Investment Trust Bond Portfolio, One Group Investment Trust
Diversified Equity Portfolio, One Group Investment Trust Diversified Mid Cap
Portfolio, and One Group Investment Trust Mid Cap Value Portfolio were added to
the variable account September 1, 1999. Consequently, no condensed financial
information is available.
13
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<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law February,
1981, with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance products, annuities and retirement
products.
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide
Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio
43215. NAS is a wholly owned subsidiary of Nationwide 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.
The number of shares which a contract owner may vote is determined by dividing
the cash
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<PAGE> 17
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. The general account is not subject
to the same laws as the variable account and the SEC has not reviewed material
in this prospectus relating to the fixed account. However, information relating
to the fixed account is subject to federal securities laws relating to accuracy
and completeness of prospectus disclosure.
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 guaranteed interest rate(s) depending on the following
categories of fixed account allocations:
- - New Money Rate - The rate credited on the fixed account allocation when
the contract is purchased or when subsequent purchase payments are made.
Subsequent purchase payments may receive different New Money Rates than
the rate when the contract was issued, since the New Money Rate is subject
to change based on market conditions.
- - Variable Account to Fixed Rate - Allocations transferred from any of the
underlying investment options in the variable account to the fixed account
may receive a different rate. The rate may be lower than the New Money
Rate. There may be limits on the amount and frequency of movements from
the variable account to the fixed account.
- - Renewal Rate - The rate available for maturing fixed account allocations
which are entering a new guarantee period. The contract owner will be
notified of this rate in a letter issued with the quarterly statements
when any of the money in the contract owner's fixed account matures. At
that time, the contract owner will have an opportunity to leave the money
in the fixed account and receive the Renewal Rate or the contract owner
can move the money to any of the other underlying mutual fund options.
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<PAGE> 18
- - Dollar Cost Averaging Rate - From time to time, Nationwide may offer a
more favorable rate for an initial purchase payment into a new contract
when used in conjunction with a Dollar Cost Averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during the 12 month anniversary in which the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
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% 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.
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 CHARGE
Nationwide deducts a Mortality and Expense Risk Charge 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.
The expense risk charges compensate Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charge is 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. The CDSC will not exceed 7% of
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. For tax purposes, a surrender is usually treated
as a withdrawal of earnings first.
The CDSC applies as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------
NUMBER OF YEARS FROM DATE OF CDSC
PURCHASE PAYMENT PERCENTAGE
- ---------------------------------------------------
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- ---------------------------------------------------
</TABLE>
The CDSC is used to cover sales expenses, including commissions (maximum of 8.5%
of purchase payments), production of sales
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<PAGE> 19
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
For contracts issued before September 1, 1999, or a date on which state
insurance authorities approve applicable contract modifications, the contract
owner may withdraw, During the first contract year, 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.
For contracts issued on or after September 1, 1999, or a date on which state
insurance authorities approve applicable contract modifications, each contract
year the contract owner may withdraw without a CDSC the greater of:
a) 10% of purchase payments made to the contract; or
b) any amount withdrawn to meet the minimum distribution requirements
under the Internal Revenue Code.
This free withdrawal privilege is cumulative.
In addition, no CDSC will be deducted:
(1) upon annuitization;
(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
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
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<PAGE> 20
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 other date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
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. Contract owners 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 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 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.
On the annuitization date, the annuitant will become the contract owner, unless
the contract owner is a Charitable Remainder Trust.
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;
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<PAGE> 21
- - The exercise of any ownership right in the contract generally will require
a written request signed by both joint owners;
- - An election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently by either joint owner; and
- - 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 and 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 beneficiary(ies) survives 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.
If the contract owner is a Charitable Remainder Trust and the annuitant dies
before the annuitization date, the death benefit will accrue to the Charitable
Remainder Trust. Any designation in conflict with the Charitable Remainder
Trust's right to the death benefit will be void.
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 $ 0 $10
Annuity
Qualified $ 0 $10
- -----------------------------------------------------------
</TABLE>
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
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<PAGE> 22
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- - New Year's Day
- - Martin Luther King, Jr. Day
- - Presidents' Day
- - Good Friday
- - Memorial Day
- - Independence Day
- - Labor Day
- - Thanksgiving
- - Christmas
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held
in the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when conditions described in
(2) and (3) exist.
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.
DETERMINING THE CONTRACT VALUE
The contract value is:
1) the value of amounts allocated to the sub-accounts of the variable
account; and
2) amounts allocated to the fixed account.
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 sub-account and the fixed account based on current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where
(a) is:
(1) the net asset value of the underlying mutual fund as of the end of
the current valuation period; and
(2) the per share amount of any dividend or income distributions made by
the underlying mutual fund (if the ex-dividend date occurs during
the current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of the
end of the preceding valuation period.
(c) is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the contract owner. 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 the underlying mutual fund
shares
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<PAGE> 23
because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
2) adding any interest earned on the amounts allocated.
TRANSFERS
Transfers from the Fixed Account to the Variable Account
Fixed account allocations may be transferred to the variable account only upon
reaching the end of an Interest Rate Guarantee Period. Normally, Nationwide will
permit 100% of such fixed account allocations to be transferred to the variable
account; however, Nationwide may, under certain economic conditions and at its
discretion, limit the maximum transferable amount. The maximum transferable
amount will not be less than 25% of the fixed account allocation reaching the
end of an Interest Rate Guarantee Period. Transfers of the fixed account
allocations must be made within 45 days after reaching the end of an Interest
Rate Guarantee Period.
Transfers from the Variable Account to the Fixed Account
Variable account allocations may be transferred to the fixed account at any
time. Normally, Nationwide will not restrict transfers from the variable account
to the fixed account; however, Nationwide may establish a maximum transfer limit
from the variable account to the fixed account.
Under no circumstances will the transfer limit be less than 10% of the current
value of the variable account, less any transfers made in the 12 months
preceding the date the transfer is requested, but not including transfers made
prior to the imposition of the transfer limit. However, Nationwide may refuse
transfers or purchase payments to the fixed account when the fixed account value
is greater than or equal to 30% of the contract value at the time the purchase
payment is made or the transfer is requested.
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").
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
Transfer Requests
Nationwide will accept transfer requests in writing or over the telephone.
Nationwide will use reasonable procedures to confirm that telephone instructions
are genuine and will not be liable for following telephone instructions that it
reasonably determined to be genuine. Nationwide may withdraw the telephone
exchange privilege upon 30 days written notice to contract owners.
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
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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.
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 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.
Nationwide will pay any amount surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
Partial Surrenders (Partial Redemption)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account. The amount withdrawn from each investment option will be
in proportion to the value in each option at the time of the surrender request.
A CDSC may apply. The contract owner may direct Nationwide to deduct
the CDSC either from:
a) the amount requested; or
b) the contract value remaining after the contract owner has received
the amount requested.
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If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
Full Surrenders (Full Redemptions)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account charges, underlying mutual fund charges and the investment performance
of the underlying mutual funds.
A CDSC may apply.
SURRENDERS UNDER A TEXAS OPTIONAL RETIREMENT PROGRAM OR THE LOUISIANA
OPTIONAL RETIREMENT PLAN
Redemption restrictions apply to contracts issued under the Texas Optional
Retirement Program or the Louisiana Optional Retirement Plan.
The Texas Attorney General has ruled that participants in contracts issued under
the Texas Optional Retirement Program may only take withdrawals if:
the participant dies;
the participant retires;
the participant terminates employment due to total disability; or
the participant that works in a Texas public institution of higher education
terminates employment.
A participant under a contract issued under the Louisiana Optional Retirement
Plan may only take distributions from the contract upon retirement or
termination of employment. All retirement benefits under this type of plan must
be paid as lifetime income; lump sum cash payments are not permitted, except for
death benefits.
Due to the restrictions described above, a participant under either of these
plans will not be able to withdraw cash values from the contract unless one of
the applicable conditions is met. However, contract value may be transferred to
other carriers, subject to any CDSC.
Nationwide issues this contract to participants in the Texas Optional Retirement
Program in reliance upon and in compliance with Rule 6c-7 of the Investment
Company Act of 1940. Nationwide issues this contract to participants in the
Louisiana Optional Retirement Plan in reliance upon and in compliance with an
exemptive order that Nationwide received from the SEC on August 22, 1990.
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
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earnings and employer contributions as of December 31, 1988 in such
Custodial Accounts may be withdrawn in the case of hardship).
C. Any distribution other than the above, including a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not
violate the restrictions 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 may charge a Loan Processing Fee at the time each new loan is
processed. If assessed it compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not allow Nationwide to assess a Loan Processing Fee.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. 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.
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LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
DISTRIBUTIONS & ANNUITY PAYMENTS
Distributions made from the contract while a loan is outstanding will
be reduced by the amount of the outstanding loan plus accrued interest
if:
- 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 and the fixed account into other
sub-accounts. 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
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested. A dollar cost
averaging program which transfers amounts from the fixed account to the variable
account is not the same as an enhanced rate dollar cost averaging program.
Contract owners who wish to utilize dollar cost averaging from the fixed account
should first inquire as to whether any enhanced rate dollar cost averaging
programs are available.
Transfers occur monthly or on another frequency if permitted by Nationwide. The
minimum monthly transfer is $100. 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.
Enhanced Rate Dollar Cost Averaging Program
Nationwide may, from time to time, offer enhanced rate dollar cost averaging
programs. Dollar cost averaging transfers for this program may only be made from
the fixed account. Such enhanced rate dollar cost averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
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").
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Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59-1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
Nationwide reserves the right to stop establishing new systematic
withdrawal programs. Nationwide also reserves the right to assess a
processing fee for this service. Systematic withdrawals are not
available before the end of the ten-day free look period (see "Right to
Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a
Qualified Plan or Tax Sheltered Annuity plan, annuitization may occur during the
first 2 years subject to Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payment
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value;
then
2) applying the contract value amount specified by the contract owner
to the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value;
then
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
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payments will vary with the performance of the selected underlying mutual funds.
Nationwide guarantees that variations in mortality experience from assumptions
used to calculate the first payment will not affect the dollar amount of the
second and subsequent payments.
ASSUMED INVESTMENT RATE
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment.
The assumed investment rate of 3.5% is the percentage rate of return required to
maintain level variable annuity payments. Subsequent variable annuity payments
may be more or less than the first based on whether actual investment
performance is higher or lower than the assumed investment rate of 3.5%.
VALUE OF AN ANNUITY UNIT
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
EXCHANGES AMONG UNDERLYING MUTUAL FUNDS
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- - 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 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.
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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.
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 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).
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 September 1, 1999, or a
date on which state insurance authorities approve applicable contract
modifications:
- - If the annuitant dies on or after his or her 86th 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 86th 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, plus purchase
payment received after that 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 surrenders.
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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 modifications and prior
to September 1, 1999 or a date on which state insurance authorities approve
applicable contract modifications:
- - If the annuitant dies on or prior to his or her 75th birthday and prior
to the annuitization date, the dollar amount of the death benefit will
be the greatest of:
1) the contract value;
2) the sum of all purchase payments, less an adjustment for amounts
surrendered; or
3) the contract value as of the most recent five year contract
anniversary, less an adjustment for amounts surrendered since that most
recent five year contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3)
above in the same proportion that the contract value was reduced on the
date(s) of the partial surrender(s).
- - 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.
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 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.
- - 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.
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:
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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.
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 Benefit provisions ("MDIB")
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.
Distributions commencing on the required distribution date must satisfy MDIB
provisions set forth in the Internal Revenue Code. Those provisions require that
distribution cannot be less than the amount determined by dividing the
annuitant's interest in the tax sheltered annuity by the end of the previous
calendar year by:
a) the annuitant's life expectancy, or if applicable;
b) the joint and survivor life expectancy of the annuitant and the
annuitant's beneficiary.
The life expectancies and joint life expectancies are determined by reference to
Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the Qualified
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
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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
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.
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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:
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 Tax Considerations").
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.
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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 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 and Qualified Contracts
Distributions from Tax Sheltered Annuities and Qualified Contracts are generally
taxed when received. A portion of each distribution is excludable from income
based on a formula required by the Internal Revenue Code. The formula excludes
from income the amount invested in the contract divided by the number of
anticipated payments (as determined pursuant to Section 72(d) of the Internal
Revenue Code) until the full investment in the contract is recovered. Thereafter
all distributions are fully taxable.
Non-Qualified Contracts - Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment is excludable from taxable income based on the ratio between the
contract owner's investment in the contract and the expected return on the
contract until the investment has been recovered. Thereafter the entire amount
is includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income, and no additional payments are
due after his or her death, then he or she may be entitled to a deduction for
the balance of the investment on his or her final income tax return.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, dividends, loans, or any portion of the contract
that is assigned or
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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 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; or
5) is allocable to an investment in the contract before August 14,
1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death. These rules are described in "Required
distributions for Non-Qualified Contracts."
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code,
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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 as an agent for an individual is
treated as owned by the individual. This would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred 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 from Individual Retirement Annuities or Individual Retirement
Accounts, 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 all or a portion of the four year spread, subjecting the amount
deferred under the four year election to current taxation.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required) or if it is
an eligible rollover distribution.
Mandatory back-up withholding rates are 31% of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in accordance
with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross income
for United States federal income tax purposes.
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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 be subject to
estate taxes, even if all or a portion of the value is also subject to federal
income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue Code
(generally, trusts that have no beneficiaries who are not 2 or more
generations younger than the contract owner).
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
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
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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 statements and reports. 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 many computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. The shareholder services
system that supports mutual fund products was fully deployed during the first
quarter 1999. Conversions of existing traditional life policies to the new
compliant system will continue through second quarter 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide's facilities in Columbus, Ohio have been inventoried, assessed, and
tested as being Year 2000 compliant. Systems supporting Nationwide's
infrastructure such as telecommunications, voice and networks were renovated and
will be brought into compliance before the end of the second quarter 1999.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners utilizing electronic interfaces with
Nationwide and processes have been put in
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<PAGE> 42
place to allow Nationwide to accept data regardless of the format.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, Nationwide has contacted mutual fund
organizations that provide funds for Nationwide's variable annuity and life
products and wholesale producers to determine when they will be Year 2000
compliant. The results are currently being gathered and analyzed.
In addition to the contingency plans developed for electronic interfaces between
Nationwide and its business partners, contingency plans were also developed for
wholesale producers who may not become compliant before the end of 1999.
Additional contingency plans will be developed for mutual fund organizations
during the second quarter 1999. Nationwide has identified external risk
scenarios, prioritized those risks and is now in the process of developing
contingency plans to minimize the impact to Nationwide, customers and producers.
Contingency plan efforts are expected to be completed by the end of the third
quarter 1999.
Operating expenses in 1998 and 1997 include approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Nationwide anticipates spending less than $5 million on Year 2000
activities in 1999, and spent $2.4 million during first quarter 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.
LEGAL PROCEEDINGS
Nationwide Life and Annuity Insurance Company ("Nationwide") is a party to
litigation and arbitration proceedings in the ordinary course of its business,
none of which is expected to have a material adverse effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified compensatory and punitive damages. Nationwide
currently is evaluating this lawsuit, which has not been certified as a class.
Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on
Nationwide in the future.
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT-Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT-Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT-Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
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<PAGE> 43
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; and
- 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 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
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<PAGE> 44
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, 1998.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
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<PAGE> 45
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 12/31/98 12/31/98 Account to 12/31/98 Variable Account
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 4.78% N/A 18.24% 08/01/94
Fidelity VIP Overseas Portfolio 5.89% N/A 7.70% 08/01/94
NSAT - Money Market Fund -1.50% N/A 3.35% 08/01/94
NSAT - Total Return Fund 11.14% N/A 19.56% 08/01/94
One Group Investment Trust Balanced 12.14% N/A 14.46% 08/01/94
Portfolio (formerly Asset Allocation
Fund)
One Group Investment Trust Equity N/A N/A 7.64% 05/01/98
Index Portfolio (1)
One Group Investment Trust Government 0.53% N/A 5.99% 08/01/94
Bond Portfolio
One Group Investment Trust Mid Cap 31.62% N/A 21.25% 08/01/94
Growth Portfolio (formerly Growth
Opportunities Fund)
One Group Investment Trust Large Cap 34.03% N/A 23.45% 08/01/94
Growth Portfolio (formerly Large
Company Growth Fund)
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 years to
1 Year to 5 Years to 12/31/98 or the Date Fund
Sub-Account Options 12/31/98 12/31/98 Life of the Fund Effective
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 10.18% 17.23% 14.12% 10/09/86
Fidelity VIP Overseas Portfolio 11.29% 8.28% 8.65% 01/28/87
NSAT - Money Market Fund 3.90% 3.67% 4.05% 11/10/81
NSAT - Total Return Fund 16.54% 17.88% 13.94% 11/08/82
One Group Investment Trust Balanced 17.54% N/A 14.84% 08/01/94
Portfolio (formerly Asset Allocation
Fund)
One Group Investment Trust Equity N/A N/A 9.56% 05/01/98
Index Portfolio(1)
One Group Investment Trust Government 5.93% N/A 6.49% 08/01/94
Bond Portfolio
One Group Investment Trust Mid Cap 37.02% N/A 21.56% 08/01/94
Growth Portfolio (formerly Growth
Opportunities Fund)
One Group Investment Trust Large Cap 39.43% N/A 23.75% 08/01/94
Growth Portfolio (formerly Large
Company Growth Fund)
</TABLE>
(1) The One Group Investment Trust - Equity Index Portfolio was added to the
variable account on May 1, 1998. Consequently, the performance information shown
reflects the period from May 1, 1998 through December 31, 1998.
The One Group Investment Trust Bond Portfolio, One Group Investment Trust
Diversified Equity Portfolio, One Group Investment Trust Diversified Mid Cap
Portfolio, and One Group Investment Trust Mid Cap Value Portfolio were added to
the variable account September 1, 1999. Consequently, no performance information
is available.
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<PAGE> 46
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE
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
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<PAGE> 47
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.
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.
ONE GROUP(R) INVESTMENT TRUST
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. One Group(R) Investment Trust offers shares in the 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 One Group(R) Investment Trust are managed by Banc One
Investment Advisers Corporation.
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO (FORMERLY ASSET ALLOCATION
FUND)
Investment Objective: The Portfolio seeks to provide total return
while preserving capital.
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO
Investment Objective: The Portfolio seeks 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 Portfolio.
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO
Investment Objective: The Portfolio seeks a high level of current income
with liquidity and safety of principal.
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO (FORMERLY GROWTH
OPPORTUNITIES FUND)
Investment Objective: The Portfolio seeks growth of capital and,
secondarily, current income, by investing primarily in equity securities.
Issuers will include medium sized companies with a history of above-average
growth or companies that are expected to enter periods of above-average
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<PAGE> 48
growth, and smaller companies which are positioned in emerging growth
industries.
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO (FORMERLY LARGE
COMPANY GROWTH FUND)
Investment Objective: The Portfolio seeks long-term capital appreciation
and growth of income by investing primarily in equity securities.
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO
Investment Objective: The Portfolio seeks to maximize total return by
investing primarily in a diversified portfolio of intermediate and
long-term debt securities.
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
Investment Objective: The Portfolio seeks long-term capital growth and
growth of income with a secondary objective of providing a moderate level
of current income.
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
Investment Objective: The Portfolio seeks long term capital growth by
investing primarily in equity securities of companies with intermediate
capitalizations.
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO
Investment Objective: The Portfolio seeks capital appreciation with the
secondary goal of achieving current income by investing primarily in equity
securities.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP")
The Fidelity Variable Insurance Products Funds are not available to contracts
issued on or after September 1, 1999.
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.
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<PAGE> 49
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 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
September 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
PAGE
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
GENERAL INFORMATION AND HISTORY
The Nationwide VA Separate Account-C is a separate investment account of
Nationwide Life and Annuity Insurance Company ("Nationwide"). 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 (95.24%) and
Nationwide Mutual Fire Insurance Company (4.76%), the ultimate controlling
persons of Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise
is one of America's largest insurance and financial services family of
companies, with combined assets of over $98.28 billion as of December 31, 1998.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each 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.
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<PAGE> 50
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The contracts are sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Agents are registered representatives of
broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
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 after the 12 month period. Transfers under this provision
must be made within 45 days after the termination date of the guarantee period.
Contract 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 a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1998, the
NSAT-Money Market Fund's seven-day current unit value yield was 3.52%. 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, 1998 the seven-day
effective yield for the NSAT-Money Market Fund was 3.58%.
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.
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<PAGE> 51
Yields of other money market funds may not be comparable if a different basis or
another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with standard method prescribed by
rules of the SEC. Standardized average annual return is found by taking a
hypothetical $1,000 investment in each of the sub-accounts' units on the first
day of the period at the offering price, which is the accumulation unit value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. 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 and Expense Risk Charge 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 the original
cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
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<PAGE> 1
================================================================================
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VA Separate Account-C:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VA Separate Account-C as of December 31,
1998, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide VA Separate
Account-C as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for each of the years in the two year period
then ended in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
================================================================================
<PAGE> 2
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
4,698,474 shares (cost $100,352,362)..................................................... $ 119,435,202
Fidelity VIP - Overseas Portfolio (FidVIPOv)
948,326 shares (cost $17,563,972)........................................................ 19,013,936
Nationwide SAT - Money Market Fund (NSATMyMkt)
9,721,545 shares (cost $9,721,545)....................................................... 9,721,545
Nationwide SAT - Total Return Fund (NSATTotRe)
4,346,223 shares (cost $65,918,788)...................................................... 79,970,511
One Group - Asset Allocation Fund (OGAstAll)
6,806,570 shares (cost $91,697,265)...................................................... 103,051,463
One Group - Equity Index Fund (OGEqIx)
1,249,094 shares (cost $12,445,896)...................................................... 13,702,564
One Group - Government Bond Fund (OGGvtBd)
3,969,880 shares (cost $41,485,994)...................................................... 42,239,520
One Group - Growth Opportunities Fund (OGGrOpp)
5,003,408 shares (cost $71,154,099)...................................................... 92,663,114
One Group - Large Company Growth Fund (OGLgCoGr)
8,934,545 shares (cost $146,873,116)..................................................... 202,188,741
-------------
Total investments................................................................... 681,986,596
Accounts receivable................................................................................ 15,346
-------------
Total assets........................................................................ 682,001,942
Accounts payable ....................................................................................... --
-------------
Contract owners' equity................................................................................. $ 682,001,942
=============
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(b)
-------- --------- ---------
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified............................ 1,945,917 $21.229680 $41,311,195 10%
Non-tax qualified........................ 3,679,860 21.229680 78,124,373 10%
Fidelity VIP - Overseas Portfolio:
Tax qualified............................ 360,308 14.144224 5,096,277 11%
Non-tax qualified........................ 983,989 14.144224 13,917,761 11%
Nationwide SAT - Money Market Fund:
Tax qualified............................ 318,412 11.836880 3,769,005 4%
Non-tax qualified........................ 503,644 11.836880 5,961,574 4%
Nationwide SAT - Total Return Fund:
Tax qualified............................ 1,225,858 22.281011 27,313,356 17%
Non-tax qualified........................ 2,363,345 22.281011 52,657,716 17%
One Group - Asset Allocation Fund:
Tax qualified............................ 1,717,800 18.423578 31,648,022 18%
Non-tax qualified........................ 3,772,445 18.423578 69,501,935 18%
Initial Funding by Depositor (note 1a) 97,500 19.509120 1,902,139 19%
One Group - Equity Index Fund:
Tax qualified............................ 252,427 10.955610 2,765,492 10%(a)
Non-tax qualified........................ 746,119 10.955610 8,174,189 10%(a)
Initial Funding by Depositor (note 1a)... 250,000 11.051791 2,762,948 11%(a)
One Group - Government Bond Fund:
Tax qualified............................ 955,478 13.199019 12,611,372 6%
Non-tax qualified........................ 1,715,256 13.199019 22,639,697 6%
Initial Funding by Depositor (note 1a)... 500,000 13.977022 6,988,511 7%
One Group - Growth Opportunities Fund:
Tax qualified............................ 1,184,086 23.685874 28,046,112 37%
Non-tax qualified........................ 2,725,495 23.685874 64,555,731 37%
Initial Funding by Depositor (note 1a)... 2,500 25.081612 62,704 39%
One Group - Large Company Growth Fund:
Tax qualified............................ 2,360,235 25.623274 60,476,948 39%
Non-tax qualified........................ 5,213,039 25.623274 133,575,127 39%
Initial Funding by Depositor (note 1a)... 300,000 27.132525 8,139,758 41%
========= ========= ------------
$682,001,942
============
</TABLE>
(a) This investment option was not being utilized for the entire period.
Accordingly, the annual return was computed for such period as the
investment option was utilized.
(b) The annual return does not include contract charges satisfied by
surrendering units.
See accompanying notes to financial statements.
================================================================================
<PAGE> 4
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL FIDVIPEI
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 6,907,178 4,265,024 1,240,121 715,785
Mortality, expense and administration
charges (note 2) .............................. (6,556,701) (3,381,832) (1,374,929) (831,713)
------------- ------------- ------------- -------------
Net investment activity ..................... 350,477 883,192 (134,808) (115,928)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ........... 19,122,996 11,087,093 1,736,107 833,449
Cost of mutual fund shares sold ................. (16,568,897) (10,118,939) (1,159,168) (586,402)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 2,554,099 968,154 576,939 247,047
Change in unrealized gain (loss) on investments 77,317,019 35,424,272 4,686,743 10,419,343
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 79,871,118 36,392,426 5,263,682 10,666,390
------------- ------------- ------------- -------------
Reinvested capital gains ........................ 28,599,549 17,620,814 4,413,373 3,598,807
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 108,821,144 54,896,432 9,542,247 14,149,269
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 222,935,462 164,145,907 30,085,527 33,139,661
Transfers between funds ......................... -- -- (996,269) 1,982,841
Redemptions ..................................... (25,865,354) (9,912,134) (5,624,154) (2,166,009)
Contingent deferred sales charges (note 2) ...... (753,231) (345,222) (149,745) (82,994)
Adjustments to maintain reserves ................ 1,451 2,745 (7,404) 2,207
------------- ------------- ------------- -------------
Net equity transactions ................... 196,318,328 153,891,296 23,307,955 32,875,706
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 305,139,472 208,787,728 32,850,202 47,024,975
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 376,862,470 168,074,742 86,585,366 39,560,391
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 682,001,942 376,862,470 119,435,568 86,585,366
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FIDVIPOV NSATMYMKT
------------------------------ ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 294,761 140,536 480,416 410,915
Mortality, expense and administration
charges (note 2) .............................. (228,517) (155,335) (122,603) (104,872)
------------- ------------- ------------- -------------
Net investment activity ..................... 66,244 (14,799) 357,813 306,043
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ........... 1,146,502 296,780 8,738,658 7,532,542
Cost of mutual fund shares sold ................. (950,918) (247,708) (8,738,658) (7,532,542)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 195,584 49,072 -- --
Change in unrealized gain (loss) on investments 503,877 230,256 -- --
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 699,461 279,328 -- --
------------- ------------- ------------- -------------
Reinvested capital gains ........................ 868,768 557,884 -- --
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,634,473 822,413 357,813 306,043
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 3,919,692 6,345,492 6,090,757 12,257,596
Transfers between funds ......................... (647,967) 555,514 (5,087,475) (7,836,939)
Redemptions ..................................... (950,606) (287,407) (416,008) (1,106,114)
Contingent deferred sales charges (note 2) ...... (34,219) (11,122) (14,645) (12,456)
Adjustments to maintain reserves ................ 71 210 294 853
------------- ------------- ------------- -------------
Net equity transactions ................... 2,286,971 6,602,687 572,923 3,302,940
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 3,921,444 7,425,100 930,736 3,608,983
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 15,092,594 7,667,494 8,799,843 5,190,860
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. 19,014,038 15,092,594 9,730,579 8,799,843
============= ============= ============= =============
</TABLE>
<PAGE> 5
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NSATTOTRE OGASTALL
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 714,940 581,993 1,900,182 851,407
Mortality, expense and administration
charges (note 2) .............................. (878,488) (486,093) (900,997) (327,460)
------------ ------------ ------------ ------------
Net investment activity ..................... (163,548) 95,900 999,185 523,947
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ........... 1,676,825 1,234,589 267,312 230,267
Cost of mutual fund shares sold ................. (1,050,209) (782,774) (195,743) (180,939)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 626,616 451,815 71,569 49,328
Change in unrealized gain (loss) on investments . 6,183,757 6,133,091 9,178,113 1,354,415
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 6,810,373 6,584,906 9,249,682 1,403,743
------------ ------------ ------------ ------------
Reinvested capital gains ........................ 3,111,349 1,667,393 1,265,780 2,977,924
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 9,758,174 8,348,199 11,514,647 4,905,614
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 20,869,076 23,481,911 52,234,693 21,558,362
Transfers between funds ......................... 86,250 990,636 1,921,949 739,176
Redemptions ..................................... (3,156,765) (1,737,301) (3,341,994) (662,596)
Contingent deferred sales charges (note 2) ...... (89,208) (60,534) (92,789) (23,352)
Adjustments to maintain reserves ................ (98) 5,636 (900) 7
------------ ------------ ------------ ------------
Net equity transactions ................... 17,709,255 22,680,348 50,720,959 21,611,597
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 27,467,429 31,028,547 62,235,606 26,517,211
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 52,503,643 21,475,096 40,816,490 14,299,279
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 79,971,072 52,503,643 103,052,096 40,816,490
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OGEQIX OGGVTBD
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 69,595 -- 1,741,737 1,067,051
Mortality, expense and administration
charges (note 2) .............................. (39,561) -- (314,513) (149,083)
------------ ------------ ------------ ------------
Net investment activity ..................... 30,034 -- 1,427,224 917,968
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ........... 534,659 -- 2,245,378 475,970
Cost of mutual fund shares sold ................. (564,922) -- (2,196,128) (475,470)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. (30,263) -- 49,250 500
Change in unrealized gain (loss) on investments . 1,256,668 -- 201,662 586,023
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 1,226,405 -- 250,912 586,523
------------ ------------ ------------ ------------
Reinvested capital gains ........................ -- -- 105,068 41,992
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,256,439 -- 1,783,204 1,546,483
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 12,077,730 -- 17,834,339 6,064,947
Transfers between funds ......................... 398,461 -- 1,944,922 493,915
Redemptions ..................................... (28,766) -- (1,686,406) (359,045)
Contingent deferred sales charges (note 2) ...... (1,300) -- (31,392) (9,910)
Adjustments to maintain reserves ................ 65 -- 8,956 43
------------ ------------ ------------ ------------
Net equity transactions ................... 12,446,190 -- 18,070,419 6,189,950
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 13,702,629 -- 19,853,623 7,736,433
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... -- -- 22,385,957 14,649,524
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. 13,702,629 -- 42,239,580 22,385,957
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
OGGROPP OGLGCOGR
------------------------------ ------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ -- -- 465,426 497,337
Mortality, expense and administration
charges (note 2) .............................. (870,837) (471,076) (1,826,256) (856,200)
-------------- -------------- -------------- --------------
Net investment activity ..................... (870,837) (471,076) (1,360,830) (358,863)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ........... 1,692,146 238,598 1,085,409 244,898
Cost of mutual fund shares sold ................. (1,119,894) (172,586) (593,257) (140,518)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............. 572,252 66,012 492,152 104,380
Change in unrealized gain (loss) on investments . 17,992,207 3,478,714 37,313,992 13,222,430
-------------- -------------- -------------- --------------
Net gain (loss) on investments .............. 18,564,459 3,544,726 37,806,144 13,326,810
-------------- -------------- -------------- --------------
Reinvested capital gains ........................ 5,435,045 4,836,828 13,400,166 3,939,986
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 23,128,667 7,910,478 49,845,480 16,907,933
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 22,224,086 20,472,239 57,599,562 40,825,699
Transfers between funds ......................... (171,521) 1,411,094 2,551,650 1,663,763
Redemptions ..................................... (3,230,769) (1,253,599) (7,429,886) (2,340,063)
Contingent deferred sales charges (note 2) ...... (105,798) (54,360) (234,135) (90,494)
Adjustments to maintain reserves ................ 1,416 (3,179) (949) (3,032)
-------------- -------------- -------------- --------------
Net equity transactions ................... 18,717,414 20,572,195 52,486,242 40,055,873
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 41,846,081 28,482,673 102,331,722 56,963,806
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 50,818,466 22,335,793 99,860,111 42,896,305
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 92,664,547 50,818,466 202,191,833 99,860,111
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
================================================================================
<PAGE> 7
================================================================================
NATIONWIDE VA SEPARATE ACCOUNT-C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide VA Separate Account-C (the Account) was established pursuant
to a resolution of the Board of Directors of Nationwide Life and
Annuity Insurance Company (the Company) on July 24, 1991. The Account
has been registered as a unit investment trust under the Investment
Company Act of 1940.
On August 17, 1994, the Company (Depositor) transferred to the Account
97,500 shares of the One Group-Asset Allocation Fund, 500,000 shares of
the One Group-Government Bond Fund, 2,500 shares of the One
Group-Growth Opportunities Fund and 300,000 shares of the One
Group-Large Company Growth Fund, for which the Account was credited
with 97,500 units of the One Group-Asset Allocation Fund, 500,000 units
of the One Group-Government Bond Fund, 2,500 units of the One
Group-Growth Opportunities Fund and 300,000 units of the One
Group-Large Company Growth Fund. These amounts represent the initial
funding of the Account. The value of the units purchased by the Company
on August 17, 1994 was $9,000,000.
On May 1, 1998, the Company (Depositor) transferred to the Account,
250,000 shares of the One Group - Equity Index Fund, for which the
Account was credited with 250,000 units of the foregoing One Group
Fund. The value of the units purchased by the Company on May 1, 1998
was $2,500,000.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts through the Account. The primary
distribution for the contracts is through banks and other financial
institutions.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase.
See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in any of the following funds:
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Funds of the Nationwide Separate Account Trust (Nationwide
SAT) (managed for a fee by an affiliated investment advisor);
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Funds of The One Group(R) Investment Trust (One Group);
One Group - Asset Allocation Fund (OGAstAll)
One Group - Equity Index Fund (OGEqIx)
One Group - Government Bond Fund (OGGvtBd)
One Group - Growth Opportunities Fund (OGGrOpp)
One Group - Large Company Growth Fund (OGLgCoGr)
At December 31, 1998, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
<PAGE> 8
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1998. The cost of investments
sold is determined on a specific identification basis. Investment
transactions are accounted on the trade date (date the order to buy or
sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge not to exceed 7% of the lesser of purchase payments or the amount
surrendered, such charge declining 1% per year, to 0%, after the purchase
payment has been held in the contract for 84 months. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The Company deducts a mortality risk charge, an expense risk charge and an
administration charge assessed through the daily unit value calculation
equal to an annual rate of 0.80%, 0.45% and 0.05%, respectively. No charges
are deducted from the initial funding by the Depositor, or from earnings
thereon.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
================================================================================
<PAGE> 53
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life and Annuity Insurance Company:
We have audited the accompanying balance sheets of Nationwide Life and Annuity
Insurance Company, a wholly owned subsidiary of Nationwide Life Insurance
Company, as of December 31, 1998 and 1997, and the related statements of income,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nationwide Life and Annuity
Insurance Company as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
($000's omitted, except per share amounts)
<TABLE>
<CAPTION>
December 31,
Assets 1998 1997
---- ----
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $ 904,946 $ 796,919
Equity securities 20,853 14,767
Mortgage loans on real estate, net 268,894 218,852
Real estate, net 2,250 2,824
Policy loans 332 215
Short-term investments 2,277 18,968
---------- ----------
1,199,552 1,052,545
---------- ----------
Cash 2 5,163
Accrued investment income 11,645 10,778
Deferred policy acquisition costs 53,007 30,087
Other assets 41,542 15,624
Assets held in separate accounts 1,533,690 891,101
---------- ----------
$2,839,438 $2,005,298
========== ==========
Liabilities and Shareholder's Equity
Future policy benefits and claims $1,163,829 $ 986,191
Other liabilities 25,933 29,426
Liabilities related to separate accounts 1,533,690 891,101
---------- ----------
2,723,452 1,906,718
---------- ----------
Commitments and contingencies (note 7 and 11)
Shareholder's equity:
Common stock, $40 par value. Authorized, issued and outstanding 66,000 shares 2,640 2,640
Additional paid-in capital 52,960 52,960
Retained earnings 50,331 35,812
Accumulated other comprehensive income 10,055 7,168
---------- ----------
115,986 98,580
---------- ----------
$2,839,438 $2,005,298
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
($000's omitted)
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Policy charges $ 28,549 $ 11,244 $ 6,656
Life insurance premiums 63 363 246
Net investment income 11,314 11,577 51,045
Realized gains (losses) on investments 696 (246) (3)
Other income 1,165 1,057 --
-------- -------- --------
41,787 23,995 57,944
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 4,881 3,948 34,711
Other benefits and claims 1,586 433 813
Amortization of deferred policy acquisition costs 4,348 1,402 7,380
Other operating expenses 8,952 1,860 7,247
-------- -------- --------
19,767 7,643 50,151
-------- -------- --------
Income before federal income tax expense 22,020 16,352 7,793
Federal income tax expense 7,501 5,749 2,707
-------- -------- --------
Net income $ 14,519 $ 10,603 $ 5,086
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
($000's omitted)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 2,640 $ 52,960 $ 20,123 $ 4,454 $ 80,177
Comprehensive income:
Net income -- -- 5,086 -- 5,086
Net unrealized losses on securities
available-for-sale arising during the -- -- -- (1,226) (1,226)
year
---------
Total comprehensive income 3,860
--------- --------- --------- --------- ---------
December 31, 1996 2,640 52,960 25,209 3,228 84,037
Comprehensive income:
Net income -- -- 10,603 -- 10,603
Net unrealized gains on securities
available-for-sale arising during the -- -- -- 3,940 3,940
year
---------
Total comprehensive income 14,543
--------- --------- --------- --------- ---------
December 31, 1997 2,640 52,960 35,812 7,168 98,580
Comprehensive income:
Net income -- -- 14,519 -- 14,519
Net unrealized gains on securities
available-for-sale arising during the -- -- -- 2,887 2,887
year
---------
Total comprehensive income 17,406
--------- --------- --------- --------- ---------
December 31, 1998 $ 2,640 $ 52,960 $ 50,331 $ 10,055 $ 115,986
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
($000's omitted)
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,519 $ 10,603 $ 5,086
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to policyholder account balances 4,881 3,948 34,711
Capitalization of deferred policy acquisition costs (29,216) (20,099) (19,987)
Amortization of deferred policy acquisition costs 4,348 1,402 7,380
Commission and expense allowances under coinsurance
agreement with affiliate -- -- 26,473
Amortization and depreciation (479) 250 1,721
Realized (gains) losses on invested assets, net (696) 246 3
Increase in accrued investment income (867) (1,589) (725)
(Increase) decrease in other assets (25,919) 21,858 (32,539)
Increase (decrease) in policy liabilities and funds withheld
on coinsurance agreement with affiliate 139,991 228,898 (7,101)
(Decrease) increase in other liabilities (3,883) (7,488) 23,198
--------- --------- ---------
Net cash provided by operating activities 102,679 238,029 38,220
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 117,228 95,366 73,966
Proceeds from sale of securities available-for-sale 17,403 30,431 2,480
Proceeds from repayments of mortgage loans on real estate 28,180 15,199 10,975
Proceeds from sale of real estate 707 -- --
Proceeds from repayments of policy loans 99 67 23
Cost of securities available-for-sale acquired (242,516) (267,899) (179,671)
Cost of mortgage loans on real estate acquired (78,180) (84,736) (57,395)
Cost of real estate acquired (3) (13) --
Policy loans issued (216) (155) (55)
Short-term investments, net 16,691 (18,476) 4,352
--------- --------- ---------
Net cash used in investing activities (140,607) (230,216) (145,325)
--------- --------- ---------
Cash flows from financing activities:
Increase in investment product and universal life insurance
product account balances 74,828 6,952 200,575
Decrease in investment product and universal life insurance
product account balances (42,061) (13,898) (89,174)
--------- --------- ---------
Net cash provided by (used in) financing activities 32,767 (6,946) 111,401
--------- --------- ---------
Net (decrease) increase in cash (5,161) 867 4,296
Cash, beginning of year 5,163 4,296 --
--------- --------- ---------
Cash, end of year $ 2 $ 5,163 $ 4,296
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1998, 1997 and 1996
($000's omitted)
(1) Organization and Description of Business
Nationwide Life and Annuity Insurance Company (the Company) is a wholly
owned subsidiary of Nationwide Life Insurance Company (NLIC).
The Company provides long-term savings and retirement products,
including variable annuities, fixed annuities and life insurance.
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, which differ from statutory
accounting practices prescribed or permitted by regulatory authorities.
An Annual Statement, filed with the Department of Insurance of the
State of Ohio (the Department), is prepared on the basis of accounting
practices prescribed or permitted by the Department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosures of contingent assets and
liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses for the reporting period. Actual
results could differ significantly from those estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1998 or 1997.
<PAGE> 7
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Impairment losses are recorded on long-lived
assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(b) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual variable and
fixed deferred annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of certain annuities with life
contingencies. Premiums for traditional life insurance products
are recognized as revenue when due. Benefits and expenses are
associated with earned premiums so as to result in recognition of
profits over the life of the contract. This association is
accomplished by the provision for future policy benefits and the
deferral and amortization of policy acquisition costs.
(c) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(a).
(d) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the separate accounts is not reflected in the
statements of income and cash flows except for the fees the
Company receives.
<PAGE> 8
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(e) Future Policy Benefits
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 5.1%, 5.1% and 5.6% for the years ended
December 31, 1998, 1997 and 1996, respectively.
(f) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC). The members of the
consolidated tax return group have a tax sharing agreement which
provides, in effect, for each member to bear essentially the same
federal income tax liability as if separate tax returns were
filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(g) Reinsurance Ceded
Reinsurance revenues ceded and reinsurance recoveries on benefits
and expenses incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(h) Statements of Cash Flows
The Company routinely invests its available cash balances in
highly liquid, short-term investments with affiliated companies.
See note 10. As such, the Company had no cash balance as of
December 31, 1995.
(i) Recently Issued Accounting Pronouncements
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 12.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits. SFAS
132 revises employers' disclosures about pension and other
postretirement benefit plans. The Statement does not change the
measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(j) Reclassification
Certain items in the 1997 and 1996 financial statements have been
reclassified to conform to the 1998 presentation.
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1998 and
1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 15,577 $ 232 $ (11) $ 15,798
Obligations of states and political subdivisions 332 1 -- 333
Debt securities issued by foreign governments 4,015 23 -- 4,038
Corporate securities 602,925 15,446 (358) 618,013
Mortgage-backed securities 261,225 5,605 (66) 266,764
--------- --------- --------- ---------
Total fixed maturity securities 884,074 21,307 (435) 904,946
Equity securities 15,323 5,530 -- 20,853
--------- --------- --------- ---------
$ 899,397 $ 26,837 $ (435) $ 925,799
========= ========= ========= =========
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 5,923 $ 109 $ (27) $ 6,005
Obligations of states and political subdivisions 267 5 -- 272
Debt securities issued by foreign governments 6,077 57 (1) 6,133
Corporate securities 482,478 10,964 (509) 492,933
Mortgage-backed securities 285,224 6,458 (106) 291,576
--------- --------- --------- ---------
Total fixed maturity securities 779,969 17,593 (643) 796,919
Equity securities 11,704 3,063 -- 14,767
--------- --------- --------- ---------
$ 791,673 $ 20,656 $ (643) $ 811,686
========= ========= ========= =========
</TABLE>
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $121,769 $122,931
Due after one year through five years 606,626 621,349
Due after five years through ten years 126,215 130,402
Due after ten years 29,464 30,264
-------- --------
$884,074 $904,946
======== ========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 26,402 $ 20,013
Adjustment to deferred policy acquisition costs (10,933) (8,985)
Deferred federal income tax (5,414) (3,860)
-------- --------
$ 10,055 $ 7,168
======== ========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3,922 $ 9,177 $ (8,764)
Equity securities 2,467 1,663 249
-------- -------- --------
$ 6,389 $ 10,840 $ (8,515)
======== ======== ========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $17,403, $30,431 and $2,480, respectively. During
1998, gross gains of $509 ($825 and $181 in 1997 and 1996,
respectively) and gross losses of $0 ($1,124 and none in 1997 and 1996,
respectively) were realized on those sales. See note 10.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $890 (none as of December 31,
1997). No valuation allowance has been recorded for these loans as of
December 31, 1998. During 1998, the average recorded investment in
impaired mortgage loans on real estate was approximately $178 ($386 in
1997) and interest income recognized on those loans was $15 (none in
1997), which is equal to interest income recognized using a cash-basis
method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $ 750 $ 934
Reductions credited to operations -- (53)
Direct write-downs charged against the allowance -- (131)
----- -----
Allowance, end of year $ 750 $ 750
===== =====
</TABLE>
<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Real estate is presented at cost less accumulated depreciation of $105
as of December 31, 1998 ($153 as of December 31, 1997). There was a
valuation allowance of $229 as of December 31, 1997.
The Company has no investments which were non-income producing for the
twelve month periods preceding December 31, 1998 and 1997.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $56,398 $53,491 $40,552
Equity securities -- 375 598
Mortgage loans on real estate 21,124 14,862 9,991
Real estate 379 318 214
Short-term investments 1,361 899 507
Other 178 90 57
------- ------- -------
Total investment income 79,440 70,035 51,919
Less:
Investment expenses 1,773 1,386 874
Net investment income ceded (note 9) 66,353 57,072 --
------- ------- -------
Net investment income $11,314 $11,577 $51,045
======= ======= =======
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $ 509 $(299) $ 181
Mortgage loans on real estate -- 53 (184)
Real estate and other 187 -- --
----- ----- -----
$ 696 $(246) $ (3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $3,562 and $3,383
as of December 31, 1998 and 1997, respectively, were on deposit with
various regulatory agencies as required by law.
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(4) Federal Income Tax
The Company's current federal income tax liability was $1,522 and $806
as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 16,670 $ 13,168
Liabilities in Separate Accounts 12,477 8,080
Mortgage loans on real estate and real estate 263 336
Other assets and other liabilities -- 48
-------- --------
Total gross deferred tax assets 29,410 21,632
-------- --------
Deferred tax liabilities:
Fixed maturity securities 8,669 7,186
Deferred policy acquisition costs 8,103 6,159
Equity securities 1,935 1,072
Other 10,422 7,892
-------- --------
Total gross deferred tax liabilities 29,129 22,309
-------- --------
$ 281 $ (677)
======== ========
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. All future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. The
Company has determined that valuation allowances are not necessary as
of December 31, 1998, 1997 and 1996 based on its analysis of future
deductible amounts.
Federal income tax expense for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $ 10,014 $ 2,458 $ 9,612
Deferred tax (benefit) expense (2,513) 3,291 (6,905)
-------- -------- --------
$ 7,501 $ 5,749 $ 2,707
======== ======== ========
</TABLE>
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 7,707 35.0 $ 5,723 35.0 $ 2,728 35.0
Tax exempt interest and dividends
received deduction (223) (1.0) -- (0.0) (175) (2.3)
Other, net 17 0.1 26 (0.2) 154 2.0
------- ------ ------- ------ ------- ------
Total (effective rate of each year) $ 7,501 34.1 $ 5,749 35.2 $ 2,707 34.7
======= ====== ======= ====== ======= ======
</TABLE>
Total federal income tax paid was $9,298, $9,566 and $2,335 during the
years ended December 31, 1998, 1997 and 1996, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(5) Comprehensive Income
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-
for-sale arising during the period:
Gross $ 6,898 $ 10,541 $ (8,334)
Adjustment to deferred policy acquisition costs (1,947) (4,778) 6,628
Related federal income tax (expense) benefit (1,733) (2,017) 362
-------- -------- --------
Net 3,218 3,746 (1,344)
-------- -------- --------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross (509) 299 (181)
Related federal income tax expense (benefit) 178 (105) 63
-------- -------- --------
Net (331) 194 118
-------- -------- --------
Total Other Comprehensive Income $ 2,887 $ 3,940 $ (1,226)
======== ======== ========
</TABLE>
(6) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
Mortgage loans on real estate: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the balance sheets for these instruments approximates
their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
Policy reserves on life insurance contracts: The estimated fair
value is the amount payable on demand. Also included are
disclosures for the Company's limited payment policies, which the
Company has used discounted cash flow analyses similar to those
used for investment contracts with known maturities to estimate
fair value.
Commitments to extend credit: Commitments to extend credit have
nominal value because of the short-term nature of such
commitments. See note 7.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $ 904,946 $ 904,946 $ 796,919 $ 796,919
Equity securities 20,853 20,853 14,767 14,767
Mortgage loans on real estate, net 268,894 276,387 218,852 229,881
Policy loans 332 332 215 215
Short-term investments 2,277 2,277 18,968 18,968
Cash 2 2 5,163 5,163
Assets held in separate accounts 1,533,690 1,533,690 891,101 891,101
Liabilities:
Investment contracts 1,153,930 1,113,584 980,263 950,105
Policy reserves on life insurance contracts 9,899 10,517 5,928 6,076
Liabilities related to separate accounts 1,533,690 1,501,255 891,101 868,056
</TABLE>
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(7) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties which owe the Company money, will
not pay. The Company minimizes this risk by adhering to a conservative
investment strategy, by maintaining credit and collection policies and
by providing for any amounts deemed uncollectible.
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by operating throughout the
United States, thus reducing its exposure to any single jurisdiction,
and also by employing underwriting practices which identify and
minimize the adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $9,500 extending into
1999 were outstanding as of December 31, 1998.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 33% (29% in 1997) in any geographic area and no more than 6% (3%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998 36% (37% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed apartment
building properties.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(8) Pension Plan and Postretirement Benefits Other Than Pensions
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $235, $257 and $189,
respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1998 and 1997 was $1,008 and $891, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1998, 1997 and 1996 was $130,
$94 and $78, respectively.
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 2,033,800 $ 1,847,800 $ 237,900 $ 200,700
Service cost 87,600 77,300 9,800 7,000
Interest cost 123,400 118,600 15,400 14,000
Actuarial loss 123,200 60,000 15,600 24,400
Plan curtailment in 1998/merger in 1997 (107,200) 1,500 -- --
Benefits paid (75,800) (71,400) (8,600) (8,200)
----------- ----------- ----------- -----------
Benefit obligation at end of year 2,185,000 2,033,800 270,100 237,900
----------- ----------- ----------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212,900 1,947,900 69,200 63,000
Actual return on plan assets 300,700 328,100 5,000 3,600
Employer contribution 104,100 7,200 12,100 10,600
Plan merger -- 1,100 -- --
Benefits paid (75,800) (71,400) (8,400) (8,000)
----------- ----------- ----------- -----------
Fair value of plan assets at end of year 2,541,900 2,212,900 77,900 69,200
----------- ----------- ----------- -----------
Funded status 356,900 179,100 (192,200) (168,700)
Unrecognized prior service cost 31,500 34,700 -- --
Unrecognized net (gains) losses (345,700) (330,700) 16,000 1,600
Unrecognized net (asset) obligation at transition (11,000) 33,300 1,300 1,500
----------- ----------- ----------- -----------
Prepaid (accrued) benefit cost $ 31,700 $ (83,600) $ (174,900) $ (165,600)
=========== =========== =========== ===========
</TABLE>
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 87,600 $ 77,300 $ 75,500
Interest cost on projected benefit obligation 123,400 118,600 105,500
Expected return on plan assets (159,000) (139,000) (116,100)
Recognized gains (3,800) -- --
Amortization of prior service cost 3,200 3,200 3,200
Amortization of unrecognized transition obligation 4,200 4,200 4,100
--------- --------- ---------
$ 55,600 $ 64,300 $ 72,200
========= ========= =========
</TABLE>
<PAGE> 18
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67,100
resulted (consisting of a $107,200 reduction in the projected benefit
obligation, net of the write-off of the $40,100 remaining unamortized
transition obligation related to WSC). The Company anticipates that the
plan will settle the obligation related to WSC employees with a
transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the
pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service
during the year) $ 9,800 $ 7,000 $ 6,500
Interest cost on accumulated postretirement benefit obligation 15,400 14,000 13,700
Actual return on plan assets (5,000) (3,600) (4,300)
Amortization of unrecognized transition obligation of affiliates 200 200 200
Net amortization and deferral 1,200 (500) 1,800
-------- -------- --------
$21,600 $ 17,100 $ 17,900
======== ======== ========
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, the Company's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
certain levels, each of which requires specified corrective action. The
Company exceeds the minimum risk-based capital requirements.
The statutory capital and surplus of the Company as reported to
regulatory authorities as of December 31, 1998, 1997 and 1996 was
$70,135, $74,820 and $71,390, respectively. The statutory net (loss)
income of the Company as reported to regulatory authorities for the
years ended December 31, 1998, 1997 and 1996 was $(3,371), $7,446 and
$670, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $7,013.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(10) Transactions With Affiliates
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $430, $703
and $410, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $2,933, $2,564 and $2,682 in 1998, 1997
and 1996, respectively. The allocations are based on techniques and
procedures in accordance with insurance regulatory guidelines. Measures
used to allocate expenses among companies include individual employee
estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
inter-company agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $2,750 and $4,981 as of December 31, 1998 and 1997,
respectively.
Effective December 31, 1996, the Company entered into an intercompany
reinsurance agreement with NLIC whereby certain inforce and
subsequently issued fixed individual deferred annuity contracts are
ceded on a 100% coinsurance with funds withheld basis. On December 31,
1997, the agreement was amended to a modified coinsurance basis. Under
modified coinsurance agreements, invested assets and liabilities for
future policy benefits are retained by the ceding company and net
investment earnings on the invested assets are paid to the assuming
company. Under terms of the Company's agreement, the investment risk
associated with changes in interest rates is borne by NLIC. Risk of
asset default is retained by the Company, although a fee is paid by
NLIC to the Company for the Company's retention of such risk. The
agreement will remain inforce until all contract obligations are
settled. The ceding of risk does not discharge the original insurer
from its primary obligation to the contractholder. The Company believes
that the terms of the modified coinsurance agreement are consistent in
all material respects with what the Company could have obtained with
unaffiliated parties. Amounts ceded to NLIC in 1998 are included in
NLIC's results of operations for 1998 and include premiums of $241,503,
net investment income of $66,353 and benefits, claims and other
expenses of $296,659. In consideration for the initial inforce business
reinsured, NLIC paid the Company $26,473 in commission and expense
allowances which were applied to the Company's deferred policy
acquisition costs as of December 31, 1996. No significant gain or loss
was recognized as a result of the agreement.
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
During 1997, the Company sold fixed maturity securities
available-for-sale at fair value of $27,253 to NLIC. The Company
recognized a $693 gain on the transactions.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $2,277 and $18,968 as of December 31,
1998 and 1997, respectively, and are included in short-term investments
on the accompanying balance sheets.
(11) Contingencies
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(12) Segment Information
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
The Variable Annuities segment consists of annuity contracts that
provide the customer with the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for a
prescribed period, with returns accumulating on a tax-deferred basis.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
and all realized gains and losses on investments in a Corporate and
Other segment.
<PAGE> 21
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
Annuities Annuities Insurance and Other Total
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (1,417) $ 6,792 $ 4098 $ 5,531 $ 11,314
Other operating revenue 18,209 3,182 8,386 -- 29,777
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 16,792 9,974 8,794 5,531 41,091
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 4,660 221 -- 4,881
Amortization of deferred policy
acquisition costs 3,466 508 374 -- 4,348
Other benefits and expenses 4,442 2,087 4,009 -- 10,538
----------- ----------- ----------- ----------- -----------
Total expenses 7,908 7,255 4,604 -- 19,767
----------- ----------- ----------- ----------- -----------
Operating income (loss) before
federal income tax 8,884 2,719 4,190 5,531 21,324
Realized gains on investments -- -- -- 696 696
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 8,884 $ 2,719 $ 4,190 $ 6,227 $ 22,020
=========== =========== =========== =========== ===========
Assets as of year end $ 1,502,829 $ 1,162,040 $ 92,482 $ 82,087 $ 2,839,438
=========== =========== =========== =========== ===========
1997:
Net investment income (1) $ (873) $ 5,927 $ 166 $ 6,357 $ 11,577
Other operating revenue 10,823 1,825 16 -- 12,664
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 9,950 7,752 182 6,357 24,241
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 3,856 92 -- 3,948
Amortization of deferred policy
acquisition costs 1,035 347 20 -- 1,402
Other benefits and expenses 1,648 347 298 -- 2,293
----------- ----------- ----------- ----------- -----------
Total expenses 2,683 4,550 410 -- 7,643
----------- ----------- ----------- ----------- -----------
Operating income before federal
income tax 7,267 3,202 (228) 6,357 16,598
Realized losses on investments -- -- -- (246) (246)
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 7,267 $ 3,202 $ (228) $ 6,111 $ 16,352
=========== =========== =========== =========== ===========
Assets as of year end $ 925,021 $ 989,116 $ 2,228 $ 88,933 $ 2,005,298
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
Annuities Annuities Insurance and Other Total
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (849) $ 50,197 $ 149 $ 1,548 $ 51,045
Other operating revenue 5,440 1,445 16 1 6,902
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 4,591 51,642 165 1,549 57,947
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 34,711 -- -- 34,711
Amortization of deferred policy
acquisition costs 1,473 5,888 19 -- 7,380
Benefits and expenses 2,024 5,889 147 -- 8,060
----------- ----------- ----------- ----------- -----------
Total expenses 3,497 46,488 166 -- 50,151
----------- ----------- ----------- ----------- -----------
Operating income before federal
income tax 1,094 5,154 (1) 1,549 7,796
Realized losses on investments -- -- -- (3) (3)
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 1,094 $ 5,154 $ (1) $ 1,546 $ 7,793
=========== =========== =========== =========== ===========
Assets as of year end $ 503,111 $ 787,682 $ 2,597 $ 73,031 $ 1,366,421
=========== =========== =========== =========== ===========
</TABLE>
(1) The Company's method of allocating net investment income
results in a charge (negative net investment income) to the
Variable Annuities segment which is recognized in the
Corporate and Other segment. The charge relates to
non-invested assets which support this segment on a statutory
basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 54
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
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. 12
(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. 52
Statements of Assets, Liabilities
and Contract Owners' Equity as of
December 31, 1998. 53
Statements of Operations and Changes
in Contract Owners' Equity for the years
ended December 31, 1998 and 1997. 55
Notes to Financial Statements. 58
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report. 60
Balance Sheets as of December 31, 1998
and 1997. 61
Statements of Income for the years
ended December 31, 1998, 1997 and 1996. 62
Statements of Shareholder's Equity for the
years ended December 31, 1998, 1997 and
1996. 63
Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996. 64
Notes to Financial Statements. 65
</TABLE>
82 of 101
<PAGE> 55
<TABLE>
<S> <C>
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 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 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.
</TABLE>
83 of 101
<PAGE> 56
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
Ralph M. Paige, Executive Director Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
</TABLE>
84 of 101
<PAGE> 57
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1733A Westwood Avenue
Alliance, OH 44601
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
James E. Brock Senior Vice President-Corporate
One Nationwide Plaza Development
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communication Officer
Columbus, OH 43215
Phillip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary
Columbus, OH 43215
Richard D. Headley Senior Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Donna A James Senior Vice President -
One Nationwide Plaza Human Resources
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Douglas C. Robinette Senior Vice President-
One Nationwide Plaza Marketing and Product
Columbus, OH 43215 Management
Bruce C. Barnes Vice President - Technology
One Nationwide Plaza Strategy and Planning
Columbus, OH 43215
</TABLE>
85 of 101
<PAGE> 58
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
David A. Diamond Vice President - Enterprise
One Nationwide Plaza Controller
Columbus, OH 43215
Matthew S. Easley Vice President -
One Nationwide Plaza Investment Life Actuarial
Columbus, OH 43215
R. Dennis Noice Vice President Systems - Nationwide
One Nationwide Plaza Financial Services
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President - Product
Columbus, OH 43215 and Market Compliance
Mark Thresher Vice President - Controller
One Nationwide Plaza
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial statements
filed for unconsolidated subsidiaries
**** other subsidiaries
86 of 101
<PAGE> 59
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
The 401K Companies, Inc. Texas Holding Company
The 401(K) Company Texas Third-party administrator for
401(k) plans
401K Investment Advisors, Inc. Texas Investment Advisor registered
with the SEC
401K Investments Services, Inc. Texas NASD registered Broker-Dealer
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
AID Finance Services, Inc. Iowa Holding Company
ALLIED General Agency Company Iowa Managing General Agent and
Surplus Lines Broker (P&C)
ALLIED Group, Inc. Iowa Holding Company
ALLIED Group Insurance Marketing Iowa Direct Marketer (P&C)
Company
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
ALLIED Group Mortgage Company Iowa Mortgage Lender
ALLIED Life Brokerage Agency, Inc. Iowa Insurance Broker
ALLIED Life Financial Corporation Iowa Holding Company
ALLIED Life Insurance Company Iowa Insurance Company
ALLIED Property and Casualty Insurance Iowa Underwrites General P&C
Company Insurance
Allnations, Inc. Ohio Promotes international
cooperative insurance
organizations
AMCO Insurance Company Iowa Underwrites General P&C
Insurance
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
CalFarm Insurance Company California Stock Corporation
Caliber Funding Corporation Delaware Stock Corporation
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GmbH
Cooperative Service Company Nebraska Insurance Agency
Depositors Insurance Company Iowa Underwrites P&C insurance
*Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
Excaliber Funding Corporation Delaware Limited purpose corporation
F&B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
</TABLE>
87 of 101
<PAGE> 60
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Financial Horizons Distributors Agency of Alabama Insurance Agency
Alabama, Inc.
Financial Horizons Distributors Agency of Ohio Insurance Agency
Ohio, Inc.
Financial Horizons Distributors Agency of Oklahoma Insurance Agency
Oklahoma, Inc.
Financial Horizons Distributors Agency of Texas Insurance Agency
Texas, Inc.
*Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Corporation Oklahoma Broker-Dealer
GatesMcDonald Health Plus, Inc. Ohio Managed Care Organization
Gates, McDonald & Company Ohio Cost Control
Gates, McDonald & Company of Nevada Nevada Self-insurance administration,
claims examinations and data
processing services
Gates, McDonald & Company of New New York Workers' compensation claims
York, Inc. administration
MedPro Solutions, Inc. Massachusetts Third-party administration
services for workers'
compensation, automobile injury
and disability claims
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance
Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
Midwest Printing Services, Inc. Iowa General Printing Services
Morley & Associates Oregon Insurance Broker
Morley Capital Management, Inc. Oregon Investment Adviser and stable
value money management
Morley Financial Services, Inc. Oregon Holding Company
Morley Research Associates, Ltd. Delaware Credit research consulting
**MRM Investments, Inc. Ohio Owns and operates a
recreational ski facility
**National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
National Deferred Compensation, Inc. Ohio Administers deferred
compensation plans for public
employees
**National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
</TABLE>
88 of 101
<PAGE> 61
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Advisory Services, Inc. Ohio Investment Management and
Administrative Services
**Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Special purpose real estate
Redevelopment Corporation corporation
Nationwide Corporation Ohio Holding Company
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services (Bermuda) Bermuda Life Insurance Company
Ltd.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust II
Nationwide Financial Services, Inc. Delaware Holding Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for
International Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
*Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Company of California Underwriter
America
Nationwide Insurance Company of Florida Ohio Insurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Services Company, LCC Ohio Shared services functions
Nationwide Insurance Golf Charities, Inc. Ohio Membership Non-Profit
Corporation
Nationwide International Underwriters California Underwriting Manager
Nationwide Investing Foundation Michigan Provide investors with
continuous source of investment
*Nationwide Investing Foundation II Massachusetts Common Law Trust
Nationwide Investment Services Oklahoma Registered Broker-Dealer in
Corporation deferred compensation market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
**Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
**Nationwide Life Insurance Company Ohio Life Insurance Company
</TABLE>
89 of 101
<PAGE> 62
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Lloyds Texas Property Insurance
Nationwide Management Systems, Inc. Ohio Preferred provider
organization, products and
related services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Funds Ohio Investment Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develop, own and operate real
estate and real estate
investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real
estate and real estate
investments
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public
employees
Nationwide Retirement Solutions, Inc. of Alabama Market and administer deferred
Alabama compensation plans for public
employees
Nationwide Retirement Solutions, Inc. of Arizona Market and administer deferred
Arizona compensation plans for public
employees
Nationwide Retirement Solutions, Inc. of Arkansas Market and administer deferred
Arkansas compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Montana Market and administer deferred
of Montana compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Nevada Market and administer deferred
of Nevada compensation plans for public
employees
Nationwide Retirement Solutions, Inc. New Mexico Market and administer deferred
of New Mexico compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Ohio Market variable annuity
of Ohio contracts to members of the
National Education Association
in the state of Ohio
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity
of Oklahoma contracts to members of the
National Education Association
in the state of Oklahoma
Nationwide Retirement Solutions, Inc. South Dakota Market and administer deferred
of South Dakota compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Texas Market and administer deferred
of Texas compensation plans for public
employees
Nationwide Retirement Solutions, Inc. Wyoming Market variable annuity
of Wyoming contracts to members of the
National Education Association
in the state of Wyoming
</TABLE>
90 of 101
<PAGE> 63
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
COMPANY STATE/COUNTRY OF (SEE ATTACHED PRINCIPAL BUSINESS
ORGANIZATION CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public
employees
*Nationwide Separate Account Trust Massachusetts Investment Company
Nationwide Trust Company, FSB United States of Federal Savings Bank
America
Neckura Holding Company Germany Administrative services for
Neckura Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Nevada Independent Companies- Nevada Workers' compensation
Construction administrative services
Nevada Independent Companies-Health Nevada Workers' compensation
and Nonprofit administrative services
Nevada Independent Companies- Nevada Workers' compensation
Hospitality and Entertainment administrative services
Nevada Independent Companies- Nevada Workers' compensation
Manufacturing administrative services
NFS Distributors, Inc. Delaware Holding Company
NWE, Inc. Ohio Special Investments
PanEuroLife Luxembourg Life Insurance
Pension Associates, Inc. Wisconsin Pension plan administration
Portland Investment Services, Inc. Oregon NASD Registered Broker-Dealer
Premier Agency, Inc. Iowa Insurance Agency
Riverview Agency, Inc. Texas Stock Corporation
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines
Company Insurance Company
SVM Sales GmbH, Neckura Germany Sales support for Neckura
Insurance Group Insurance Group
Union Bond and Trust Company Oregon Oregon state bank with trust
powers
Villanova Capital, Inc. Delaware Holding Company
Villanova Mutual Fund Capital Trust Delaware Business Trust
Villanova SA Capital Trust Delaware Business Trust
**Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
Western Heritage Insurance Company Arizona Excess and Surplus Lines
Insurance Company
</TABLE>
91 of 101
<PAGE> 64
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE/COUNTRY (SEE ATTACHED CHART)
COMPANY OF ORGANIZATION UNLESS OTHERWISE INDICATED 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 Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-A Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-B Separate Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-C Separate Account
</TABLE>
92 of 101
<PAGE> 65
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE/COUNTRY (SEE ATTACHED CHART)
COMPANY OF ORGANIZATION UNLESS OTHERWISE INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-D Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
93 of 101
<PAGE> 66
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ----------------------------
| ALLIED LIFE | | ALLIED | | AID FINANCE |
| FINANCIAL | | GROUP, INC. | | SERVICES, INC. |
| CORPORATION | | (AGI) | | (AID FINANCE) |
| (ALFC) | | | | |
|Common Stock: 850 | |Common Stock: 850 Shares | |Common Stock: 10,000 |
|------------ Shares | |------------ | |------------ Shares |
| |---| | |---| | |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
|Casualty- | | |Casualty- | | |Casualty- |
|100% $47,286,429 | | |100% $1,049,237,226| | |100% $19,545,634 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| ALLIED GROUP | | | AMCO | | | ALLIED |
| MERCHANT BANKING | | | INSURANCE COMPANY | | | GROUP INSURANCE |
| CORPORATION | | | (AMCO) | | | MARKETING COMPANY |
|Common Stock: 10,000 | | |Common Stock: 155,991 | | |Common Stock: 20,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| |----| |---| | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
| | | | | | | |Aid Finance- |
|AFLC-100% $100,000 | | | |AGI-100% $95,925,450| | |100% $16,059,469 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | WESTERN | | | DEPOSITORS |
| BROKERAGE | | | | HERITAGE INSURANCE | | | INSURANCE COMPANY |
| AGENCY, INC. | | | | COMPANY | | | (DEPOSITORS) |
|Common Stock: 500,000 | | | |Common Stock: 4,776,076 | | |Common Stock: 199,991 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|AFLC-100% $442,695 | | | |AMCO-100% $11,686,037| | |AGI-100% $15,251,842 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | ALLIED | | | ALLIED PROPERTY |
| INSURANCE | | | | GENERAL AGENCY | | | AND CASUALTY |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 250,000 | | | |Common Stock: 5,000 | | |Common Stock: 156,822 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AFLC-100% $41,732,343| |AMCO-100% $135,342 | | |AGI-100% $33,018,634 |
- --------------------------- --------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| PREMIER | | | ALLIED |
| AGENCY, | | | GROUP MORTGAGE |
| INC. | | | COMPANY |
|Common Stock: 100,000 | | |Common Stock: 9,500 |
|------------ Shares | | |------------ Shares |
| |---|---| |
| Cost | | | Cost |
| ---- | | | ---- |
|AGI-100% $100,000 | | |AGI-100% $213,976 |
--------------------------- | ----------------------------
|
| ----------------------------
| | MIDWEST |
| | PRINTING SERVICES |
| | LTD. |
| |Common Stock: 10,000 |
| |------------ Shares |
|---| |
| Cost |
| ---- |
|AFLC-100% $610,000 |
----------------------------
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |============================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
| || |--------------------------------------------------------------------| |--------------------------
- --| || |
|| |--------------------------------------------------------------|----------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| | NATIONWIDE LLOYDS | | | | | |
|| | | | |Common Stock: 20,000 | |Common Stock: 10,000 |
||==| | |---|------------ Shares | |--|------------ Shares |
|| | A TEXAS LLOYDS | | | | | | |
|| | | | | Cost | | | Cost |
|| | | | | ---- | | | ---- |
|| | | | |Casualty-100% $5,944,422 | | |Casualty-100% $87,943,140 |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE PROPERTY | | | NECKURA |
|| | INSURANCE COMPANY | | | AND CASUALTY | | | INSURANCE COMPANY |
|| |Guaranty Fund | | | INSURANCE COMPANY | | | |
|| |------------ | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
||==|Certificate |---| |---|------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WISCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |---- |---|------------ Shares | ---- |--|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares | | | Common Stock: 10,000 | | | |Common Stock: 1 Share |
| |--------| | ------------ Shares | ---| |--|------------ |
| Cost | | | | | | | |
|Casualty-99.9% ---- | | | Cost | | | | Cost |
|Other Capital: $26,714,335 | | | ---- | | | | ---- |
|------------- | | | SIC-100% $6,000,000 | | | |Neckura-100% DM 51,639 |
|Casualty-Ptd. $ 713,576 | | | | | | | |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |--------| |------------ Shares |----| |--|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
-------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1500 Shares |
| | |------------ |------------|------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- -----------------------------------------------------------------------|
|
- --------------- --------------------------------------------------
| |
- -----------------------------------------------------------------------------------------|----------------------- |
| | | | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | | CORPORATION |
| | | | | REDEVELOPMENT | | | |
| | | | | CORPORATION | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | Cost | | | Cost | | | Shares Cost |
| | ---- | | | ---- | | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $751,352,485|
| | | | | | | |Fire 649,510 24,007,936|
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | NATIONWIDE | | | INSURANCE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. | | |Common Stock: 10,330 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 | |--------| ---- |
| |------------ Shares | | |------------ Shares | | |Casualty-18.6% $88,320 |
| | Cost | | | Cost | | |Fire-18.6% $88,463 |
| | ---- | | | ---- | | |Preferred Stock 1466 Shares |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 | | |--------------- Cost |
| | | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | LONE STAR | | | NATIONWIDE CASH | | | PENSION ASSOCIATES |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY | | | OF WAUSAU, INC. |
| | | | |Common Stock: 100 Shares | | |Common Stock: 1,000 Shares |
------|Common Stock: 1,000 | |----|------------ | |--------|------------- |
| |------------ Shares | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-90% $9,000 | | | |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 | | |Casualty-100% $2,839,392 |
| -------------------------------- | -------------------------------- | ----------------------------------
| || | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | COLONIAL COUNTY MUTUAL | | | NATIONWIDE INSURANCE | | | AMERCIAN MARINE |
| | INSURANCE COMPANY | | | COMPANY OF FLORIDA | | | UNDERWRITERS, INC. |
| | | | |Common Stock: 10,000 | | |Common Stock: 20 Shares |
| |Surplus Debentures | | |------------- Shares | | |------------- |
| |------------------ | |----| | |--------| Cost |
| | Cost | | | Cost | | ---- |
| | ---- | | | ---- | | |
| |Colonial $500,000 | | |Casualty-100% $300,000,000 | |Casualty-100% $5,020 |
| |Lone Star 150,000 | | | | | |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | WAUSAU INTERNATIONAL |
| | INSURANCE COMPANY | | | UNDERWRITERS |
| |Common Stock 12,000 | | | |
| |------------ Shares | | |Common Stock: 1,000 Shares |
|-----| | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $10,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE |
| | ENTERPRISE SERVICES, LTD. | | | ARENA LLC |
| | | | | |
| |Single Member Limited | | | |
|.....|Liability Company | |....| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
</TABLE>
Page 1
<PAGE> 69
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-------------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
----------------|------------ ----------------------------- ---------------||------------
| ||
- ----------------------------- | ----------------------------- ----------------------------- || ----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |--|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| INVESTORS, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ |..| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
- ----------------------------- | ----------------------------- || ----------------------------- ----------------------------
| ||
- ----------------------------- | ----------------------------- || -----------------------------
| NATIONWIDE | | | NATIONWIDE | || | NATIONWIDE |
| PROPERTIES, LTD. | | | INVESTING | || | INVESTING |
| | | | FOUNDATION II | || | FOUNDATION III |
| Units: |..| | | || | |
| ------ | | |==||==| |
| | | | || | |
| | | | || | | ----------------------
| NW Life -97.6% | | | || | | | MORLEY RESEARCH |
| NW Mutual -2.4% | | COMMON LAW TRUST | || | OHIO BUSINESS TRUST | | ASSOCIATES, LTD. |
- ----------------------------- ----------------------------- || ----------------------------- | |
|| |Common Stock: 1,000 |
----------------------------- || ----------------------------- |------------- Shares|------
| NATIONWIDE | || | NATIONWIDE | | Cost |
| SEPARATE ACCOUNT | || | ASSET ALLOCATION TRUST | | ---- |
| TRUST | || | | |Morley-100% $1,000|
| | || | | ----------------------
| |==||==| |
| | | |
| | | |
| | | MASSACHUSETTS |
| COMMON LAW TRUST | | BUSINESS TRUST |
----------------------------- -----------------------------
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $751,352,485 |
|Fire 649,510 24,007,936 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------------|-------------------------------|-------------------|--------------------------------|-----------------------------
| | | |
-------------|--------------- --------------|-------------- | ---------------|-------------
| MORLEY FINANCIAL | | THE 401(k) COMPANIES, INC.| | | NATIONWIDE RETIREMENT |
| SERVICES, INC. (MORLEY) | | (401(k)) | | | SOLUTIONS, INC. |
|Common Stock: 82,343 | |Common Stock: Control: | | |Common Stock: 236,494 |
|---|------------- Shares | |------------- ------- |--| | |------------- Shares |
| | | |Class A Other-100% | | | | |
| |NFS-100% | |Class B NFS -100% | | | |NRS-100% |
| ----------------------------- ----------------------------- | | ---------------|-------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY & | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | ASSOCIATES, INC. | | SERVICES, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF NEW |
| | | | | | | | ALABAMA | | | MEXICO |
| |Common Stock: 3,500 | | Common Stock: 1,000,000 | | | | Common Stock: 10,000 | | | Common Stock: 1,000 |
|---|------------- Shares | | ------------- Shares |--| | | ------------- Shares |--|--| ------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $1,000 | |401(k)-100% $7,800 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY CAPITAL | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | MANAGEMENT | | ADVISORS, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARIZONA | | | SO. DAKOTA |
| |Common Stock: 500 | |Common Stock: 1,000 | | | |Common Stock: 1,000 | | |Common Stock: 1,000 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $5,000 | |401(k)-100% $1,000 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | UNION BOND | | 401(k) ICOMPANY | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | & TRUST COMPANY | | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARKANSAS | | | WYOMING |
| |Common Stock: 2,000 | |Common Stock: 855,000 | | | |Common Stock: 50,000 | | |Common Stock: 500 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | Cost | | | Cost |
| | ---- | | ---- | | | ---- | | | ---- |
| |Morley-100% $50,000 | |401(k)-100% $1,000 | | |NRS-100% $500 | | |NRS-100% $500 |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | PORTLAND INVESTMENT | | NATIONWIDE TRUST | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | SERVICES, INC. | | COMPANY, FSB | | | SOLUTIONS, INS. AGENCY, | | | SOLUTIONS, INC. OF |
| | | | | | | INC. | | | OHIO |
| |Common Stock: 1,000 | |Common Stock: 2,800,000 | | |Common Stock: 1,000 | | | |
|---|------------- Shares | |------------- Shares |-----| |------------- Shares |--|==| |
| | Cost | | Cost | | | Cost | | | |
| | ---- | | ---- | | | ---- | | | |
| |Morley-100% $25,000 | |NFS-100% $3,500,000 | | |NRS -100% $1,000 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ---------------------------- | ---------------------------
| | EXCALIBER FUNDING | | NATIONWIDE FINANCIAL | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | SERVICES CAPITAL TRUST II | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | MONTANA | | | OKLAHOMA |
| |Common Stock: 1,000 | | | | |Common Stock: 500 | | | |
|---|------------- Shares | | |-----| |------------- Shares |--|==| |
| | Cost | | | | | Cost | | | |
| | ---- | | | | | ---- | | | |
| |Morley-100% $1,000 | |NFS-100% | | |NRS-100% $500 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | CALIBER FUNDING | | NFS DISTRIBUTORS INC. | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | NEVADA | | | TEXAS |
| | | | | | | Common Stock: 1,000 | | | |
|---| | | |-----| | ------------- Shares |--|==| |
| | | | | Cost | | |
| | | | | ---- | | |
|Morley-100% | |NFS-100% | | NRS-100% $1,000 | | |
----------------------------- ----------------------------- ----------------------------- ---------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------|--------------------|---------------------------------------|
| | |
| ---------------|---------------- --------------|----------------
| | EMPLOYERS LIFE INSURANCE CO. | | GATES MCDONALD |
| | OF WAUSAU (ELIOW) | | & COMPANY (GATES) |
| | | | |
| |Common Stock: 250,000 | |Common Stock: 254 |
| |--|------------- Shares | |--|------------- Shares |
| | | | | | |
| | | Cost | | | Cost |
| | | ---- | | | ---- |
| | |NW CORP. -100% $126,509,480 | | |NW CORP. -100% $25,683,532 |
| | -------------------------------- | -------------------------------
- ------------ | | |
| -------------------------------- | | -------------------------------- | --------------------------------
| | NATIONWIDE TRUST | | | | WAUSAU PREFERRED | | | HEALTHCARE |
| | COMPANY | | | | HEALTH INSURANCE CO. | | | FIRST, INC. |
| | | | | | | | | |
| |Common Stock: 2,800,000 | | | |Common Stock: 200 | | | |
|--|------------- Shares | | |--|------------- Shares | |--| |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |ELIOW -100% $57,413,193 | | |Gates-100% $6,700,000 |
| -------------------------------- | -------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE FINANCIAL | | | NATIONWIDE GLOBAL | | | GATES MCDONALD & COMPANY |
| | SERVICES (BERMUDA) INC. | | | HOLDINGS, INC. (NGH) | | | OF NEW YORK, INC. |
| | | | | | | | |
| |Common Stock: 250,000 | | |Common Stock: 1 | | |Common Stock: 3 |
|--|------------- Shares | |-----|------------- Share | |--|------------- Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |NW CORP.-100% $7,000,000 | | |Gates-100% $106,947 |
| -------------------------------- | -------------------------------- | -------------------------------
| | | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE DEFERRED | | | NATIONWIDE GLOBAL HOLDINGS | | | GATES MCDONALD & COMPANY |
| | COMPENSATION, INC. | | | -HONG KONG, LIMITED | | | OF NEVADA |
| | | | | | | | |
| | | | |Common Stock: 2 | | |Common Stock: 40 |
|--| | | |------------- Shares | |--|------------- Shares |
| | | | | | | | |
| | | | | | | | Cost |
| | | | | | | | ---- |
| |NFS-100% | | |NGH-100% | | |Gates-100% $93,750 |
| -------------------------------- | -------------------------------- | -------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | IRVIN L. SCHWARTZ | | | NATIONWIDE | | | GATES McDONALD |
| | AND ASSOCIATES, INC. | | | HEALTH PLANS, INC. (NHP) | | | HEALTH PLUS, INC. |
| | | | | | | | |
| |Common Stock: Control | | |Common Stock: 100 | | |Common Stock: 200 |
|--|------------- ------- | |-----|------------- Shares |--| |--|------------- Shares |
| | | | | | | |
| | | | Cost | | | Cost |
|Class A Other-100% | | | ---- | | | ---- |
|Class B NFS -100% | | |NW CORP.-100% $14,603,732 | | |Gates-100% $2,000,000 |
-------------------------------- | -------------------------------- | -------------------------------
| |
-------------------------------- | -------------------------------- |
| MRM INVESTMENTS, INC. | | | NATIONWIDE MANAGEMENT | |
| | | | SYSTEMS, INC. | |
| | | | | |
|Common Stock: 1 | | |Common Stock: 100 | |
|------------- Share |--| |------------- Shares |--|
| | | | |
| Cost | | Cost | |
| ---- | | ---- | |
|NW CORP.-100% $7,000,000 | |NHP Inc.-100% $25,149 | |
-------------------------------- -------------------------------- |
|
-------------------------------- |
| NATIONWIDE | |
| AGENCY, INC. | |
| | |
|Common Stock: 100 | |
|------------ Shares |--|
| |
| Cost |
| ---- |
|NHP Inc.-99% $116,077 |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
Page 2
</TABLE>
<PAGE> 72
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified Contracts
as of January 31, 1999 was 6,226 and 10,305, 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 Variable Account-II, Nationwide
Variable Account-5, Nationwide Variable Account-6, Nationwide
Variable Account-9, Nationwide VA Separate Account-A, Nationwide
VA Separate Account-B, Nationwide VA Separate Account-C,
Nationwide VLI Separate Account, Nationwide VL Separate
Account-A, Nationwide VL Separate Account-B, Nationwide VL
Separate Account-C, Nationwide VL Separate Account-D,
Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, Nationwide VLI Separate Account-4, Nationwide VLI
Separate Account-5, and Nationwide Variable Account, all of
which are separate investment accounts of Nationwide or its
affiliates.
NAS also acts as principal underwriter for Nationwide Separate
Account Trust, Nationwide Asset Allocation Trust and Nationwide
Mutual Funds which are open-end management investment companies.
96 of 101
<PAGE> 73
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and Chief Executive Officer-
Columbus, OH 43215 and Director
Robert A. Oakley
One Nationwide Plaza Executive Vice President - Chief Financial
Columbus, OH 43215 Officer and Director
Susan A. Wolken
One Nationwide Plaza Director
Columbus, OH 43215
Paul J. Hondros
One Nationwide Plaza Director
Columbus, OH 43215
Robert J. Woodward, Jr.
One Nationwide Plaza Executive Vice President - Chief Investment
Columbus, OH 43215 Officer and Director
Elizabeth A. Davin
One Nationwide Plaza Assistant Secretary
Columbus, OH 43215
Dennis W. Click Secretary
One Nationwide Plaza
Columbus, OH 43215
Alan A. Todryk Vice President - Taxation
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, Jr. Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
Charles S. Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Joseph P. Rath Vice President - Product and Market 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>
97 of 101
<PAGE> 74
<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
John Davis
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant represents that any of the contracts which are
issued pursuant to Section 403(b) of the Internal Revenue 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 Internal
Revenue Code.
Nationwide represents that the fees and charges deducted under the
contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
risks assumed by Nationwide.
98 of 101
<PAGE> 75
Offered by Nationwide Life and Annuity
Insurance Company
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
Nationwide VA Separate Account-C
Deferred Variable Annuity Contracts
PROSPECTUS
September 1, 1999
99 of 101
<PAGE> 76
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of the Nationwide VA Separate Account-C:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG LLP
Columbus, Ohio
April 6, 1999
100 of 101
<PAGE> 77
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 29th day of
June, 1999.
NATIONWIDE VA SEPARATE ACCOUNT-C
---------------------------------------------
(Registrant)
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
---------------------------------------------
(Depositor)
By /s/JOSEPH P. RATH
---------------------------------------------
Joseph P. Rath
Vice President -
Product and Market Compliance
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 29th day
of June, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- -----------------------------
Lewis J. Alphin
A. I. BELL Director
- -----------------------------
A. I. Bell
KENNETH D. DAVIS Director
- -----------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- -----------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -----------------------------
Willard J. Engel
FRED C. FINNEY Director
- -----------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief
- -----------------------------
Joseph J. Gasper Operating Office and Director
DIMON R. McFERSON Chairman and Chief Executive Officer
- -----------------------------
Dimon R. McFerson 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
RALPH M. PAIGE Director
- -----------------------------
Ralph M. Paige
JAMES F. PATTERSON Director By /s/JOSEPH P. RATH
- ----------------------------- -----------------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- -----------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -----------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -----------------------------
Nancy C. Thomas
</TABLE>
101 of 101
<PAGE> 1
EXHIBIT NO. 4
The Variable Annuity Contract Form
<PAGE> 2
ABCD
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 toe
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.
ABCD ABCDEF
Secretary President
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 Details in the contract may be found
on pages 10, 14, and 15.
INDIVIDUAL, FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE ANNUITY,
NON-PARTICIPATING
<PAGE> 3
CONTENTS
Page
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 .................................................. 12
Annuitization Provisions .............................................. 14
Annuity Payment Options ............................................... 16
Annuity Tables ........................................................ 17
2
<PAGE> 4
DATA PAGE
OWNER
JOINT OWNER (if any)
ANNUITANT
BENEFICIARY
CONTINGENT BENEFICIARY (if any)
CONTRACT NUMBER
AGE AND SEX OF ANNUITANT
ISSUE DATE
INITIAL PURCHASE PAYMENT
ANNUITY COMMENCEMENT DATE
Contract Owners may have Purchase Payments applied to the general
Account of Financial Horizons Life Insurance Company or towards the
purchase of shares at net asset value of the following funds:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
-Equity-Income Portfolio
-Overseas Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
-Money Market Fund
-Total Return Fund
THE ONE GROUP INVESTMENT TRUST
Asset Allocation Fund
Government Bond Fund
Large Company Growth Fund
Small Company Growth Fund
Fidelity Equity Income Portfolio
Fidelity Overseas Portfolio
NSAT Money Market Fund
NSAT Total Return Fund
FOR USE WITH FINANCIAL HORIZONS VA SEPARATE ACCOUNT 3
A SEPARATE INVESTMENT ACCOUNT SPECIALLY
ESTABLISHED FOR INVESTMENT IN THE ABOVE FUNDS
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<PAGE> 5
DEFINITIONS
THE COMPANY The Company is Financial Horizons Life 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.
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<PAGE> 6
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.
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.
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<PAGE> 7
GENERAL PROVISIONS
CHARGES The Company deducts charges for the maintenance
and administration of the Contract. These charges
are designed only to reimburse the Company for
expenses incurred that relate to the maintenance
and administration of the Contract. The Company
will monitor these charges to ensure that they do
not exceed accumulated expenses. The charges are
91) Contract Maintenance Charge: $30.00 on each
Contract Anniversary and on any date that is not
the Contract Anniversary when the Contract is
surrendered for its full value, and (2) Contract
Administration Charge: assessed daily through the
unit value calculation, equal to an annual rate of
0.05%. The Contract Maintenance Charge may not be
increased; it may, however be decreased by the
Company if the circumstances under which the
Contract is issued allow for lower than
anticipated maintenance and administration
expenses.
DEDUCTIONS FOR PREMIUM TAXES The Company will deduct from the Contract Value
the amount of any premium taxes levied by a sate
or any other governmental entity. At present,
premium taxes imposed by certain states range form
.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 and 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.
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.
6
<PAGE> 8
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,
then an Owner and Joint Owner have been named, the
Company will only honor requests for changes and
the exercise of their ownership rights that are
made by both the Owner and Joint Owner. When a
Joint Owner has been named, al references to
"Owner" or "Contract Owner" throughout this
Contract should be constructed 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 take 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.
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.
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<PAGE> 9
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 overpayments
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.
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
8
<PAGE> 10
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 of 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.
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 payments $2,000. However,
if periodic payment 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
payment are made after the first.
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<PAGE> 11
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 The Owner elects to have the Purchase Payments
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. An 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 The Variable Account Contract Value is the sum of
CONTRACT VALUE 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 cancelled or surrendered to equal such
amount.
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 The purchase payments applied to the Variable
VARIABLE ACCOUNT 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 The number of Accumulation Units for each
ACCUMULATION UNITS 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-
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<PAGE> 12
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
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
11
<PAGE> 13
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 tot he 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.
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 amount 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
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<PAGE> 14
amount requested; plus (b) any Contingent
Deferred Sales Charge which applies; plus (c)
any Contract Maintenance 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
SALES CHARGE surrendered, a Contingent Deferred Sales Charge
may be applied at the time of a surrender. The
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.
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<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 lease 84 months or any
values applied to purchase an annuity.
REDUCTION OF CONTINGENT The amount of Contingent Deferred Sales Charges on
DEFERRED SALES CHARGE 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.
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; less
3. Any Contract Maintenance 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 The Company has the right to suspend or delay the
SURRENDER 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;
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.
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<PAGE> 16
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 The Owner may change the Annuity Commencement
COMMENCEMENT DATE 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 The Owner may change the Annuity Payment Option
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.
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.
15
<PAGE> 17
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 At the Annuity Commencement Date, the Variable
VARIABLE ANNUITY PAYMENT 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 first vary in
AFTER THE FIRST 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.
The Company guarantees that the dollar amount of
each payment after the first will not be affected
by the 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.
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<PAGE> 18
JOINT AND LAST The amount to be paid under this option will be
SURVIVOR ANNUITY 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 The amount to be paid under this option will be
120 OR 240 PAYMENTS paid during the lifetime of the Annuitant. A
GUARANTEED 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 AGE 120 240 ATTAINED AGE 120 240
LAST BIRTHDAY NONE MONTHS MONTHS LAST BIRTHDAY NONE MONTHS MONTHS
<S> <C> <C> <C> <C> <C> <C> <C>
40 $3.99 $3.98 $3.91 40 $3.99 $3.98 $3.91
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
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."
<PAGE> 21
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 [86] 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.
/s/ DENNIS W. CLICK /s/ JOSEPH J. GASPER
- ------------------------ -------------------------
Dennis W. Click Joseph J. Gasper
Secretary President
