<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-66496
`40 Act File No. 811-7908
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 10 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 12 [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
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
<PAGE> 2
NATIONWIDE VA SEPARATE ACCOUNT-C
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM CAPTION
PART A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover Page.................................................................................Cover Page
Item 2. Definitions.................................................................Glossary of Special Terms
Item 3. Synopsis or Highlights......................................................Synopsis of the Contracts
Item 4. Condensed Financial Information.......................................Condensed Financial Information
Item 5. General Description of Registrant, Depositor, and Portfolio
Companies ..........................Nationwide Life Insurance Company; Investing in the Contract
Item 6. Deductions and Expenses...............................................Standard Charges and Deductions
Item 7. General Description of Variable
Annuity Contracts.......................................Contract Ownership; Operation of the Contract
Item 8. Purchase and Contract Value..................................................Annuitizing the Contract
Item 9. Redemptions............................................................................Death Benefits
Item 10. Annunity Period.............................................................Operation of the Contract
Item 11. Death Benefit and Distributions................................................Surrender (Redemption)
Item 12. Taxes ....................................................................Federal Tax Considerations
Item 13. Legal Proceedings...................................................................Legal Proceedings
Item 14. Table of Contents of the Statement of Additional
Information.........................Table of Contents of the Statement of Additional Information
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page.................................................................................Cover Page
Item 16. Table of Contents...................................................................Table of Contents
Item 17. General Information and History.......................................General Information and History
Item 18. Services.....................................................................................Services
Item 19. Purchase of Securities Being Offered.............................Purchase of Securities Being Offered
Item 20. Underwriters.............................................................................Underwriters
Item 21. Calculation of Performance................................................Calculation of Performance
Item 22. Annuity Payments.....................................................................Annuity Payments
Item 23. Financial Statements.............................................................Financial Statements
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.............................................................Item 24
Item 25. Directors and Officers of the Depositor.......................................................Item 25
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant..............................................................Item 26
Item 27. Number of Contract Owners.....................................................................Item 27
Item 28. Indemnification...............................................................................Item 28
Item 29. Principal Underwriter.........................................................................Item 29
Item 30. Location of Accounts and Records..............................................................Item 30
Item 31. Management Services...........................................................................Item 31
Item 32. Undertakings..................................................................................Item 32
</TABLE>
<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 May 1, 2000.
Variable annuities are complex investment products with unique benefits and
advantages that may be particularly useful to many investors in meeting
long-term savings and retirement needs. There are, however, costs and charges
associated with some of these unique benefits - costs and charges that do not
exist or are not present with other investment products. With help from
financial consultants or advisers, investors are encouraged to compare and
contrast the costs and benefits of the variable annuity described in this
prospectus with those of other investment products, including other variable
annuity or variable life insurance products offered by Nationwide Life and
Annuity Insurance Company and its affiliates. This process will aid in
determining whether the purchase of the contract described in this prospectus is
consistent with an individual's goals, risk tolerance, time horizon, marital
status, tax situation, and other personal characteristics and needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THE CONTRACTS
BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
The following underlying mutual funds are available under the contracts:
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
- - 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 Trust Mid Cap Value Portfolio
The Fidelity VIP Funds are not available to new contracts issued on or after
September 1, 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- - 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 May 1, 2000) 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 41.
For general information or to obtain FREE copies of the:
- - Statement of Additional Information;
1
<PAGE> 4
- - prospectus, annual report or semi-annual report for any underlying
mutual fund; or
- - required Nationwide forms,
call:
1-800-860-3946
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
THIS ANNUITY IS NOT:
- - A BANK DEPOSIT - FEDERALLY INSURED
- - ENDORSED BY A BANK - AVAILABLE IN
OR GOVERNMENT AGENCY 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.
2
<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 of measure used to calculate the variable
annuity payments.
CONTRACT VALUE - The total value 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 for which accumulation units
and annuity units are separately maintained - each sub-account corresponds to a
single underlying mutual fund.
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.
3
<PAGE> 6
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...................9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY....10
NATIONWIDE INVESTMENT SERVICES
CORPORATION.................................10
TYPES OF CONTRACTS...............................10
Non-Qualified Contracts
Individual Retirement Annuities (IRAs)
Simplified Employee Pension IRAs (SEP IRAs)
Roth IRAs
Tax Sheltered Annuities
Qualified Plans
INVESTING IN THE CONTRACT........................12
The Variable Account and Underlying Mutual Funds
The Fixed Account
CHARGES AND DEDUCTIONS...........................14
Mortality and Expense Risk Charge
Administration Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP...............................16
Joint Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT........................17
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers Prior to Annuitization
Transfers After Annuitization
Transfer Requests
RIGHT TO REVOKE..................................20
SURRENDER (REDEMPTION)...........................20
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Texas Optional Retirement Program or the
Louisiana Optional Retirement Plan
Surrenders Under a Qualified Contract or Tax Sheltered Annuity
LOAN PRIVILEGE...................................22
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.......................................23
CONTRACT OWNER SERVICES..........................23
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE........................25
ANNUITIZING THE CONTRACT.........................25
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...................................27
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...........................28
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.......................31
Federal Income Taxes
Withholding
Non-Resident Aliens
4
<PAGE> 7
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS.......................................36
LEGAL PROCEEDINGS............................................36
ADVERTISING AND SUB-ACCOUNT
PERFORMANCE SUMMARY.....................................37
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...41
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS...........42
APPENDIX: B: CONDENSED FINANCIAL INFORMATION.................44
5
<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contract owners unless the contract
owner meets an available exception under the contract.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments surrendered)..................7%(1)
Range of CDSC Over Time:
- -----------------------------------------------------
NUMBER OF COMPLETED YEARS
FROM CDSC
DATE OF PURCHASE PAYMENT PERCENTAGE
- -----------------------------------------------------
0 7%
- -----------------------------------------------------
1 6%
- -----------------------------------------------------
2 5%
- -----------------------------------------------------
3 4%
- -----------------------------------------------------
4 3%
- -----------------------------------------------------
5 2%
- -----------------------------------------------------
6 1%
- -----------------------------------------------------
7 0%
- -----------------------------------------------------
(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 each 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 each purchase payment 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").
Withdrawals may be restricted for contracts issued as Tax Sheltered Annuities or
issued to fund tax qualified plans due to Internal Revenue Code restrictions.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of daily net assets of the variable account)
Mortality and Expense Risk Charges............1.25%
Administration Charge(3)......................0.05%
Total Variable Account Charges...........1.30%
(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 permit Nationwide to assess a Loan Processing Fee (see "Loan
Privilege").
6
<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 0.48% 0.08% 0.00% 0.56%
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.73% 0.14% 0.00% 0.87%
- ----------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.39% 0.15% 0.00% 0.54%
- ----------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.58% 0.14% 0.00% 0.72%
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Bond Portfolio 0.45% 0.30% 0.00% 0.75%
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Balanced Portfolio 0.70% 0.25% 0.00% 0.95%
(formerly Asset Allocation Fund)
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Equity Index Portfolio 0.27% 0.28% 0.00% 0.55%
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Government Bond Portfolio 0.45% 0.28% 0.00% 0.73%
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Mid Cap Growth Portfolio 0.65% 0.27% 0.00% 0.92%
(formerly Growth Opportunities Fund)
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Large Cap Growth Portfolio 0.65% 0.23% 0.00% 0.88%
(formerly Large Company Growth Fund)
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Diversified Equity Portfolio 0.68% 0.27% 0.00% 0.95%
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Diversified Mid Cap 0.60% 0.32% 0.00% 0.92%
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Mid Cap Value Portfolio 0.63% 0.32% 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 in calculating 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 0.48% 0.09% 0.00% 0.57%
- ---------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.73% 0.18% 0.00% 0.91%
- ---------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Bond Portfolio 0.55% 0.30% 0.00% 0.85%
- ---------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Equity Index Portfolio 0.30% 0.28% 0.00% 0.58%
- ---------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Diversified Equity Portfolio 0.70% 0.27% 0.00% 0.97%
- ---------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Diversified Mid Cap Portfolio 0.71% 0.32% 0.00% 1.03%
- ---------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust Mid Cap Value Portfolio 0.70% 0.32% 0.00% 1.02%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
EXAMPLE
The following chart shows the expenses (in dollars) that would be incurred under
this contract assuming a $1,000 investment, 5% annual return, and no change in
expenses. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown below.
The chart reflects the expenses of both the variable account and the underlying
mutual funds. A 7 year CDSC schedule and a variable account charge of 1.30% is
assumed. Deductions for premium taxes are not reflected but may apply.
<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 Yrs. 1 3 5 10 1 3 5 10 Yrs.
Yr. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs.
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP Equity-Income 90 105 131 224 20 60 104 224 * 60 104 224
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 93 115 147 258 23 70 120 258 * 70 120 258
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
NSAT - Money Market Fund 89 105 130 222 19 60 103 222 * 60 103 222
- ----------------------------------------------------------------------------------------------------------------------------
NSAT - Total Return Fund 91 110 139 242 22 65 112 242 * 65 112 242
- ----------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 92 111 141 245 22 66 114 245 * 66 114 245
Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 94 118 152 266 24 73 125 266 * 73 125 266
Balanced Portfolio
(formerly, Asset Allocation
Fund)
- ----------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 89 105 130 223 19 60 103 223 * 60 103 223
Equity Index Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 91 111 140 243 21 66 113 243 * 66 113 243
Government Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 93 117 150 263 23 72 123 263 * 72 123 263
Mid Cap Growth Portfolio
(formerly, Growth
Opportunities Fund)
- ----------------------------------------------------------------------------------------------------------------------------
One Group Investment Trust 93 116 148 259 23 71 121 259 * 71 121 259
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 93 117 150 263 23 72 123 263 * 72 123 263
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.
8
<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" will also mean "certificate."
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;
- - SEP IRAs;
- - Roth IRAs;
- - Tax Sheltered Annuities; or
- - Qualified.
For more detailed information with regard to the differences in contract types,
please see "Types of Contracts" later in this prospectus.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
- -------------------- ----------------- ------------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- -------------------- ----------------- ------------------
Non-Qualified $2,000 $10
- -------------------- ----------------- ------------------
IRA $2,000 $10
- -------------------- ----------------- ------------------
SEP IRA $2,000 $10
- -------------------- ----------------- ------------------
Roth IRA $2,000 $10
- -------------------- ----------------- ------------------
Tax Sheltered $0 $10
Annuity
- -------------------- ----------------- ------------------
Qualified $0 $10
- -------------------- ----------------- ------------------
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 and the
purpose for which the contract is purchased. 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 other amounts 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.
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of the underlying mutual funds and the assessment of variable
account charges, (for more information on the calculation of accumulation unit
values, see "Variable Payment Annuity"). Please refer to Appendix B for
information regarding accumulation units.
9
<PAGE> 12
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 INVESTMENT SERVICES CORPORATION
The contracts are distributed by the general distributor, Nationwide Investment
Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. (For
contracts issued in the State of Michigan, all references to NISC shall mean
Nationwide Investment Svcs. Corporation.) NISC is a wholly owned subsidiary of
Nationwide Life Insurance Company.
TYPES OF CONTRACTS
The contracts described in this prospectus are classified according to the tax
treatment they are subject to under the Internal Revenue Code. The following is
a general description of the various types of contracts. Eligibility
requirements, tax benefits (if any), limitations, and other features of the
contracts will differ depending on the type of contract.
NON-QUALIFIED CONTRACTS
A Non-Qualified Contract is a contract that does not qualify for certain tax
benefits under the Internal Revenue Code, and which is not an IRA, a Roth IRA, a
SEP IRA, or a Tax Sheltered Annuity.
Upon the death of the owner of a Non-Qualified Contract, mandatory distribution
requirements are imposed to ensure distribution of the entire balance in the
contract a required period.
Non-Qualified Contracts that are owned by natural persons allow for the deferral
of taxation on the income earned in the contract until it is distributed or
deemed to be distributed.
INDIVIDUAL RETIREMENT ANNUITIES (IRAS)
IRAs are contracts that are issued by insurance companies and satisfy the
following requirements:
- - the contract is not transferable by the owner;
- - the premiums are not fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from qualified plans, tax-sheltered annuities and other IRAs can be
received);
- - certain minimum distribution requirements must be satisfied after the owner
attains the age of 70 1/2;
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
Depending on the circumstance of the owner, all or a portion of the
contributions made to the account may be deducted for federal income tax
purposes.
Failure to make the mandatory distributions can result in an additional penalty
tax of 50% of the excess of the amount required to be distributed over the
amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement
Accounts and Individual Retirement Annuities, from Tax Sheltered Annuities, and
from qualified retirement plans, including 401(k) plans.
For further details regarding IRAs, please refer to the disclosure statement
provided when the IRA was established.
SIMPLIFIED EMPLOYEE PENSION IRAS (SEP IRAS)
A SEP IRA is a written plan established by an employer for the benefit of
employees which permits the employer to make contributions to an IRA established
for the benefit of each employee.
10
<PAGE> 13
An employee may make deductible contributions to a SEP IRA in the same way, and
with the same restrictions and limitations, as for an IRA. In addition, the
employer may make contributions to the SEP IRA, subject to dollar and percentage
limitations imposed by both the Internal Revenue Code and the written plan.
A SEP IRA plan established by an employer must satisfy certain requirements:
- - minimum participation rules;
- - top-heavy contribution rules;
- - nondiscriminatory allocation rules; and
- - requirements regarding a written allocation formula.
In addition, the plan cannot restrict withdrawals of non-elective contributions,
and must restrict withdrawals of elective contributions before March 15th of the
following year.
ROTH IRAS
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
- - the contract is not transferable by the owner;
- - the premiums are not fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from other Roth IRAs and IRAs can be received);
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, certain distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over
from the IRA to the Roth IRA is required to be included in the owner's federal
gross income at the time of the rollover, and will be subject to federal income
tax.
There are income limitations on eligibility to participate in a Roth IRA and
additional income limitations for eligibility to roll over amounts from an IRA
to a Roth IRA. For further details regarding Roth IRAs, please refer to the
disclosure statement provided when the Roth IRA was established.
TAX SHELTERED ANNUITIES
Certain tax-exempt organizations (described in section 501(c)(3) of the Internal
Revenue Code) and public school systems may establish a plan under which annuity
contracts can be purchased for their employees. These annuity contracts are
often referred to as Tax Sheltered Annuities.
Purchase payments made to Tax Sheltered Annuities are excludible from the income
of the employee, up to statutory maximum amounts. These amounts should be set
forth in the plan adopted by the employer.
The owner's interest in the contract is nonforfeitable (except for failure to
pay premiums) and cannot be transferred. Certain minimum distribution
requirements must be satisfied after the owner attains the age of 70 1/2, and
after the death of the owner, additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within the
required period of time.
QUALIFIED PLANS
Contracts that are owned by Qualified Plans are not intended to confer tax
benefits on the beneficiaries of the plan; they are used as investment vehicles
for the plan. The income tax consequences to the beneficiary of a Qualified Plan
are controlled by the operation of the plan, not by operation of the assets in
which the plan invests.
Beneficiaries of Qualified Plans should contact their employer and/or trustee of
the plan to obtain and review the plan, trust, summary plan description and
other documents for the tax and other consequences of being a participant in a
qualified plan.
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INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide VA Separate Account-C is a variable account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
variable account on July 24, 1991, pursuant to Ohio law. Although the variable
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, each corresponding to a
single underlying mutual fund. 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 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
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<PAGE> 15
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.
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.
- - 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 (see "Enhanced
Rate 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 which the 12 month anniversary of the fixed account
allocation occurs.
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<PAGE> 16
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 surrenders and any applicable charges
including CDSC.
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 Charge compensates Nationwide for guaranteeing the annuity
purchase rates of the contracts. This guarantee ensures that the annuity
purchase rates will not change regardless of the death rates of annuity payees
or the general population.
The Expense Risk Charge compensates Nationwide for guaranteeing that 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. Earnings are not subject to the CDSC, but may
not be distributed prior to the distribution of all purchase payments. (For tax
purposes, a surrender is usually treated as a withdrawal of earnings first.)
The CDSC applies as follows:
- ------------------------------------ --------------------
NUMBER OF YEARS FROM DATE OF CDSC
PURCHASE PAYMENT PERCENTAGE
- ------------------------------------ --------------------
0 7%
- ------------------------------------ --------------------
1 6%
- ------------------------------------ --------------------
2 5%
- ------------------------------------ --------------------
3 4%
- ------------------------------------ --------------------
4 3%
- ------------------------------------ --------------------
5 2%
- ------------------------------------ --------------------
6 1%
- ------------------------------------ --------------------
7 0%
- ------------------------------------ --------------------
The CDSC is used to cover sales expenses, including commissions (maximum of 8.5%
of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general account, which may indirectly include portions of the
Administration Charge and other variable account charges, since Nationwide may
generate a profit from these charges.
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All or a portion of any withdrawal may be subject to federal income taxes.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty.
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 each 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 each purchase payment 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
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-
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<PAGE> 18
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
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;
- 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
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- 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 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 survives the annuitant, the contingent beneficiary 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
- --------------------- ----------------- -------------------
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
- --------------------- ----------------- -------------------
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
- --------------------- ----------------- -------------------
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 issued by Nationwide on the life of any
one annuitant cannot exceed $1,000,000 without Nationwide's prior consent.
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<PAGE> 20
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 - Independence Day
- - Memorial Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Martin Luther King, Jr.
Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when conditions described in
(2) and (3) exist.
If Nationwide is closed on days when the New York Stock Exchange is open,
contract value may be affected since the contract owner will not have access to
their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to 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.
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<PAGE> 21
Changes in the net investment factor may not be directly proportional to changes
in the net asset value of the underlying mutual fund shares because of the
deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
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 PRIOR TO ANNUITIZATION
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.
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.
Transfers Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation date.
TRANSFERS AFTER ANNUITIZATION
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
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.
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<PAGE> 22
For new purchase payments allocated to the fixed account or for transfers to the
fixed account from the variable account, this period begins on the date of
deposit or transfer and ends on the one year anniversary of the deposit or
transfer. The guaranteed interest rate period may last for up to 3 months beyond
the 1 year anniversary because guaranteed terms end on the last day of a
calendar quarter.
During an interest rate guarantee period, transfers cannot be made from the
fixed account, and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using market
timing firms. To avoid this, Nationwide may modify transfer rights of contract
owners who use market timing firms (or other third parties) to transfer funds on
their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse transfer requests:
- - submitted by any agent acting under a power of attorney on behalf of more
than one contract owner; or
- - submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing firms
(or other third parties) on behalf of more than one contract owner at the
same time.
Nationwide will not restrict transfer rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
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 CDSC deducted is a percentage of the amount requested by
the contract owner. Amounts deducted for CDSC are not subject to subsequent
CDSC. The contract owner may direct Nationwide to deduct the CDSC either from:
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a) the amount requested; or
b) the contract value remaining after the contract owner has received the
amount requested.
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;
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2. earnings credited to such contracts after the last plan year beginning
before January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except that
earnings and employer contributions as of December 31, 1988 in such
Custodial Accounts may be withdrawn in the case of hardship).
C. Any distribution other than the above, including a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate
the restrictions 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 $1,000, 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:
- --------------- ------------ --------------------------
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
- --------------- ------------ --------------------------
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*)
- --------------- ------------ --------------------------
*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 permit 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 credited interest rate will be
2.25% less than the loan interest rate fixed by Nationwide. The credited
interest rate 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.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a
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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 the fixed account and/or certain sub-accounts 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 occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Dollar Cost Averaging from the Fixed Account
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 that wish to utilize Dollar Cost Averaging from the fixed
account should first inquire whether any Enhanced Rate Dollar Cost Averaging
programs are available.
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
Nationwide may, from time to time, offer Enhanced Rate Dollar Cost Averaging
programs in which contract owners may allocate all or a portion of their fixed
account assets. Enhanced Rate Dollar Cost Averaging programs allow the contract
owner to earn a higher rate of interest on assets allocated to the program than
would be earned on assets in the fixed account. Each enhanced interest rate is
guaranteed for as long as the corresponding program is in effect and applies
only to the assets within that program. Nationwide will process transfers until
either amounts in the Enhanced Rate Dollar Cost Averaging program are exhausted,
or the contract owner instructs Nationwide in writing to stop the transfers. For
these programs only, when a written request to discontinue transfers is
received, Nationwide will automatically transfer the remaining amount in the
program 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.
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.
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A CDSC may apply to amounts taken through systematic withdrawals.
If a CDSC applies, the maximum amount that can be withdrawn annually without a
CDSC is the greatest of:
1) 10% of all purchase payments made to the contract as of the withdrawal
date; or
2) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
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
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payment by the value of an annuity unit as of the annuitization date. This
number of annuity units remains fixed during annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
ASSUMED INVESTMENT RATE
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment.
The assumed investment rate of 3.5% is the percentage rate of return required to
maintain level variable annuity payments. Subsequent variable annuity payments
may be more or less than the first based on whether actual investment
performance is higher or lower than the assumed investment rate of 3.5%.
VALUE OF AN ANNUITY UNIT
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
EXCHANGES AMONG UNDERLYING MUTUAL FUNDS
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- - 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.
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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.
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 a 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 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
payments 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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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.
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; and
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.
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In the event that the contract owner is NOT a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a contract
owner;
b) any change of annuitant will be treated as the death of a contract
owner; and
c) in either case, the appropriate distribution will be made upon the
death or change, as the case may be.
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
29
<PAGE> 32
the year following the year in which the annuitant dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR IRAS AND SEP IRAS
Distributions from an IRA or SEP IRA must begin no later than April 1 of the
calendar year following the calendar year in which the contract owner reaches
age 70 1/2. Distribution may be paid in a lump sum or in substantially equal
payments over:
a) the contract owner's life or the lives of the contract owner and his
or her spouse or designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the IRA
or SEP IRA must be distributed by December 31 of the calendar year in which the
fifth anniversary of the contract owner's death occurs, unless:
a) the contract owner names his or her surviving spouse as the beneficiary and
such spouse chooses to:
1) treat the contract as an 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 IRA, 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)(1) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The owner of an IRA or SEP IRA must
annually report the amount of non-deductible purchase payments, the amount of
any distribution, the amount by which non-deductible purchase payments for all
years exceed non-taxable distributions for all years, and the total balance of
all Individual Retirement Annuities.
IRA 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.
30
<PAGE> 33
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 "non-qualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- - the type of contract purchased;
- - the purposes for which the contract is purchased; and
- - the personal circumstances of individual investor having interests in the
contracts.
See "Synopsis of the Contracts" for a brief description of the various types of
contracts and the different purposes for which the contracts may be purchased.
Existing tax rules are subject to change, and may affect individuals differently
depending on their situation. Nationwide does not guarantee the tax status of
any contracts or any transactions involving the contracts.
If the contract is purchased as an investment of certain retirement plans (such
as qualified retirement plans, Individual Retirement Accounts, and custodial
accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal
Revenue Code), tax advantages enjoyed by the contract owner and/or annuitant may
relate to participation in the plan rather than ownership of the annuity
contract. Such plans are permitted to purchase investments other than annuities
and retain tax-deferred status.
The following is a brief summary of some of the federal income tax
considerations related to the contracts. In addition to the federal income tax,
distributions from annuity contracts may be subject to state and local income
taxes. The tax rules across all states and localities are not uniform and
therefore will not be discussed in this prospectus. Tax rules that may apply to
contracts issued in U.S. territories such as Puerto Rico and Guam are also not
discussed. Nothing in this prospectus should be considered to be tax advice.
Contract owners and prospective contract owners are encouraged to consult a
financial consultant, tax advisor or legal counsel to discuss the taxation and
use of the contracts.
31
<PAGE> 34
The Internal Revenue Code sets forth different income tax rules for the
following types of annuity contracts:
- - IRAs;
- - SEP IRAs;
- - Roth IRAs;
- - Tax Sheltered Annuities; and
- - "Non-Qualified Annuities."
IRAs and SEP IRAs
Distributions from IRAs and SEP IRAs are generally taxed when received. If any
of the amount contributed to the IRA was nondeductible for federal income tax
purposes, then a portion of each distribution is excludable from income.
If distributions of income from an IRA are made prior to the date that the owner
attains the age of 59 1/2 years, the income is subject to both the regular
income tax and an additional penalty tax of 10%. The penalty tax can be avoided
if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled (as defined in the Internal
Revenue Code;
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - used for qualified higher education expenses;
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or non taxable depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
- - it is made on or after the date on which the contract owner attains age 59
1/2;
- - it is made to a beneficiary (or the contract owner's estate) on or after
the death of the contract owner;
- - it is attributable to the contract owner's disability; or
- - it is used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
The five year rule generally is satisfied if the distribution is not made within
the five taxable year period beginning with the first taxable year in which a
contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax
purposes.
A non-qualified distribution is not includible in gross income to the extent
that the distribution, when added to all previous distributions, does not exceed
that total amount of contributions made to the Roth IRA. Any non-qualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior
to January 1, 1999 if the owner elected the special 4-year income averaging
provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled (as defined in the Internal
Revenue Code);
- - part of a series of substantially equal periodic payments made not less
frequently
32
<PAGE> 35
than annually made for the life (or life expectancy) of the owner, or the
joint lives (or joint life expectancies) of the owner and his or her
designated beneficiary;
- - for qualified higher education expenses; or
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
If the contract owner dies before the contract is completely distributed, the
balance may be included in the contract owner's gross estate for tax purposes.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
established pursuant to the Internal Revenue Code. The formula excludes from
income the amount invested in the contract divided by the number of anticipated
payments until the full investment in the contract is recovered. Thereafter all
distributions are fully taxable.
If a distribution of income is made from a Tax Sheltered Annuity prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary; - used for qualified higher education
expenses;
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer; or
- - made to the owner after separation from service with
his or her employer after age 55.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is
owned by a natural person is not taxable until it is distributed from the
contract.
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, any portion of the contract that is assigned or
pledged; or any portion of the contract that is 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.
With respect to annuity distributions on or after the annuitization date, a
portion of each annuity payment is excludable from taxable income. The amount
excludable is based on the ratio between the contract owner's investment in the
contract and the expected return on the contract. Once the entire investment in
the contract is recovered, all distributions are fully includable 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 as a result of the annuitant's death no more payments are due
under the contract, then the unrecovered investment in the contract may be
deducted on his or her final tax return.
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 the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments
that were made prior to August 14, 1982. For those contracts, distributions that
are made prior to the annuitization date 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
33
<PAGE> 36
investment in the contract as of August 14, 1982, will be treated as taxable
income.
The Internal Revenue Code imposes 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 is:
- - the result of a contract owner's death;
- - the result of a contract owner's disability, as defined in the Internal
Revenue Code;
- - one of a series of substantially equal periodic payments made over the life
(or life expectancy) of the contract owner or the joint lives (or joint
life expectancies) of the contract owner and the beneficiary selected by
the contract owner to receive payment under the annuity payment option
selected by the contract owner; or
- - is allocable to an investment in the contract before August 14, 1982.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
by individuals. Different rules (the so-called "non-natural persons" rules)
apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities are not treated as annuity contracts under the Internal Revenue Code.
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. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent of an individual is
treated as owned by the individual. This would cause the contract to be treated
as an annuity under the Internal Revenue Code, 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 persons rules also do not apply to contracts that are:
- - acquired by the estate of a decedent by reason of the death of the
decedent;
- - issued in connection with certain qualified retirement plans and individual
retirement plans; or
- - purchased by an employer upon the termination of certain qualified
retirement plans.
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. If the distribution is from a Tax Sheltered Annuity,
it will be subject to mandatory 20% withholding that cannot be waived, unless:
- - the distribution is made directly to another Tax Sheltered Annuity or IRA;
or
- - the distribution satisfies the minimum distribution requirements imposed by
the Internal Revenue Code.
In addition, contract owners may not waive withholding if the distribution is
subject to mandatory back-up withholding (if no taxpayer identification number
is given or if the Internal Revenue Service notifies Nationwide that mandatory
back-up withholding is required). Mandatory back-up withholding rates are 31% of
income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
34
<PAGE> 37
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- - who would be required to include the contract, death benefit, distribution,
or other payment in his or her federal gross estate at his or her death; or
- - who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
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
35
<PAGE> 38
earnings of his or her contract. Nationwide believes that the investments
underlying this contract meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
- 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 o 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.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
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 was 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). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended complaint seeks
unspecified compensatory and punitive damages. No class has been certified. On
June 11, 1999, Nationwide and the other named defendants filed a motion to
dismiss the amended complaint. On March 8, 2000, the Court denied the motion to
dismiss the amended complaint filed by Nationwide and the other named
defendants. 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.
The general distributor, NISC, is not engaged in any litigation of any material
nature.
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<PAGE> 39
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- precious metals;
- real estate;
- stocks and bonds;
- closed-end funds;
- bank money market deposit accounts and passbook savings;
- CDs; and
- the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- S&P 500;
- Shearson/Lehman Intermediate Government/Corporate Bond Index;
- Shearson/Lehman Long-Term Government/Corporate Bond Index;
- Donoghue Money Fund Average;
- U.S. Treasury Note Index;
- Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
- Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- Lipper Analytical Services, Inc.;
- CDA/Wiesenberger;
- Morningstar;
- Donoghue's;
- magazines such as:
= Money;
= Forbes;
= Kiplinger's Personal Finance Magazine;
= Financial World;
= Consumer Reports;
= Business Week;
= Time;
= Newsweek;
= National Underwriter; 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.
37
<PAGE> 40
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 non-standardized average
annual total return ("non-standardized return").
Standardized average annual total return shows the percentage rate of return of
a hypothetical initial investment of $1,000 for the most recent one, five and
ten year periods (or for a period covering the time the underlying mutual fund
has been available in the variable account if it has not been available for one
of the prescribed periods). Any calculation will reflect the standard 7-year
CDSC schedule and the deduction of all charges that could be made to the
contracts, except for premium taxes, which may be imposed by certain states.
Non-standardized 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 non-standardized 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.
If the underlying mutual fund has been available in the variable account for
less than one year (or if the underlying mutual fund has been effective for less
than one year), standardized and non-standardized performance is not annualized.
The standardized average annual total return and non-standardized total return
quotations are calculated using data for the period ended December 31, 1999.
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> 41
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 12/31/99 12/31/99 Account to 12/31/99 Variable
Account
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio -1.35% 16.78% 15.77% 08/01/94
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 34.47% 15.55% 13.37% 08/01/94
- -----------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund -2.81% 3.39% 3.53% 08/01/94
- -----------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund -0.75% 18.94% 16.94% 08/01/94
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Bond N/A N/A -6.13% 09/01/99
Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Balanced 0.49% 14.60% 13.12% 08/01/94
Portfolio (formerly Asset Allocation
Fund)
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Equity 13.24% N/A 14.63% 05/01/98
Index Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Government -8.71% 5.01% 4.48% 08/01/94
Bond Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Mid Cap 17.49% 24.66% 21.84% 08/01/94
Growth Portfolio (formerly Growth
Opportunities Fund)
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Large Cap 21.29% 26.51% 24.32% 08/01/94
Growth Portfolio (formerly Large
Company Growth Fund)
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Diversified N/A N/A 11.29% 09/01/99
Equity Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Diversified N/A N/A 22.38% 09/01/99
Mid Cap Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Mid Cap N/A N/A -2.21% 09/01/99
Value Portfolio
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
10 years to
1 Year to 5 Years to 12/31/99 or the Date Fund
Sub-Account Options 12/31/99 12/31/99 Life of the Fund Effective
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 4.95% 17.07% 13.00% 10/09/86
- -----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 40.77% 15.85% 9.98% 01/28/87
- -----------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 3.49% 3.86% 3.63% 11/10/81
- -----------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 5.55% 19.21% 13.29% 11/08/82
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Bond -2.78% N/A 11.89% 05/01/97
Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Balanced 6.79% 14.91% 13.31% 08/01/94
Portfolio (formerly Asset Allocation
Fund)
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Equity 19.54% N/A 17.56% 05/01/98
Index Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Government -2.60% 5.45% 4.75% 08/01/94
Bond Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Mid Cap 23.79% 24.89% 21.97% 08/01/94
Growth Portfolio (formerly Growth
Opportunities Fund)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 42
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
10 years to
1 Year to 5 Years to 12/31/99 or the Date Fund
Sub-Account Options 12/31/99 12/31/99 Life of the Fund Effective
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One Group Investment Trust Large Cap 27.59% 26.72% 24.45% 08/01/94
Growth Portfolio (formerly Large
Company Growth Fund)
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Diversified 7.71% N/A 16.37% 03/30/95
Equity Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Diversified 9.06% N/A 14.49% 03/30/95
Mid Cap Portfolio
- -----------------------------------------------------------------------------------------------------------------
One Group Investment Trust Mid Cap -3.12% N/A 2.64% 05/01/97
Value Portfolio
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE> 43
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
41
<PAGE> 44
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
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Villanova Mutual
Fund Capital Trust ("VMF"), an indirect subsidiary of Nationwide Financial
Services, Inc.
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 VMF believes will have above-average earnings or otherwise
provide investors with above-average potential for capital appreciation. To
maximize this potential, VMF 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 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 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. In the future the Funds may also be
sold to qualified pension and retirement plans for the benefit of plan
participants. Bank One Investment Advisors Corporation, an indirect wholly-owned
subsidiary of Bank One Corporation, serves as investment advisor to One Group
Investment Trust.
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 aggregate 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 One Group
Investment Trust.
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.
42
<PAGE> 45
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.
THE FIDELITY VIP FUNDS ARE NOT AVAILABLE TO NEW CONTRACTS ISSUED ON OR AFTER
SEPTEMBER 1, 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP")
The Fidelity Variable Insurance Products Fund ("VIP") is an open-end,
diversified management investment company organized as a Massachusetts business
trust on November 13, 1981. Shares of VIP are purchased by insurance companies
to fund benefits under variable insurance and annuity policies. Fidelity
Management & Research Company ("FMR") is the manager for the VIP Fund and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
VIP OVERSEAS PORTFOLIO
Investment Objective: Long term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside of the United States.
43
<PAGE> 46
APPENDIX B: 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- 21.229680 22.280043 4.95% 1,964,127 1999
----------------- ---------------- ------------------- ------------------ ----------
Income Portfolio - Q 19.268781 21.229680 10.18% 1,945,917 1998
----------------- ---------------- ------------------- ------------------ ----------
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- 21.229680 22.280043 4.95% 3,981,435 1999
----------------- ---------------- ------------------- ------------------ ----------
Income Portfolio - NQ 19.268781 21.229680 10.18% 3,679,860 1998
----------------- ---------------- ------------------- ------------------ ----------
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 14.144224 19.911517 40.77% 379,475 1999
----------------- ---------------- ------------------- ------------------ ----------
Portfolio - Q 12.709885 14.144224 11.29% 360,308 1998
----------------- ---------------- ------------------- ------------------ ----------
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 14.144224 19.911517 40.77% 1,038,871 1999
----------------- ---------------- ------------------- ------------------ ----------
Portfolio - NQ 12.709885 14.144224 11.29% 983,989 1998
----------------- ---------------- ------------------- ------------------ ----------
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* 11.836880 12.249399 3.49% 632,925 1999
----------------- ---------------- ------------------- ------------------ ----------
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 - NQ* 11.836880 12.249399 3.49% 957,505 1999
----------------- ---------------- ------------------- -----------------------------
11.392164 11.836880 3.90% 503,644 1998
----------------- ---------------- ------------------- ------------------ ----------
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
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
</TABLE>
*The 7-day yield on the NSAT Money Market Fund as of December 31, 1999 was
4.08%.
44
<PAGE> 47
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 - Q 22.281011 23.518255 5.55% 1,294,160 1999
----------------- ---------------- ------------------- ------------------ ----------
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
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
NSAT Total Return Fund - NQ 22.281011 23.518255 5.55% 2,639,891 1999
----------------- ---------------- ------------------- ------------------ ----------
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 18.423578 19.675211 6.79% 2,679,742 1999
----------------- ---------------- ------------------- ------------------ ----------
Trust Balanced Portfolio - Q 15.674014 18.423578 17.54% 1,717,800 1998
----------------- ---------------- ------------------- ------------------ ----------
(formerly, Asset Allocation Fund) 12.921017 15.674014 21.31% 882,338 1997
----------------- ---------------- ------------------- ------------------ ----------
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 18.423578 19.675211 6.79% 6,639,433 1999
----------------- ---------------- ------------------- ------------------ ----------
Trust Balanced Portfolio - NQ 15.674014 18.423578 17.54% 3,772,445 1998
----------------- ---------------- ------------------- ------------------ ----------
(formerly, Asset Allocation Fund) 12.921017 15.674014 21.31% 1,619,845 1997
----------------- ---------------- ------------------- ------------------ ----------
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 Trust 10.955610 13.095858 19.54% 1,079,436 1999
----------------- ---------------- ------------------- ------------------ ----------
Equity Index Portfolio - Q 10.000000 10.955610 9.56% 252,427 19981
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
One Group Investment Trust 10.955610 13.095858 19.54% 3,048,481 1999
Equity Index Portfolio - NQ ----------------- ---------------- ------------------- ------------------ ----------
10.000000 10.955610 9.56% 746,119 19981
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
One Group Investment 13.199019 12.856498 -2.60% 1,479,536 1999
----------------- ---------------- ------------------- ------------------ ----------
Trust Government Bond 12.460216 13.199019 5.93% 955,478 1998
----------------- ---------------- ------------------- ------------------ ----------
Portfolio - Q 11.511652 12.460216 8.24% 488,790 1997
----------------- ---------------- ------------------- ------------------ ----------
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>
45
<PAGE> 48
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 13.199019 12.856498 -2.60% 3,433,968 1999
----------------- ---------------- ------------------- ------------------ ----------
Trust Government Bond 12.460216 13.199019 5.93% 1,715,256 1998
----------------- ---------------- ------------------- ------------------ ----------
Portfolio - NQ 11.511652 12.460216 8.24% 785,214 1997
----------------- ---------------- ------------------- ------------------ ----------
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 23.685874 29.321738 23.79% 1,409,374 1999
----------------- ---------------- ------------------- ------------------ ----------
Trust Mid Cap Growth Portfolio - 17.286833 23.685874 37.02% 1,184,086 1998
Q (formerly, Growth Opportunities ----------------- ---------------- ------------------- ------------------ ----------
Fund) 13.492662 17.286833 28.12% 969,427 1997
----------------- ---------------- ------------------- ------------------ ----------
11.819338 13.492662 14.16% 569,164 1996
----------------- ---------------- ------------------- ------------------ ----------
9.652463 11.819338 22.45% 182,690 1995
----------------- ---------------- ------------------- ------------------ ----------
10.000000 9.652463 -3.48% 37,250 1994
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
One Group Investment 23.685874 29.321738 23.79% 3,356,134 1999
----------------- ---------------- ------------------- ------------------ ----------
Trust Mid Cap Growth Portfolio - 17.286833 23.685874 37.02% 2,752,495 1998
----------------- ---------------- ------------------- ------------------ ----------
NQ (formerly, Growth 13.492662 17.286833 28.12% 1,967,681 1997
----------------- ---------------- ------------------- ------------------ ----------
Opportunities Fund) 11.819338 13.492662 14.16% 1,083,660 1996
----------------- ---------------- ------------------- ------------------ ----------
9.652463 11.819338 22.45% 385,700 1995
----------------- ---------------- ------------------- ------------------ ----------
10.000000 9.652463 -3.48% 57,644 1994
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
One Group Investment 25.623274 32.691561 27.59% 3,016,430 1999
----------------- ---------------- ------------------- ------------------ ----------
Trust Large Cap Growth Portfolio 18.376907 25.623274 39.43% 2,360,235 1998
----------------- ---------------- ------------------- ------------------ ----------
- - Q (formerly, Large Company 14.112701 18.376907 30.22% 1,752,117 1997
----------------- ---------------- ------------------- ------------------ ----------
Growth Fund) 12.255940 14.112701 15.15% 1,008,706 1996
----------------- ---------------- ------------------- ------------------ ----------
10.003154 12.255940 22.52% 388,897 1995
----------------- ---------------- ------------------- ------------------ ----------
10.000000 10.003154 0.03% 43,062 1994
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
One Group Investment 25.623274 32.691561 27.59% 7,063,890 1999
----
----------------- ---------------- ------------------- ------------------ ----------
Trust Large Cap Growth Portfolio 18.376907 25.623274 39.43% 5,213,039 1998
----------------- ---------------- ------------------- ------------------ ----------
- - NQ (formerly, Large Company 14.112701 18.376907 30.22% 3,368,336 1997
----------------- ---------------- ------------------- ------------------ ----------
Growth Fund) 12.255940 14.112701 15.15% 1,721,371 1996
----------------- ---------------- ------------------- ------------------ ----------
10.003154 12.255940 22.52% 632,427 1995
----------------- ---------------- ------------------- ------------------ ----------
10.000000 10.003154 0.03% 76,916 1994
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
One Group Investment Trust 10.000000 10.572360 5.72% 170,001 1999
----------------- ---------------- ------------------- ------------------ ----------
Diversified Equity Portfolio - Q
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
One Group Investment Trust 10.000000 10.572360 5.72% 464,908 1999
----------------- ---------------- ------------------- ------------------ ----------
Diversified Equity Portfolio - NQ
- ----------------------------------- ----------------- ---------------- ------------------- ------------------ ----------
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
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 Trust 10.000000 10.890908 8.91% 66,580 1999
---------------- ---------------- ------------------- ------------------ ----------
Diversified Mid Cap Portfolio - Q
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
One Group Investment Trust 10.000000 10.890908 8.91% 190,256 1999
---------------- ---------------- ------------------- ------------------ ----------
Diversified Mid Cap Portfolio - NQ
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
One Group Investment Trust 10.000000 10.156152 1.56% 104,139 1999
Mid Cap Value Portfolio - Q
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
One Group Investment Trust 10.000000 10.156152 1.56% 293,539 1999
Mid Cap Value Portfolio - NQ
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
- ------------------------------------ ---------------- ---------------- ------------------- ------------------ ----------
</TABLE>
(1) The unit value information shown reflects the period from May 1, 1998 to
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 condensed financial
information is available.
47
<PAGE> 50
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS NATIONWIDE VA SEPARATE ACCOUNT- C
This Statement of Additional Information is not a prospectus. It contains
information in addition to and in some respects more detailed than set forth in
the prospectus and should be read in conjunction with the prospectus dated May
1, 2000. 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"). Nationwide is a
member of the Nationwide group of companies and all of Nationwide's common stock
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 the Nationwide group of companies. The Nationwide group
of companies is one of America's largest insurance and financial services family
of companies, with combined assets of over $120 billion as of December 31, 1999.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each such contract owner and
records with respect to the contract value of each contract.
The custodian of the assets of the variable account is Nationwide. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds. Nationwide, or affiliates of Nationwide, may have
entered into agreements with either the investment adviser or distributor for
several of the underlying mutual funds. The agreements relate to administrative
services furnished by Nationwide or an affiliate of Nationwide and provide for
an annual fee based on the average aggregate net assets of the variable account
(and other separate accounts of Nationwide or life insurance company
subsidiaries of Nationwide) invested in particular underlying mutual funds.
These fees in no way affect the net asset value of the underlying mutual funds
or fees paid by the contract owner.
1
<PAGE> 51
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
Investment Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio
43215, a wholly owned subsidiary of Nationwide. During the fiscal years ending
December 31, 1999, 1998, and 1997, no underwriting commissions were paid by
Nationwide to NISC.
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, 1999, the
NSAT Money Market Fund's seven-day current unit value yield was 4.08%. 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, 1999 the seven-day effective
yield for the NSAT Money Market Fund was 4.16%.
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.
2
<PAGE> 52
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.
If the underlying mutual fund has been available in the variable account for
less than a year (or if the underlying mutual fund has been effective for less
than one year), standardized and non-standardized return is not annualized.
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 average 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.
3
<PAGE> 53
<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 (comprised of the
sub-accounts listed in note 1(b)) (collectively, "the Account") as of December
31, 1999, 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 Account'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, 1999, 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 the Account as of December
31, 1999, 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 18, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
5,152,374 shares (cost $113,466,068) .......................................................... $ 132,467,528
Fidelity VIP - Overseas Portfolio (FidVIPOv)
1,029,183 shares (cost $19,655,355) ........................................................... 28,240,776
Nationwide SAT - Money Market Fund (NSATMyMkt)
19,480,767 shares (cost $19,480,767) .......................................................... 19,480,767
Nationwide SAT - Total Return Fund (NSATTotRe)
4,919,238 shares (cost $77,754,208) ........................................................... 92,530,876
One Group - Balanced Portfolio (OGBal)
11,694,160 shares (cost $168,266,068) ......................................................... 183,364,423
One Group - Bond Portfolio (OGBond)
523,399 shares (cost $5,326,512) .............................................................. 5,223,524
One Group - Diversified Equity Portfolio (OGDivEq)
381,899 shares (cost $6,919,995) .............................................................. 6,709,966
One Group - Diversified Mid Cap Portfolio (OGDivMidCap)
172,120 shares (cost $2,581,569) .............................................................. 2,612,786
One Group - Equity Index Portfolio (OGEqIx)
4,177,620 shares (cost $47,981,692) ........................................................... 54,058,407
One Group - Government Bond Portfolio (OGGvtBd)
6,343,001 shares (cost $66,112,826) ........................................................... 63,176,294
One Group - Large Cap Growth Portfolio (OGLgCapGr)
12,407,714 shares (cost $240,567,341) ......................................................... 329,548,871
One Group - Mid Cap Growth Portfolio (OGMidCapGr)
6,799,591 shares (cost $106,869,791) .......................................................... 139,731,600
One Group - Mid Cap Value Portfolio (OGMidCapV)
387,900 shares (cost $3,854,489) .............................................................. 4,030,277
---------------
Total investments .......................................................................... 1,061,176,095
Accounts receivable ................................................................................. 261,947
---------------
Total assets ............................................................................... 1,061,438,042
ACCOUNTS PAYABLE ....................................................................................... 24,234
---------------
CONTRACT OWNERS' EQUITY ................................................................................ $ 1,061,413,808
===============
</TABLE>
(Continued)
<PAGE> 3
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, CONTINUED
<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 1,964,127 $ 22.280043 $ 43,760,834 5%
Non-tax qualified 3,981,435 22.280043 88,706,543 5%
Fidelity VIP - Overseas Portfolio:
Tax qualified 379,475 19.911517 7,555,923 41%
Non-tax qualified 1,038,871 19.911517 20,685,498 41%
Nationwide SAT - Money Market Fund:
Tax qualified 632,925 12.249399 7,752,951 3%
Non-tax qualified 957,505 12.249399 11,728,861 3%
Nationwide SAT - Total Return Fund:
Tax qualified 1,294,160 23.518255 30,436,385 6%
Non-tax qualified 2,639,891 23.518255 62,085,630 6%
One Group - Balanced Fund:
Tax qualified 2,679,742 19.675211 52,724,489 7%
Non-tax qualified 6,639,433 19.675211 130,632,245 7%
One Group - Bond Portfolio:
Tax qualified 154,762 10.028902 1,552,093 0%(a)
Non-tax qualified 372,959 10.028902 3,740,369 0%(a)
One Group - Diversified Equity Portfolio:
Tax qualified 170,001 10.572360 1,797,312 6%(a)
Non-tax qualified 464,908 10.572360 4,915,175 6%(a)
One Group - Diversified Mid Cap Portfolio:
Tax qualified 66,580 10.890908 725,117 9%(a)
Non-tax qualified 190,256 10.890908 2,072,061 9%(a)
One Group - Equity Index Fund:
Tax qualified 1,079,436 13.095858 14,136,141 20%
Non-tax qualified 3,048,481 13.095858 39,922,474 20%
One Group - Government Bond Fund:
Tax qualified 1,479,536 12.856498 19,021,652 (3)%
Non-tax qualified 3,433,968 12.856498 44,148,803 (3)%
One Group - Large Cap Growth Fund:
Tax qualified 3,016,430 32.691561 98,611,805 28%
Non-tax qualified 7,063,890 32.691561 230,929,591 28%
One Group - Mid Cap Growth Fund:
Tax qualified 1,409,374 29.321738 41,325,295 24%
Non-tax qualified 3,356,134 29.321738 98,407,682 24%
One Group - Mid Cap Value Portfolio:
Tax qualified 104,139 10.156152 1,057,652 2%(a)
Non-tax qualified 293,539 10.156152 2,981,227 2%(a)
========== ============ --------------
$1,061,413,808
==============
</TABLE>
(a) Non-annualized. The return was computed for the period 9/1/99 (effective
date) through 12/31/99.
(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 CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ----------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- ----------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
OGDivMidCap OGEqIx
----------------------------- -----------------------------
1999 1998 1999 1998
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ 3,773 - 527,516 69,595
Mortality, expense and administration
charges (note 2)..................... (5,145) - (384,999) (39,561)
-------------- -------------- -------------- --------------
Net investment activity.............. (1,372) - 142,517 30,034
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.. 20,942 - 3,116,712 534,659
Cost of mutual fund shares sold........ (21,188) - (2,606,913) (564,922)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments.. (246) - 509,799 (30,263)
Change in unrealized gain (loss) on investments 31,217 - 4,820,047 1,256,668
-------------- -------------- -------------- --------------
Net gain (loss) on investments....... 30,971 - 5,329,846 1,226,405
-------------- -------------- -------------- --------------
Reinvested capital gains............... 174,370 - 647,824 -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations. 203,969 - 6,120,187 1,256,439
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 2,588,143 - 36,015,097 12,077,730
Transfers between funds................ 1,194 - 2,402,047 398,461
Redemptions............................ (6,028) - (4,086,915) (28,766)
Annuity benefits....................... - - - -
Contingent deferred sales charges (note 2) (122) - (54,097) (1,300)
Adjustments to maintain reserves....... 10,022 - (40,333) 65
-------------- -------------- -------------- --------------
Net equity transactions............ 2,593,209 - 34,235,799 12,446,190
-------------- -------------- -------------- --------------
Net change in contract owners' equity.... 2,797,178 - 40,355,986 13,702,629
Contract owners' equity beginning of period - - 13,702,629 -
-------------- -------------- -------------- --------------
Contract owners' equity end of period.... $ 2,797,178 - 54,058,615 13,702,629
============== ============== ============== ==============
</TABLE>
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ----------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- ----------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
OGGvtBd OGLgCapGr
----------------------------- -----------------------------
1999 1998 1999 1998
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. 2,974,373 1,741,737 400,827 465,426
Mortality, expense and administration
charges (note 2)..................... (655,256) (314,513) (3,311,041) (1,826,256)
------------- -------------- -------------- --------------
Net investment activity.............. 2,319,117 1,427,224 (2,910,214) (1,360,830)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.. 8,667,456 2,245,378 11,675,973 1,085,409
Cost of mutual fund shares sold........ (8,636,682) (2,196,128) (4,939,283) (593,257)
------------- -------------- -------------- --------------
Realized gain (loss) on investments.. 30,774 49,250 6,736,690 492,152
Change in unrealized gain (loss) on investments (3,690,058) 201,662 33,665,907 37,313,992
------------- -------------- -------------- --------------
Net gain (loss) on investments....... (3,659,284) 250,912 40,402,597 37,806,144
------------- -------------- -------------- --------------
Reinvested capital gains............... 2,360 105,068 29,768,620 13,400,166
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations. (1,337,807) 1,783,204 67,261,003 49,845,480
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 35,090,477 17,834,339 84,344,126 57,599,562
Transfers between funds................ (2,340,963) 1,944,922 1,401,455 2,551,650
Redemptions............................ (10,387,808) (1,686,406) (25,175,190) (7,429,886)
Annuity benefits....................... (61) - (107) -
Contingent deferred sales charges (note 2) (87,123) (31,392) (474,350) (234,135)
Adjustments to maintain reserves....... (5,840) 8,956 (7,374) (949)
------------- -------------- -------------- --------------
Net equity transactions............ 22,268,682 18,070,419 60,088,560 52,486,242
------------- -------------- -------------- --------------
Net change in contract owners' equity.... 20,930,875 19,853,623 127,349,563 102,331,722
Contract owners' equity beginning of period 42,239,580 22,385,957 202,191,833 99,860,111
------------- -------------- -------------- --------------
Contract owners' equity end of period.... 63,170,455 42,239,580 329,541,396 202,191,833
============= ============== ============== ==============
</TABLE>
(Continued)
<PAGE> 5
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ----------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- ----------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
OGMidCapGr OGMidCapV
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................. $ - - 9,534 -
Mortality, expense and administration
charges (note 2)..................... (1,366,426) (870,837) (7,653) -
-------------- -------------- -------------- --------------
Net investment activity.............. (1,366,426) (870,837) 1,881 -
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.. 1,545,306 1,692,146 12,999 -
Cost of mutual fund shares sold........ (842,130) (1,119,894) (13,337) -
-------------- -------------- -------------- --------------
Realized gain (loss) on investments.. 703,176 572,252 (338) -
Change in unrealized gain (loss) on investments 11,352,793 17,992,207 175,789 -
-------------- -------------- -------------- --------------
Net gain (loss) on investments....... 12,055,969 18,564,459 175,451 -
-------------- -------------- -------------- --------------
Reinvested capital gains............... 16,002,619 5,435,045 - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations. 26,692,162 23,128,667 177,332 -
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners...................... 27,336,129 22,224,086 3,878,893 -
Transfers between funds................ (313,270) (171,521) 1,935 -
Redemptions............................ (6,448,351) (3,230,769) (19,588) -
Annuity benefits....................... - - - -
Contingent deferred sales charges (note 2) (198,328) (105,798) (132) -
Adjustments to maintain reserves....... 88 1,416 439 -
-------------- -------------- -------------- --------------
Net equity transactions............ 20,376,268 18,717,414 3,861,547 -
-------------- -------------- -------------- --------------
Net change in contract owners' equity.... 47,068,430 41,846,081 4,038,879 -
Contract owners' equity beginning of period 92,664,547 50,818,466 - -
-------------- -------------- -------------- --------------
Contract owners' equity end of period.... $ 139,732,977 92,664,547 4,038,879 -
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NATIONWIDE VA SEPARATE ACCOUNT-C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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.
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 - Balanced Portfolio (OGBal) (formerly One Group -
Asset Allocation Fund)
One Group - Bond Portfolio (OGBond)
One Group - Diversified Equity Portfolio (OGDivEq)
One Group - Diversified Mid Cap Portfolio (OGDivMidCap)
One Group - Equity Index Portfolio (OGEqIx)
(formerly One Group - Equity Index Fund)
One Group - Government Bond Portfolio (OGGvtBd)
(formerly One Group - Government Bond Fund)
One Group - Large Cap Growth Portfolio (OGLgCapGr)
(formerly One Group - Large Company Growth Fund))
One Group - Mid Cap Growth Portfolio (OGMidCapGr)
(formerly One Group - Growth Opportunities Fund)
One Group - Mid Cap Value Portfolio (OGMidCapV)
At December 31, 1999, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
(Continued)
<PAGE> 7
NATIONWIDE VA SEPARATE ACCOUNT-C
NOTES TO FINANCIAL STATEMENTS, Continued
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, 1999. The cost of investments
sold is determined on a specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
(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> 54
<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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
Columbus, Ohio
January 28, 2000
<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 1999 1998
------ --------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $ 1,051,556 $ 904,946
Equity securities 5,659 20,853
Mortgage loans on real estate, net 330,068 268,894
Real estate, net 2,200 2,250
Policy loans 465 332
Short-term investments 706 2,277
--------------- ---------------
1,390,654 1,199,552
--------------- ---------------
Cash 4,280 2
Accrued investment income 13,906 11,645
Deferred policy acquisition costs 92,025 53,007
Reinsurance receivable from affiliate 91,667 -
Other assets 42,851 41,542
Assets held in separate accounts 2,127,080 1,533,690
--------------- ---------------
$ 3,762,463 $ 2,839,438
=============== ===============
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $ 1,480,807 $ 1,163,829
Other liabilities 41,308 25,933
Liabilities related to separate accounts 2,127,080 1,533,690
--------------- ---------------
3,649,195 2,723,452
--------------- ---------------
Commitments and contingencies (notes 8 and 12)
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 59,536 50,331
Accumulated other comprehensive income (1,868) 10,055
--------------- ---------------
113,268 115,986
--------------- ---------------
$ 3,762,463 $ 2,839,438
=============== ===============
</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,
---------------------------------------------
1999 1998 1997
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Policy charges $44,793 $28,549 $11,244
Life insurance premiums 292 63 363
Net investment income 13,959 11,314 11,577
Realized gains (losses) on investments 5,208 696 (246)
Other income 1,059 1,165 1,057
------------- ------------- --------------
65,311 41,787 23,995
------------- ------------- --------------
Benefits and expenses:
Interest credited to policyholder account balances 8,548 4,881 3,948
Other benefits and claims 5,210 1,586 433
Amortization of deferred policy acquisition costs 13,592 4,348 1,402
Other operating expenses 24,185 8,952 1,860
------------- ------------- --------------
51,535 19,767 7,643
------------- ------------- --------------
Income before federal income tax expense 13,776 22,020 16,352
Federal income tax expense 4,571 7,501 5,749
------------- ------------- --------------
Net income $ 9,205 $14,519 $10,603
============= ============= ==============
</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, 1999, 1998 and 1997
($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, 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 year - - - 3,940 3,940
---------------
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 year - - - 2,887 2,887
---------------
Total comprehensive income 17,406
------------ -------------- -------------- ----------------- ---------------
December 31, 1998 2,640 52,960 50,331 10,055 115,986
Comprehensive income:
Net income - - 9,205 - 9,205
Net unrealized losses on securities
available-for-sale arising during the year - - - (11,923) (11,923)
---------------
Total comprehensive income (2,718)
------------ -------------- -------------- ----------------- ---------------
December 31, 1999 $2,640 $52,960 $59,536 $(1,868) $113,268
============ ============== ============== ================= ===============
</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,
----------------------------------------------
1999 1998 1997
------------- ---------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,205 $ 14,519 $ 10,603
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to policyholder account balances 8,548 4,881 3,948
Capitalization of deferred policy acquisition costs (33,965) (29,216) (20,099)
Amortization of deferred policy acquisition costs 13,592 4,348 1,402
Amortization and depreciation 1,351 (479) 250
Realized (gains) losses on invested assets, net (5,208) (696) 246
Increase in accrued investment income (2,261) (867) (1,589)
Increase in policy liabilities and funds withheld
on coinsurance agreement with affiliate 160,246 139,991 228,898
Other, net 20,486 (29,802) 14,370
------------- ---------------- ---------------
Net cash provided by operating activities 171,994 102,679 238,029
------------- ---------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 137,210 117,228 95,366
Proceeds from sale of securities available-for-sale 73,864 17,403 30,431
Proceeds from repayments of mortgage loans on real estate 32,397 28,180 15,199
Proceeds from sale of real estate - 707 -
Proceeds from repayments of policy loans 109 99 67
Cost of securities available-for-sale acquired (375,642) (242,516) (267,899)
Cost of mortgage loans on real estate acquired (93,500) (78,180) (84,736)
Cost of real estate acquired - (3) (13)
Policy loans issued (242) (216) (155)
Short-term investments, net 1,571 16,691 (18,476)
------------- ---------------- ---------------
Net cash used in investing activities (224,233) (140,607) (230,216)
------------- ---------------- ---------------
Cash flows from financing activities:
Increase in investment product and universal life insurance
product account balances 192,893 74,828 6,952
Decrease in investment product and universal life insurance
product account balances (136,376) (42,061) (13,898)
------------- ---------------- ---------------
Net cash provided by (used in) financing activities 56,517 32,767 (6,946)
------------- ---------------- ---------------
Net increase (decrease) in cash 4,278 (5,161) 867
Cash, beginning of year 2 5,163 4,296
Cash, end of year $ 4,280 $ 2 $ 5,163
============= ================ ===============
</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, 1999, 1998 and 1997
($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 accumulated other comprehensive income in
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, 1999 or 1998.
<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 4.5%, 5.1% and 5.1% for the years ended
December 31, 1999, 1998 and 1997, 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) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $431.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 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. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(i) RECLASSIFICATION
Certain items in the 1998 and 1997 financial statements have been
reclassified to conform to the 1999 presentation.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
--------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 36,717 $ 2 $ (1,198) $ 35,521
Obligations of states and political subdivisions 302 - (7) 295
Debt securities issued by foreign governments 2,256 2 (22) 2,236
Corporate securities 773,869 2,208 (13,367) 762,710
Mortgage-backed securities 252,668 1,001 (2,875) 250,794
--------------- ------------- ------------- ---------------
Total fixed maturity securities 1,065,812 3,213 (17,469) 1,051,556
Equity securities 1,990 3,669 - 5,659
--------------- ------------- ------------- ---------------
$1,067,802 $6,882 $(17,469) $1,057,215
===========================================================
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
=============== ============= ============= ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, 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 $ 50,029 $ 49,799
Due after one year through five years 399,476 393,204
Due after five years through ten years 331,022 326,616
Due after ten years 285,285 281,937
------------ ---------------
$1,065,812 $1,051,556
============ ===============
</TABLE>
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Gross unrealized gains (losses) $(10,587) $26,402
Adjustment to deferred policy acquisition costs 7,714 (10,933)
Deferred federal income tax 1,006 (5,414)
------------- --------------
$ (1,868) $10,055
============= ==============
</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>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ (35,128) $ 3,922 $ 9,177
Equity securities (1,861) 2,467 1,663
------------- ------------- -------------
$ (36,989) $ 6,389 $10,840
============= ============= =============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $73,864, $17,403 and $30,431, respectively. During
1999, gross gains of $297 ($509 and $825 in 1998 and 1997,
respectively) and gross losses of $37 (none and $1,124 in 1998 and
1997, respectively) were realized on those sales. See note 10.
The Company has no investments which were non-income producing for the
twelve month periods preceding December 31, 1999 and 1998.
Real estate is presented at cost less accumulated depreciation of $155
as of December 31, 1999 ($105 as of December 31, 1998). There was no
valuation allowance as of December 31, 1999 or 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1999 was $881 ($890 as of December 31,
1998). No valuation allowance has been recorded for these loans as of
December 31, 1999 or 1998. During 1999, the average recorded investment
in impaired mortgage loans on real estate was approximately $885 ($178
in 1998) and there was no interest income recognized on those loans.
Interest income recognized on impaired loans was $15 in 1998, which is
equal to interest income recognized using a cash-basis method of income
recognition.
The valuation allowance account for mortgage loans on real estate was
$750 for the year ended December 31, 1999 and remains unchanged from
the previous two years.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $66,160 $56,398 $53,491
Equity securities - - 375
Mortgage loans on real estate 23,475 21,124 14,862
Real estate 413 379 318
Short-term investments 1,580 1,361 899
Other 334 178 90
------------ ----------- -----------
Total investment income 91,962 79,440 70,035
Less:
Investment expenses 2,040 1,773 1,386
Net investment income ceded (note 11) 75,963 66,353 57,072
------------ ----------- -----------
Net investment income $13,959 $11,314 $11,577
============ =========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $ 260 $ 509 $(299)
Mortgage loans on real estate 7 - 53
Real estate and other 4,941 187 -
------------ ----------- ------------
$ 5,208 $ 696 $(246)
============ =========== ============
</TABLE>
Fixed maturity securities with an amortized cost of $3,540 and $3,562
as of December 31, 1999 and 1998, respectively, were on deposit with
various regulatory agencies as required by law.
(4) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
Interest rate swaps are primarily used to convert specific investment
securities from a fixed-rate to a floating-rate basis. Amounts
receivable or payable under these agreements are recognized as an
adjustment to net investment income consistent with the nature of the
hedged item. The changes in fair value of the interest rate swap
agreements are not recognized on the balance sheet, except for interest
rate swaps designated as hedges of fixed maturity securities
available-for-sale, for which changes in fair values are reported in
accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
investments denominated in foreign currencies into U.S. dollars at
specified exchange rates. Gains and losses on foreign currency swaps
are recorded in earnings based on the related spot foreign exchange
rate at the end of the reporting period. Gains and losses on these
contracts offset those recorded as a result of translating the hedged
foreign currency denominated investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
Interest rate swaps
<S> <C>
Pay fixed/receive variable rate swaps hedging investments $ 1,585
Foreign currency swaps
Hedging foreign currency denominated investments $ 1,420
Interest rate futures contracts $ 2,483
</TABLE>
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(5) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset as of December 31, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 17,454 $ 16,670
Liabilities in separate accounts 15,603 12,477
Fixed maturity securities 3,905 -
Mortgage loans on real estate and real estate 266 263
------------ ------------
Total gross deferred tax assets 37,228 29,410
------------ ------------
Deferred tax liabilities:
Fixed maturity securities - 8,669
Deferred policy acquisition costs 15,624 8,103
Equity securities 1,284 1,935
Other 13,799 10,422
------------ ------------
Total gross deferred tax liabilities 30,707 29,129
------------ ------------
Net deferred tax asset $ 6,521 $ 281
============ ============
</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, 1999, 1998 and 1997 based on its analysis of future
deductible amounts.
The Company's current federal income tax liability was $1,860 and
$1,522 as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ------------
<S> <C> <C> <C>
Currently payable $ 4,391 $10,014 $2,458
Deferred tax expense (benefit) 180 (2,513) 3,291
------------ ----------- ------------
$ 4,571 $ 7,501 $5,749
============ =========== ============
</TABLE>
Total federal income tax expense for the years ended December 31, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
Amount % Amount % Amount %
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $4,822 35.0 $7,707 35.0 $5,723 35.0
Tax exempt interest and dividends
received deduction (255) (1.8) (223) (1.0) - -
Other, net 4 - 17 0.1 26 (0.2)
----------- -------- ----------- -------- ----------- --------
Total (effective rate of each year) $4,571 33.2 $7,501 34.1 $5,749 35.2
=========== ======== =========== ======== =========== ========
</TABLE>
Total federal income tax paid was $4,053, $9,298 and $9,566 during the
years ended December 31, 1999, 1998 and 1997, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(6) COMPREHENSIVE INCOME
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
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>
1999 1998 1997
------------- ------------- --------------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $ (36,729) $ 6,898 $10,541
Adjustment to deferred policy acquisition costs 18,645 (1,947) (4,778)
Related federal income tax (expense) benefit 6,330 (1,733) (2,017)
------------- ------------- --------------
Net (11,754) 3,218 3,746
------------- ------------- --------------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross (260) (509) 299
Related federal income tax expense (benefit) 91 178 (105)
------------- ------------- --------------
Net (169) (331) 194
------------- ------------- --------------
Total Other Comprehensive Income $ (11,923) $ 2,887 $ 3,940
============= ============= ==============
</TABLE>
(7) 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. The carrying amount and fair value for fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
equity securities.
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 fair value because of the short-term nature of such
commitments. See note 8.
FUTURES CONTRACTS: The fair value for futures contracts is based
on quoted market prices.
INTEREST RATE AND FOREIGN CURRENCY SWAPS: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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>
1999 1998
------------------------------- -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $ 1,051,556 $ 1,051,556 $ 904,946 $ 904,946
Equity securities 5,659 5,659 20,853 20,853
Mortgage loans on real estate, net 330,068 324,610 268,894 276,387
Policy loans 465 465 332 332
Short-term investments 706 706 2,277 2,277
Cash 4,280 4,280 2 2
Assets held in separate accounts 2,127,080 2,127,080 1,533,690 1,533,690
Liabilities:
Investment contracts (1,335,787) (1,283,459) (1,153,930) (1,113,584)
Policy reserves on life insurance contracts (145,020) (145,370) (9,899) (10,517)
Liabilities related to separate accounts (2,127,080) (2,082,541) (1,533,690) (1,501,255)
Derivative financial instruments:
Interest rate swaps hedging assets 109 109 - -
Foreign currency swaps (18) (18) - -
Futures contracts 21 21 - -
</TABLE>
(8) 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 and derivative financial instruments. These
instruments involve, to varying degrees, elements of credit risk in
excess of amounts recognized on the balance sheets.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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 $10,039 extending into
2000 were outstanding as of December 31, 1999.
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 30% (33% in 1998) in any geographic area and no more than 5% (6%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999 22% (36% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed apartment
building properties.
(9) 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.
Pension costs charged to operations by the Company during the years
ended December 31, 1999, 1998 and 1997 were $127, $235 and $257,
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,
1999 and 1998 was $1,040 and $1,008, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1999, 1998 and 1997 was $177,
$130 and $94, 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, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185,000 $ 2,033,800 $ 270,100 $ 237,900
Service cost 80,000 87,600 14,200 9,800
Interest cost 109,900 123,400 17,600 15,400
Actuarial (gain) loss (95,000) 123,200 (64,400) 15,600
Plan settlement in 1999/curtailment in 1998 (396,100) (107,200) - -
Benefits paid (72,400) (75,800) (11,000) (8,600)
Acquired companies - - 13,300 -
------------- ------------- ------------- -------------
Benefit obligation at end of year 1,811,400 2,185,000 239,800 270,100
------------- ------------- ------------- -------------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541,900 2,212,900 77,900 69,200
Actual return on plan assets 161,800 300,700 3,500 5,000
Employer contribution 12,400 104,100 20,900 12,100
Plan settlement (396,100) - - -
Benefits paid (72,400) (75,800) (11,000) (8,400)
------------- ------------- ------------- -------------
Fair value of plan assets at end of year 2,247,600 2,541,900 91,300 77,900
------------- ------------- ------------- -------------
Funded status 436,200 356,900 (148,500) (192,200)
Unrecognized prior service cost 28,200 31,500 - -
Unrecognized net (gains) losses (402,000) (345,700) (46,700) 16,000
Unrecognized net (asset) obligation at transition (7,700) (11,000) 1,100 1,300
------------- ------------- ------------- -------------
Prepaid (accrued) benefit cost $ 54,700 $ 31,700 $ (194,100) $ (174,900)
============= ============= ============= =============
</TABLE>
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% - -
Assumed health care cost trend rate:
Initial rate - - 15.00% 15.00%
Ultimate rate - - 5.50% 8.00%
Uniform declining period - - 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- -------------- --------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80,000 $ 87,600 $ 77,300
Interest cost on projected benefit obligation 109,900 123,400 118,600
Expected return on plan assets (160,300) (159,000) (139,000)
Recognized gains (9,100) (3,800) -
Amortization of prior service cost 3,200 3,200 3,200
Amortization of unrecognized transition obligation (asset) (1,400) 4,200 4,200
------------- -------------- --------------
$ 22,300 $ 55,600 $ 64,300
============= ============== ==============
</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 Nationwide Insurance 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). During 1999, the plan
transferred assets to settle its obligation related to WSC employees. A
settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- -------------- -------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service
during the year) $14,200 $ 9,800 $ 7,000
Interest cost on accumulated postretirement benefit obligation 17,600 15,400 14,000
Actual return on plan assets (3,500) (5,000) (3,600)
Amortization of unrecognized transition obligation of affiliates 600 200 200
Net amortization and deferral (1,800) 1,200 (500)
------------- -------------- -------------
$27,100 $21,600 $17,100
============= ============== =============
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
NPPBC:
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 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, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) 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 certain levels, each of
which requires specified corrective action. The Company exceeds the
minimum risk-based capital requirements.
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The statutory capital and surplus of the Company as reported to
regulatory authorities as of December 31, 1999, 1998 and 1997 was
$63,275, $70,135 and $74,820, respectively. The statutory net (loss)
income of the Company as reported to regulatory authorities for the
years ended December 31, 1999, 1998 and 1997 was $(305), $(3,371) and
$7,446, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1999,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $6,328.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $660, $430
and $703, 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. Measures used
to allocate expenses among companies include individual employee
estimates of time spent, special cost studies, salary expense,
commission expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. In
addition, beginning in 1999 Nationwide Services Company, a subsidiary
of NMIC, provides computer, telephone, mail, employee benefits
administration, and other services to NMIC and certain of its direct
and indirect subsidiaries, including the Company, based on specified
rates for units of service consumed. For the years ended December 31,
1999, 1998 and 1997, the Company made payments to NMIC and Nationwide
Services Company totaling $5,150, $2,933, and $2,564, respectively. In
addition, the Company does not believe that expenses recognized under
these agreements are materially different than expenses that would have
been recognized had the Company operated on a stand-alone basis.
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. Amounts ceded to NLIC in 1999 are included in NLIC's results
of operations for 1999 and include premiums of $258,468 ($241,503 and
$300,617 in 1998 and 1997, respectively), net investment income of
$75,963 ($66,353 and $57,072 in 1998 and 1997, respectively) and
benefits, claims and other expenses of $319,240 ($296,659 and $343,426
in 1998 and 1997, respectively). In consideration for the initial
inforce business reinsured, NLIC paid the Company $26,473 in commission
and expense allowances which were applied to the Company's deferred
policy acquisition costs as of December 31, 1996. No significant gain
or loss was recognized as a result of the agreement.
During 1999, the Company entered into an intercompany reinsurance
agreement with NLIC wherby certain life insurance contracts are ceded
on a 100% coinsurance basis. Amounts ceded to NLIC include premiums of
$87,696 and expenses of $3,150 during 1999 and policy reserves of
$91,667 as of December 31, 1999.
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 reinsurance agreements with affiliates are consistent in
all material respects with what the Company could have obtained with
unaffiliated parties.
<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 $706 and $2,277 as of December 31,
1999 and 1998, respectively, and are included in short-term investments
on the accompanying balance sheets.
(12) CONTINGENCIES
On October 29, 1998, the Company was 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).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company affiliates which were
used to fund certain tax-deferred retirement plans. The amended
complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, the Company and the other named
defendants filed a motion to dismiss the amended complaint. On March 8,
2000, the court denied the motion to dismiss the amended complaint
filed by the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(13) 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 access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. 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, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. 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, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
Annuities Annuities Insurance and Other Total
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (2,304) $ 8,550 $ 1,596 $ 6,117 $ 13,959
Other operating revenue 26,187 3,310 16,647 -- 46,144
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 23,883 11,860 18,243 6,117 60,103
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 6,561 1,987 -- 8,548
Amortization of deferred policy
acquisition costs 7,686 963 4,943 -- 13,592
Other benefits and expenses 13,593 7,378 8,424 -- 29,395
----------- ----------- ----------- ----------- -----------
Total expenses 21,279 14,902 15,354 -- 51,535
----------- ----------- ----------- ----------- -----------
Operating income (loss) before
federal income tax 2,604 (3,042) 2,889 6,117 8,568
Realized gains on investments -- -- -- 5,208 5,208
----------- ----------- ----------- ----------- -----------
Consolidated income (loss) before
federal tax expense $ 2,604 $ (3,042) $ 2,889 $ 11,325 $ 13,776
=========== =========== =========== =========== ===========
Assets as of year end $ 1,957,486 $ 1,352,324 $ 382,388 $ 70,265 $ 3,762,463
=========== =========== =========== =========== ===========
1998:
Net investment income (1) $ (1,417) $ 6,792 $ 408 $ 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 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
=========== =========== =========== =========== ===========
</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>
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 (loss) before
federal income tax 7,267 3,202 (228) 6,357 16,598
Realized losses on investments - - - (246) (246)
--------------- --------------- --------------- ---------------- -------------
Consolidated income (loss) 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>
- ----------
(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> 55
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) To be filed by Financial Statements:
(1) Financial statements included
in Prospectus
(Part A):
Condensed Financial Information.
(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.
Statements of Assets, Liabilities
and Contract Owners' Equity as of
December 31, 1999.
Statements of Operations for the years ended
December 31, 1999, and 1998.
Statements of Changes in Contract Owners'
Equity for the years ended December 31, 1999
and 1998.
Notes to Financial Statements.
Nationwide Life and Annuity Insurance Company:
Independent Auditors' Report.
Balance Sheets as of December 31, 1999 and
1998.
Statements of Income for the years ended
December 31, 1999, 1998 and 1997.
Statements of Shareholder's Equity for the
years ended December 31, 1999, 1998 and 1997.
Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
Notes to Financial Statements.
<PAGE> 56
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 - Attached hereto.
(4) The form of the variable annuity contract
- Filed previously with Post-Effective
Amendment No.8 (File No. 33-66496) and
hereby incorporated by reference.
(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 (Filed 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 by reference.
<PAGE> 57
<TABLE>
<CAPTION>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365-6107
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
301 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
Xerox Corporation
Suite 200
1401 H Street NW
Washington, DC 20005-2110
Ralph M. Paige 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
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1767D Westwood Avenue
Alliance, OH 44601
Richard D. Headley Executive Vice President - Chief
One Nationwide Plaza Information Technology Officer
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
Charles A. Bryan Senior Vice President -
One Nationwide Plaza Chief Actuary - Property and Casualty
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Thomas L. Crumrine Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Senior Vice President -
One Nationwide Plaza Corporate Controller
Columbus, OH 43215
Philip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary - Nationwide Financial
Columbus, OH 43215
Patricia R. Hatler Senior Vice President,
One Nationwide Plaza General Counsel and Secretary
Columbus, OH 43215
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
David K. Hollingsworth Senior Vice President -
One Nationwide Plaza Business Development and
Columbus, OH 43215 Sponsor Relations
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
Donna A James Senior Vice President - Chief Human
One Nationwide Plaza Resources Officer
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Gregory S. Lashutka Senior Vice President -
One Nationwide Plaza Corporate Relations
Columbus, OH 43215
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Mark D. Phelan Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
Douglas C. Robinette Senior Vice President -
One Nationwide Plaza Claims and Finance Services
Columbus, OH 43215
Mark R. Thresher Senior Vice President -
One Nationwide Plaza Finance - Nationwide Financial
Columbus, OH 43215
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Operations
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Product
One Nationwide Plaza Management and Nationwide
Columbus, OH 43215 Financial Marketing
</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
<PAGE> 60
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
The 401(k) Companies, Inc. Texas Holding Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
The 401(k) Company Texas Third-party administrator for 401(k)
plans
---------------------------------------- ------------------------- ------------------ ---------------------------------------
401(k) Investment Advisors, Inc. Texas Investment advisor registered with the
SEC
---------------------------------------- ------------------------- ------------------ ---------------------------------------
401(k) Investments Services, Inc. Texas NASD registered broker-dealer
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Affiliate Agency, Inc. Delaware Insurance agency marketing life
insurance & annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Affiliate Agency of Ohio, Inc. Ohio Insurance agency marketing life
insurance & annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
AID Finance Services, Inc. Iowa Holding Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED General Agency Company Iowa Managing general agent and surplus
lines broker for property & casualty
insurance products
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Group, Inc. Iowa Property & casualty holding company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Group Insurance Marketing Iowa Direct marketer for property and
Company casualty insurance products
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
ALLIED Property and Casualty Insurance Iowa Underwrites general property &
Company casualty insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
AMCO Insurance Company Iowa Underwrites general property &
casualty insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
American Marine Underwriters, Inc. Florida Underwriting manager for ocean cargo
and bulk insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Auto Direkt Insurance Company Germany Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Cal-Ag Insurance services, Inc. California Captive insurance brokerage firm
---------------------------------------- ------------------------- ------------------ ---------------------------------------
CalFarm Insurance Agency California Former marketing company for
traditional agent producers of CalFarm
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
CalFarm Insurance Company California Multi-line insurance company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Caliber Funding Delaware A limited purpose corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Colonial County Mutual Insurance Texas Insurance Company
Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Columbus Insurance Brokerage and Germany General service insurance broker
Service GmbH
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance agency that sells and
services commercial insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Depositors Insurance Company Iowa Underwrites property & casualty
insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
eNationwide, LLC Ohio A limited liability company to provide
administrative services to
Nationwide's direct operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Excaliber Funding Corporation Delaware Limited purpose corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
F&B, Inc. Iowa Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Alabama Insurance agency marketing life
of Alabama, Inc. insurance and annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Ohio Insurance marketing life insurance and
of Ohio, Inc. annuity products through financial
institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Oklahoma Insurance marketing life insurance and
of Oklahoma, Inc. annuity products through financial
institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Distributors Agency Texas Insurance marketing life insurance and
of Texas, Inc. annuity products through financial
institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Financial Horizons Investment Trust Massachusetts Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Financial Horizons Securities Oklahoma Limited broker-dealer doing business
Corporation solely in the financial institution
market
---------------------------------------- ------------------------- ------------------ ---------------------------------------
GatesMcDonald Health Plus Inc. Ohio Managed Care Organization
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Gates, McDonald & Company Ohio Services employers for managing
workers' and unemployment compensation
matters
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Gates, McDonald & Company of New York, New York Workers' compensation/self-insured
Inc. claims administration services to
employers with exposure in New York
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Insurance Intermediaries, Inc. Ohio Insurance agency providing commercial
property & casualty brokerage services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Landmark Financial Services of New New York Insurance agency marketing life
York, Inc. insurance and annuity products through
financial institutions
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Leben Direkt Insurance Company Germany Life insurance through direct mail
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas General agent to market non-standard
automobile and motorcycle insurance
for Colonial Mutual Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
MedProSolutions, Inc. Massachusetts Provides third-party administration
services for workers compensation,
automobile injury and disability claims
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Midwest Printing Services, Ltd. Iowa General printing services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Morley & Associates, Inc. Oregon Insurance brokerage
---------------------------------------- ------------------------- ------------------ ---------------------------------------
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, England Insurance Company
Ltd.
---------------------------------------- ------------------------- ------------------ ---------------------------------------
National Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**National Premium and Benefit Delaware Provides third-party administration
Administration Company services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Advisory Services, Inc. Ohio Registered broker-dealer providing
investment management and
administrative services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**Nationwide Agency, Inc. Ohio Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Agribusiness Insurance Iowa Provides property & casualty insurance
--------------------------------------
Company primarily to agricultural business
----------------------------------
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Arena, LLC Ohio A limited liability company related to
arena development
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Asset Allocation Trust Ohio Diversified open-end investment company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Assurance Company Wisconsin Underwrites non-standard automobile
and motorcycle insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Cash Management Company Ohio Investment Securities Agent
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Nationwide Corporation Ohio Holding company for entities
affiliated with Nationwide Mutual
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Exclusive Distribution Ohio A limited liability company providing
Company, LLC agency support services to Nationwide
exclusive agents
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Assignment Company Ohio An assignment company to administer
structured settlement business
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Institution New Mexico Insurance Agency
Distributors Agency, Inc. of New Mexico
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Institution Massachusetts Insurance Agency
Distributors Agency, Inc. of
Massachusetts
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services Bermuda Long-term insurer which issued
(Bermuda) Ltd. variable annuity and variable life
products to persons outside the U.S. &
Bermuda
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust securities & uses proceeds to acquire
debentures
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust II securities & uses proceeds to acquire
debentures
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Financial Services, Inc. Delaware Holding Company for entities
associated with Nationwide Mutual
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Foundation Ohio Not-for profit corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide General Insurance Company Ohio Primarily provides automobile and fire
insurance to select customers
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Finance, LLC Ohio Act as a support company for
Nationwide Global Holdings, Inc. & its
international capitalization efforts
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Funds Cayman Islands Exempted company with limited
liability for purpose of issuing
investment shares to segregated asset
accounts of Nationwide Financial
Services (Bermuda) Ltd. and to
non-U.S. resident investors
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Holdings, Inc. Ohio Holding Company for Nationwide
Insurance Enterprise international
operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Holdings, Inc.-NGH Grand Duchy of Analyze European market of life
Luxembourg Branch Luxembourg insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
Nationwide Global Holdings-Hong Kong, Hong Kong Primarily a holding company for
Limited Nationwide Global Holdings, Inc. Asian
operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Global Holdings-NGH Brasil Brazil Holding company
Participacoes LTDA
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Health Plans, Inc. Ohio Health insuring organization
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Home Mortgage Company Iowa Mortgage lendor
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Indemnity Company Ohio Reinsurance company assuming business
from Nationwide Mutual Insurance
Company and other insurers within the
Nationwide Insurance Enterprise
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Insurance Company of America Wisconsin Independent agency personal lines
underwriter of property & casualty
insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Insurance Company of Florida Ohio Transacts general insurance business
except life insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Insurance Golf Charities, Ohio Not-for-profit corporation
Inc.
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide International Underwriters California Special risks, excess & surplus lines
underwriting manager
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Investing Foundation Michigan Provide investors with continuous
source of investment under management
of trustees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Investing Foundation II Massachusetts Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Investment Services Oklahoma Registered broker-dealer
Corporation
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
**Nationwide Life Insurance Company Ohio Life Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Lloyds Texas Commercial property insurance in Texas
---------------------------------------- ------------------------- ------------------ ---------------------------------------
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 Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
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. Alabama Market and administer deferred
of Alabama compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Arizona Market and administer deferred
of Arizona compensation plans for public employees
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Arkansas Market and administer deferred
of 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 contracts to
of Ohio members of the National Education
Association in the state of Ohio
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity contracts to
of Oklahoma 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 contracts to
of Wyoming members of the National Education
Association in the state of Wyoming
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
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 Seguradora S.A. Brazil Engage in elementary, health & life
insurance; private open pension and
wealth concession plans
---------------------------------------- ------------------------- ------------------ ---------------------------------------
*Nationwide Separate Account Trust Massachusetts Diversified, open-end investment
company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Services Company, LLC. Ohio Single member limited liability
company performing shared services
functions for the Nationwide Insurance
Enterprise
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nationwide Trust Company, FSB United States Federal savings bank chartered by the
Office of Thrift Supervision in U.S.
Department of Treasury to exercise
custody & fiduciary powers
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Neckura Insurance Company Germany Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Neckura Life Insurance Company Germany Life and health insurance company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services to Nevada employers in the
construction industry
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services to Nevada employers in health
& nonprofit industries
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services to Nevada employers in the
hospitality & entertainment industries
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing, Transportation and services to Nevada employers in the
Distribution manufacturing, transportation and
distribution industries
---------------------------------------- ------------------------- ------------------ ---------------------------------------
NFS Distributors, Inc. Delaware Holding company for Nationwide
Financial Services, Inc. distribution
companies
---------------------------------------- ------------------------- ------------------ ---------------------------------------
NGH Luxembourg, S.A Luxembourg Acts primarily as holding company for
Nationwide Global Holdings, Inc.
European operations
---------------------------------------- ------------------------- ------------------ ---------------------------------------
NGH Netherlands, B.V. The Netherlands Holding company for other overseas
companies
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
---------------------------------------- ------------------------- ------------------ ---------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
---------------------------------------- ------------------------- ------------------ ---------------------------------------
<S> <C> <C> <C>
NGH UK, Ltd. United Kingdom Assist Nationwide Global Holdings,
Inc. with European operations and
marketing
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Northpointe Capital LLC Delaware Limited liability company for
investments
---------------------------------------- ------------------------- ------------------ ---------------------------------------
PanEuroLife Luxembourg Life Insurance company providing
individual life insurance primarily in
the UK, Belgium and France
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Pension Associates, Inc. Wisconsin Pension plan administration and record
keeping services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Portland Investment Services, Inc. Oregon NASD registered broker-dealer
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Premier Agency, Inc. Iowa Insurance Agency
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Riverview Agency, Inc. Texas Has a pending application to become a
licensed insurance agency with the
Texas Department of Insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Scottsdale Indemnity Company Ohio Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Scottsdale Insurance Company Ohio Insurance Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Scottsdale Surplus Lines Insurance Arizona Provides excess and surplus lines
Company insurance coverage on a non-admitted
basis
---------------------------------------- ------------------------- ------------------ ---------------------------------------
SVM Sales GmbH, Neckura Insurance Group Germany Recruits and supervises external sales
partners who obtain new business for
the Neckura Group as well as to offer
financial services
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Union Bond & Trust Company Oregon Oregon state bank with trust powers
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Villanova Capital, Inc. Delaware Holding Company
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Villanova Mutual Fund Capital Trust Delaware Trust designed to act as a registered
investment advisor
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Villanova SA Capital Trust Delaware Trust designed to act as a registered
investment advisor
---------------------------------------- ------------------------- ------------------ ---------------------------------------
Western Heritage Insurance Company Arizona Underwrites excess and surplus lines
of property and casualty insurance
---------------------------------------- ------------------------- ------------------ ---------------------------------------
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
--------------------------------------------------------------------------------------------------------------------------------
<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 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 Variable Account-6 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-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 Variable Account-11 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
Nationwide VL Separate Account-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VL Separate Account-C Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VL Separate Account -D Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
- --------------------------- --------------------------- ----------------------------
| ALLIED GROUP | | ALLIED | | |
| MERCHANT BANKING | | GROUP, INC. | | |
| CORPORATION | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 10,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|100% $150,055 | | |100% $243,344,521 | | | |
- --------------------------- | --------------------------- | ----------------------------
| |
- --------------------------- | --------------------------- | ----------------------------
| NATIONWIDE INSURANCE | | | AMCO | | | DEPOSITORS |
| COMPANY OF AMERICA | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
| | | | (AMCO) | | | (DEPOSITORS) |
|Common Stock: 12,000 | | |Common Stock: 500,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | |---|---| |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
| | | | | | | |
|AGI-100% $215,273,000 | | |AGI-100% $147,425,540| | |AGI 100% $22,251,842 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| AID FINANCE | | | ALLIED | | | ALLIED PROPERTY |
| SERVICES, INC. | | | GENERAL AGENCY | | | AND CASUALTY |
| (AID FINANCE) | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 10,000 | | |Common Stock: 5,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AGI-100% $19,545,634| |AMCO-100% $135,342 | | |AGI-100% $47,018,643 |
- --------------------------- --------------------------- | ----------------------------
| |
- --------------------------- --------------------------- | ----------------------------
| ALLIED | | MIDWEST | | | NATIONWIDE |
| GROUP INSURANCE | | PRINTING SERVICES, | | | HOME MORTGAGE |
| MARKETING COMPANY | | LTD. | | | COMPANY (NHMC) |
| | |Common Stock: 10,000 | | | |
|Common Stock: 20,000 | |------------ Shares | | |Common Stock: 54,348 |
|------------ Shares | | |---|---|------------ Shares |
| | | | | | |
| | | | | | |
| | | | | | |
| Cost | | Cost | | | |
| ---- | | ---- | | | |
| Aid | |AGI-100% $610,000 | | |AGI-80% |
| Finance-100% $16,059,469| --------------------------- | ----------------------------
- -------------------------- | |
--------------------------- | ----------------------------
| PREMIER | | | AGMC |
| AGENCY, | | | REINSURANCE, LTD. |
| INC. | | | |
|Common Stock: 100,000 | | |Common Stock: 11,000 |
|------------ Shares | | |------------ Shares |
| |---| | |
| Cost | | Cost |
| ---- | | ---- |
|AGI-100% $100,000 | |NHMC-100% $11,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
NATIONWIDE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |==============================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
- --| || |--------------------------------------------------------------------| |-----------------------
|| |
|| |--------------------------------------------------------------|-------------------
|| | |
|| -------------------------------- | -------------------------------- -----------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | INSURANCE COMPANY | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| |Guaranty Fund | | | | | |
=====||==|------------ |---| | |Common Stock: 20,000 | |Common Stock: 10,000 |
|Certificate | | |---|------------ Shares | |--|------------ Shares |
|----------- | | | | | | | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|Casualty $500,000 | | | |Casualty-100% $5,944,422 | | |Casualty-100% $142,943,140 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | NATIONWIDE PROPERTY | | | NECKURA |
| | | | | AND CASUALTY | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | INSURANCE COMPANY | | | |
|------------ | | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
| |---| |---|------------ Shares | | |------------ Shares |
| Cost | | | | | | | |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $6,000,000 | | |Neckura-100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | NATIONWIDE ASSURANCE | | | NECKURA LIFE |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| | | |------------ Shares | | |------------ Shares |
| Cost | | | | |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $3,506,173 | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681|
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| SCOTTSDALE | | | NATIONWIDE AGRIBUSINESS | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | BROKERAGE AND SERVICE |
| (SIC) | | | | | | GmbH |
|Common Stock: 30,136 | | |Common Stock: 1,000,000 | | |Common Stock: 1 Share |
|---|------------ Shares |--------|---|------------ Shares | |--|------------ |
| | | | | | | | |
| | | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-99.9% $26,714,335 | | |Neckura-100% DM 51,639 |
| |Casualty-100% $150,000,500 | | |Other Capital | | | |
| | | | |------------- | | | |
| | | | |Casualty-Ptd. $713,576 | | | |
| -------------------------------- | ------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | --------------------------------
| | SCOTTSDALE | | | NATIONAL CASUALTY | | | LEBEN DIREKT |
| | SURPLUS LINES | | | COMPANY | | | INSURANCE COMPANY |
| | INSURANCE COMPANY | | | (NC) | | | |
| |Common Stock: 10,000 | | | Common Stock: 100 Shares | | |Common Stock: 4,000 Shares |
|---|------------ Shares | ----| ------------- | |--|------------ |
| | | | | | | |
| | Cost | | Cost | | | Cost |
| | ---- | | ---- | | | ---- |
| |SIC-100% $6,000,000 | |Casualty-100% $67,442,439 | | |Neckura-100% DM 4,000,000 |
| | | | | | | |
| -------------------------------- -------------------------------- | --------------------------------
| | |
| -------------------------------- -------------------------------- | --------------------------------
| | NATIONAL PREMIUM & | | NCC OF AMERICAN, LTD. | | | AUTO DIREKT |
| | BENEFIT ADMINISTRATION | | (INACTIVE) | | | INSURANCE COMPANY |
| | COMPANY | | | | | |
| |Common Stock: 10,000 | | | | |Common Stock: 1500 Shares |
|---|------------ Shares | | | |--|------------ |
| | | | | | | |
| | Cost | | | | | Cost |
| | ---- | | | | | ---- |
| |SIC-100% $10,000 | |NC-100% | | |Neckura-100% DM 1,643,149 |
| -------------------------------- -------------------------------- | --------------------------------
| |
| -------------------------------- -------------------------------- | --------------------------------
| | WESTERN . | | SUN DIRECT | | | SVM SALES |
| | HERITAGE INSURANCE | | VERSICHERUNGS - | | | GmbH |
| | COMPANY | | AKTIENGESCLISCHAFT | | | |
| |Common Stock: 4,776,076 | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|---|------------ Shares | |------------ |------------| |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|SIC-100% $57,000,000 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| 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 | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $1,008,497,908 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 36,862,514 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE CASH | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 100 Shares | |-----| ---- |
| |------------ Shares | | |------------ | | |Casualty-18.6% $90,630 |
| | | | | Cost | | |Fire-18.6% $90,722 |
| | Cost | | | ---- | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-100% $11,226 | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE INSURANCE | | | CALFARM INSURANCE |
| | GENERAL AGENCY, INC. | | | COMPANY OF FLORIDA | | | COMPANY |
| | | | | | | |Common Stock: 49,800 Shares |
------|Common Stock: 1,000 | |----|Common Stock: 10,000 Shares| |-----|------------- |
| |------------ Shares | | |------------ | | |
| | | | | Cost | | |
| | Cost | | | ---- | | |
| | ---- | | |Casualty-100% $300,000,000 | |Casualty-100% |
| |Casualty-100% $5,000,000 | | | | | |
| -------------------------------- | -------------------------------- -------------------------------------
| || | |
| -------------------------------- | -------------------------------- -------------------------------------
| | COLONIAL COUNTY | | | NATIONWIDE INTERNATIONAL | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | UNDERWRITERS | | AGENCY |
| | COMPANY | | |Common Stock: 1,000 Shares | | |
| | | |----|------------ | | |
| | | | | | | |
| | | | | Cost | |Common Stock: 1,000 shares |
| |Surplus Debentures: | | | ---- | |------------- |
| |------------------- | | |Casualty-100% $10,000 | | |
| | Cost | | -------------------------------- | |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- |CalFarm Insurance |
| |Lone Star 150,000 | | | NATIONWIDE | |Company - 100% |
| -------------------------------- | | ARENA LLC | -------------------------------------
| | | | |
| -------------------------------- | | | -------------------------------------
| | NATIONWIDE SERVICES | | | | | CAL-AG INSURANCE |
| | COMPANY, LLC | | | | | SERVICES |
| | | | | | | |
| |Single Member Limited | |....| | |Common Stock: 1,000 Shares |
|.....|Liability Company | | | | |------------ |
| | | | | | | |
| | | | |Casualty-90% | |CalFarm Insurance |
| |Casualty-100% | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| | | NATIONWIDE |
| -------------------------------- | | EXCLUSIVE DISTRIBUTION |
| | AMERICAN MARINE | | | COMPANY, LLC (NEDCO) |
| | UNDERWRITERS, INC. | | | |
| | | | | Single Member Limited |
| |Common Stock: 20 Shares | |....| Liability Compnany |
|-----|------------ | | | |
| | Cost | | | |
| | ---- | | |Casualty-100% |
| |Casualty-100% $5,020 | | | |
| | | | --------------------------------
| -------------------------------- | |
| | --------------------------------
| --------------------------------- | | INSURANCE |
| | eNATIONWIDE, LLC | | | INTERMEDIARIES, INC |
| | | | | |
| | Single Member Limited | | |Common Stock 1,615 Shares |
| | Liability Company | |----|------------ |
| | | | Cost |
|.....| | | ---- |
| | |Casualty-100% $1,615,000 |
| | | |
|Casualty-100% | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1999
</TABLE>
Page 1
<PAGE> 73
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-----------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE TRUST |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | COMPANY, FSB |
| | | CAPITAL TRUST | | Common Stock: 2,800,000 |
| Common Stock: 3,814,779 | | Preferred Stock: | | ------------ Shares |
| ------------ Shares | | --------------- | | Cost |
| | | | | ---- |
| NFS--100% | | NFS--100% | | NFS--100% $3,000,000 |
----------------|------------ ----------------------------- -----------------------------
|
| ||--------------------------
- ----------------------------- | ----------------------------- -----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC | | INSTITUTION DISTRIBUTORS |
| | | | (NW ADV. SERV.) | | AGENCY, INC. (NFIDAI) |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | |
| ------------ Shares |--|--| ------------ Shares |==== | |
| | | | | || | |
| Cost | | | Cost | || | Common Stock: 1,000 Shares|
| ---- | | | ---- | || | ------------ |
| NW Life-100% $58,070,003 | | | NW Life-100% $5,996,261 | || | NFSDI-100% |
- ----------------------------- | ----------------------------- || --------------|--||----------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE INVESTMENT | | | NATIONWIDE MUTUAL | || | FINANCIAL HORIZONS | | || | |
| SERVICES CORPORATION | | | FUNDS | || | DISTRIBUTORS AGENCY | | || | |
| | | | | || | OF ALABAMA, INC. | | || | |
| Common Stock: 5,000 | | | OHIO BUSINESS TRUST | || | | | || | FLORIDA |
| ------------ Shares | | | | || | Common Stock: 10,000 | | || | RECORDS |===
| |--| | |==|| | ------------ Shares |-- || | ADMINISTRATOR |
| | | | | || | | | || | |
| Cost | | | | || | Cost | | || | |
| ---- | | | | || | ---- | | || | |
| NW Life-100% $529,728 | | | | || | NFIDAI-100% $100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ------------------------------| || -----------------------
| NATIONWIDE FINANCIAL | | | NATIONWIDE | || | LANDMARK FINANCIAL | | || | |
| ASSIGNMENT | | | SEPARATE ACCOUNT | || | SERVICES OF | | || | |
| COMPANY | | | TRUST | || | NEW YORK, INC. | | || | |
| | | | | || | | | || | |
| | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| |--| | MASSACHUSETTS |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | BUSINESS TRUST | || | | | || | OF OHIO, INC. |
| | | | | || | Cost | | || | |
| | | | | || | ---- | | || | |
| NW Life-100% | | | | || | NFIDAI-100% $10,100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | FINANCIAL HORIZONS | | || | |
| INVESTORS, LTD. | | | GLOBAL FUND | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | CAYMAN ISLANDS | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |--| | EXEMPTED LLC |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | | | || | OF OKLAHOMA, INC |
| | | | | || | Cost | | || | |
| NW Life-90% | | | | || | ---- | | || | |
| NW Mutual-10% | | | | || | NFIDAI-100% $153,000 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | ASSET ALLOCATION TRUST | || | | | || | |
| | | | | || | | | || | |
| Units: |--| | | || | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | OHIO BUSINESS TRUST |==== | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | || | OF TEXAS, INC |
| | | | | Cost | | || | |
| NW Life-97.6% | | | | ---- | | || | |
| NW Mutual-2.4% | | | | NFIDAI-100% $100 | | || | |
- ----------------------------- ----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | |
| INSTITUTION DISTRIBUTORS | | || | |
| INS. AGENCY, INC. | | || | |
| OF MASS. | | || | AFFILIATE |
| |-- ====| AGENCY OF |
|Common Stock: 100 Shares | | | OHIO, INC |
|------------ | | | |
| | | | |
|NFIDAI-100% | | | |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INS. AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
(Center)
NATIONWIDE(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 $1,008,497,908 |
|Fire 649,510 36,862,514 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------|-------------------------|--------------------------|-----------------------------|----------------------|--------------
| | | | |
- -----------|------------ ------------|-------------- -----------|------------- ---------------|--------- ------------|--------------
|NFS DISTRIBUTORS, INC.| | IRVIN L. SCHWARTZ | | NATIONWIDE FINANCIAL | |VILLANOVA CAPITAL, INC.| | NATIONWIDE FINANCIAL |
| (NFSDI) | | AND ASSOCIATES, INC. | |SERVICES (BERMUDA) INC.| |Common Stock: 958,750 | | SERVICES CAPITAL |
| | |Common Stock: Control: | |Common Stock: 250,000 | |------------- Shares | | TRUST II |
| | |------------- -------- | |------------- Shares | |NFS-96% | | |
| | |Class A Other-100%| | Cost | |Preferred Stock:500,000| | |
|NFS-100% | |Class B NFS -100%| | ---- | |--------------- Shares | | |
| | | | |NFS-100% $3,500,000 | |NFS-100% | | NFS-100% |
- -----------|------------ --------------------------- ------------------------- ---------------|--------- -------------------------
| | |
- -----------|---------------------------- -----------------------------|-----------------------|
- -----------|------------ --------------|----------- ------------|------------ --------------|---------- ------------|-------------
| NATIONAL DEFERRED | | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL | | VILLANOVA MUTUAL FUND |
| COMPENSATION, INC. | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)| | CAPITAL TRUST (VMF) |
| | |Common Stock: 236,494 | | | |Common Stock: 82,343 | | |
| | |------------- Shares | | | |------------ Shares | | |
| | | | | | | | | |
|NFSDI-100% | | | | | |VILLANOVA CAPITAL, INC.| | |
| | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% | |DELAWARE BUSINESS TRUST|
- ----------||------------ -------------------|------ ---------------------|--- ---------------------|--- -------------------------
|| | | |
|| | | -----
|| ---------------------------- | ------------------------- | ------------------------- | ------------------------
|| | NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | | | MORLEY & |
|| |SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | |INVESTORS SERVICES, INC.| | | ASSOCIATES, INC. |
|| | | | | NEW MEXICO | | | | | | |
|| |Common Stock: 10,000 | | | Common Stock: 1,000 | | | Common Stock: 5 Shares | | | Common Stock: 3,500 |
|| |------------- Shares |--|--| ------------- Shares | |--|------------- | |--| ------------- Shares |
============ | Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | | |Morley-100% $1,000|
---------------------------- | -------------------------- | -------------------------- | ------------------------
| | |
---------------------------- | -------------------------- | -------------------------- | -----------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | VILLANOVA VALUE | | | EXCALIBER FUNDING |
|SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | INVESTOR, LLC | | | CORPORATION |
| | | | SO. DAKOTA | | | | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | | | | |Common Stock: 1,000 |
|------------- Shares |--|--|------------- Shares | ...| | |--|------------- Shares |
| Cost | | | Cost | | | | | Cost |
| ---- | | | ---- | | | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | VSA-100% | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | -----------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | MORLEY CAPITAL | | | CALIBER FUNDING |
| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | MANAGEMENT | | | CORPORATION |
| ARKANSAS | | | OF WYOMING | | | | | |
|Common Stock: 50,000 |-----|Common Stock: 500 Shares| |Common Stock: 500 Shares| | | |
|------------- Shares | | |------------- | |------------- |--|--| |
| Cost | | | Cost | | Cost | | | |
| ---- | | | ---- | | ---- | | | |
|NRS-100% $500 | | |NRS-100% $500 | |Morley-100% $5,000 | | |Morley-100% |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | UNION BOND | | | MORLEY RESEARCH |
| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | & TRUST COMPANY | | | ASSOCIATES, LTD. |
| AGENCY, INC. | | | OF OHIO | | | | | |
|Common Stock: 1,000 | | | | |Common Stock: 2,000 | | | Common Stock: 1,000 |
|------------- Shares |--|==| | |------------- Shares |--|--| ------------- Shares |
| | | | | | | | | |
| Cost | | | | | Cost | | | Cost |
| ---- | | | | | ---- | | | ---- |
|NRS-100% $1,000 | | | | | Morley-100% $50,000 | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
|SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| | | | OKLAHOMA | | | |
|Common Stock: 500 | | | | | Common Stock: 1,000 | |
|------------- Shares |--|==| | | ------------- Shares |--
| Cost | | | | | Cost |
| ---- | | | | | ---- |
|NRS-100% $500 | | | | | Morley-100% $25,000 |
---------------------------- | -------------------------- --------------------------
|
---------------------------- | --------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT|
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. |
| | | | OF TEXAS |
|Common Stock: 1,000 |-- ==| |
|------------- Shares | | |
| Cost | | |
| ---- | | |
|NRS-100% $1,000 | | |
---------------------------- --------------------------
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
------------------------------- | ---------------------------- -----------------------------
| GATES MCDONALD | | | NATIONWIDE | | NATIONWIDE GLOBAL |
| & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) | | HOLDINGS, INC. (NGH) |
| | | | | | |
- ------------------- --|Common Stock: 254 Shares | |--|Common Stock: 100 Shares | |Common Stock: 1 Share |
| | | |------------ | || |------------ | --|------------ |
| ---------------|-------------- | | Cost | || | Cost || | Cost |
| | | | | ---- | || | ---- || | ---- |
| | THE 401(k) COMPANIES, INC. | | |NW Corp.-100% $25,683,532 | || | || | |
| | (401(k)) | | |------------------------------ || |NW Corp.-100% $14,603,732|| |NW Corp.-100% $257,000,000|
| | | | || --------------------------- | -----------------------------
| |Common Stock: Control | | |------------------------------ || ----------------------------| -----------------------------
||--|------------- ------- | | | MEDPROSOLUTIONS, INC. | || | NATIONWIDE MANAGEMENT || | NATIONWIDE GLOBAL |
|| |Class A Other-100% | --| | |--| SYSTEMS, INC. || | HOLDINGS, INC. - |
|| |Class B NFS-100% | | | Cost | || | || | LUXEMBOURG BRANCH |
|| | | | | ---- | || |Common Stock: 100 Shares || | (BRANCH) |
|| ------------------------------ | |Gates-100% $6,700,000 | || |------------- || | |
|| | | | || | Cost ||--| |
|| | | | || | ---- || |Endowment Capital - |
|| ------------------------------ | ------------------------------- || |NHP Inc.-100% $25,149 || | $1,000,000 |
|| | 401(k) INVESTMENT | | || ----------------------------| --------------|--------------
|| | SERVICES, INC. | | |------------------------------ || ----------------------------| --------------|--------------
|| | | | | GATES MCDONALD & | || | NATIONWIDE || | NGH LUXEMBOURG S.A. |
|| |Common Stock: 1,000,000 | | | COMPANY OF NEW YORK, INC. | || | AGENCY, INC. || | (LUX SA) |
|| |------------ Shares | --| | |--| || | |
||--| | | |Common Stock: 3 Shares | | |Common Stock: 100 Shares || |Common Stock: 5894 Shares |
|| | Cost | | |------------ | | |------------ || -|------------ |
|| | ---- | | | Cost | | | Cost || || Cost |
|| |401(k)-100% $7,800 | | | ---- | | | ---- || || ---- |
|| ------------------------------ | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 || ||BRANCH.-99.98% $115,470,723|
|| | ------------------------------- | ----------------------------| |-----------------------------
|| ------------------------------ | | | |
|| | 401(k) INVESTMENT | | ------------------------------- | ----------------------------| |-----------------------------
|| | ADVISORS, INC. | | | GATES MCDONALD & | | |NATIONWIDE GLOBAL HOLDINGS|| || PAN EURO LIFE |
|| | | | | COMPANY OF NEVADA | | | -HONG KONG, LIMITED || || |
|| |Common Stock: 1,000 Shares | --| | | | || ||Common Stock: 1,300,000 |
||--|------------ | | |Common Stock: 40 Shares | | |Common Stock: 2 Shares || ||------------ Shares |
|| | Cost | | |------------ | | |------------ Cost -- -- |
|| | ---- | | | Cost | | | ---- || || Cost |
|| |401(k)-100% $1,000 | | | ---- | | |NGH-50% || || ---- |
|| ------------------------------ | |Gates-100% $93,750 | | |Casualty--50% || ||LUX SA-90% 3,817,832,685|
|| | ------------------------------- | ----------------------------| || LUF |
|| ------------------------------ | | | |-----------------------------
|| | 401(k) COMPANY | | ------------------------------- | ----------------------------| |-----------------------------
|| | | | | GATES MCDONALD | | | NGH || ||NATIONWIDE GLOBAL HOLDINGS |
|| |Common Stock: 855,000 Shares| | | HEALTH PLUS, INC. | | | NETHERLANDS B.V. || ||- NGH BRASIL PARTICIPACOES,|
|| | | --| | | | || || LTDA (NGH BRASIL) |
|| | Cost | | |Common Stock: 200 Shares | | |Common Stock: 40 Shares || || |
||--| ---- | | |------------ | | |------------ -- -- Shares Cost |
|| |401(k)-100% $1,000 | | | Cost | | | Cost || | ------ ---- |
|| ------------------------------ | | ---- | | | ---- || |LUX SA 6,164,899 R6,164,899|
|| | |Gates-100% $2,000,000 | | |NGH-100% NLG 52,500 || |NGH 1 R1 |
|| ------------------------------ | ------------------------------- | ----------------------------| --------------|--------------
|| | | | | | |
|===| | | ------------------------------- | ----------------------------| --------------|--------------
| | RIVERVIEW AGENCY, INC. | | |NEVADA INDEPENDENT COMPANIES-| | | NATIONWIDE || | NATIONWIDE |
| | | | |MANUFACTURING TRANSPORTATION | | | SERVICES SP. Z.O.O. || | SEGURADORA S.A. |
| | | | | AND DISTRIBUTION | | | || | |
| | | --| | | |Common Stock: 80 Shares || | Shares Cost |
| | | | |Common Stock: 1,000 Shares | | |------------ Cost -- | ------ ---- |
| ------------------------------ | |------------ | | | ---- || |NGH |
| | |Gates-100% | | |NGH-100% 4,000 PLN || |BRASIL 9,999,999 R9,999,999|
| ------------------------------ | ------------------------------- | --------------------------- | |LUX SA 1 R1 |
| | | | | | -----------------------------
| | PENSION ASSOCIATES, INC. | | ------------------------------- | ----------------------------| -----------------------------
| | | | | NEVADA INDEPENDENT | | | MRM INVESTMENTS, INC. || | NATIONWIDE GLOBAL |
- ----| Common Stock: 1,000 Shares | | | COMPANIES-HEALTH AND PROFIT | | | || | FINANCE, LLC |
| | --| | ---|Common Stock: 1 Share || | Single Member Limited |
| Cost | | |Common Stock: 1,000 Shares | |------------ || | Liability Company |
| ---- | | |------------ | | Cost |...| |
| NFS-100% $2,839,392 | | | | | ---- | | |
------------------------------ | |Gates-100% | |NW Corp.-100% $7,000,000 | |NGH-100% |
| ------------------------------- ---------------------------- -----------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-CONSTRUCTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| | |
| |Gates-100% |
| -------------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-HOSPITALITY AND | Subsidiary Companies - Solid Line
--| ENTERTAINMENT | Contractual Association - Double Line
| | Limited Liability Company - Dotted Line
|Common Stock: 1,000 Shares |
|Gates-100% | December 31, 1999
-------------------------------
Page 2
</TABLE>
<PAGE> 76
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of January 31, 2000 was 8,490 and 15,393,
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 Investment Services Corporation ("NISC") acts as
principal underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide Variable Account,
Nationwide Variable Account-II, Nationwide Variable Account-5,
Nationwide Variable Account-6, Nationwide Variable Account- 8
Nationwide Variable Account-9, Nationwide Variable Account-10,
Nationwide Variable Account- 11, Nationwide VA Separate
Account-A, Nationwide VA Separate Account-B, Nationwide VA
Separate Account-C, Nationwide VL Separate Account-A, Nationwide
VL Separate Account-B, Nationwide VL Separate Account -C,
Nationwide VL Separate Account -D, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VLI
Separate Account -4, Nationwide VLI Separate Account -5, NACo
Variable Account, Nationwide DC Variable Account, and the
Nationwide DCVA-II, all of which are separate investment accounts
of Nationwide or its affiliates.
(b) NATIONWIDE INVESTMENT SERVICES CORPORATION DIRECTORS AND
OFFICERS
- --------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
- --------------------------------------------------------------------------------
Joseph J. Gasper Chairman of the Board and
One Nationwide Plaza Director
Columbus, OH 43215
- --------------------------------------------------------------------------------
<PAGE> 77
NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS (CONTINUED)
-------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
-------------------------------------------------------------------------------
Dimon R. McFerson Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
-------------------------------------------------------------------------------
Richard A. Karas Vice Chairman and Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Duane C. Meek President
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Philip C. Gath Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
-------------------------------------------------------------------------------
Robert J. Woodard Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
-------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President and Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Barbara J. Shane Vice President - Compliance Officer
Two Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
John F. Delaloye Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Glenn W. Soden Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
E. Gary Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Duane M. Campbell Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------
<PAGE> 78
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
Nationwide
<S> <C> <C> <C> <C>
Investment N/A N/A N/A N/A
Services
Corporation
</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.
<PAGE> 79
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of 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 28, 2000
<PAGE> 80
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(b) for effectiveness of this
Registration Statement and has caused this Post-Effective Amendment-10 to be
signed on its behalf in the City of Columbus, and State of Ohio, on this 28th
day of April, 2000.
NATIONWIDE VARIABLE ACCOUNT-9
-----------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-----------------------------------------------
(Depositor)
By/s/ STEVEN SAVINI, ESQ.
-----------------------------------------------
Steven Savini, Esq.
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 28th day
of April, 2000.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- ----------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ----------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- ----------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- ----------------------------------------
Keith W. Eckel
Willard J. Engel Director
- ----------------------------------------
Willard J. Engel
Fred C. Finney Director
- ----------------------------------------
Fred C. Finney
Joseph J. Gasper President and Chief Operating
- ----------------------------------------
Joseph J. Gasper Officer and Director
Dimon R. MCFerson Chairman and Chief Executive
- ----------------------------------------
Dimon R. McFerson Officer and Director
David O. Miller Chairman of the Board and
- ----------------------------------------
David O. Miller Director
Yvonne L. Montgomery Director
- ----------------------------------------
Yvonne L. Montgomery
Robert A. Oakley Executive Vice President and Chief
- ----------------------------------------
Robert A. Oakley Financial Officer
Ralph m. paige Director
- ----------------------------------------
Ralph M. Paige
James F. Patterson Director
- ----------------------------------------
James F. Patterson
Arden L. Shisler Director
- ----------------------------------------
Arden L. Shisler
Robert L. Stewart Director
- ----------------------------------------
Robert L. Stewart
Nancy C. Thomas Director
- ----------------------------------------
Nancy C. Thomas
By /s/ STEVEN SAVINI, ESQ.
-----------------------------------
Steven Savini, Esq.
Attorney-in-Fact
<PAGE> 1
MARKETING COORDINATION AND
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement entered into this 1st day of May, 2000, between Nationwide Life
and Annuity Insurance Company ("Nationwide"), and Nationwide Investment Services
Corporation ("NISC").
Nationwide proposes to develop, issue and administer, and NISC proposes to
provide the exclusive national distribution services for certain annuity and
life products (the "Products"). The parties hereby agree as follows:
A. ADMINISTRATION OF PRODUCTS
1. Appointment of Product Administration
Nationwide is hereby appointed Product Administrator for the
Products.
2. Duties of Nationwide
Nationwide will perform in a proper and timely manner, those
functions enumerated in the column marked "Nationwide" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
3. Duties of NISC
NISC will perform in a proper and timely manner, those
functions enumerated in the column marked "NISC" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
B. MARKETING COORDINATION AND SALES ADMINISTRATION
1. Distribution of Products
The Products will be distributed through registered
representatives of NASD broker-dealer firms, appointed by
Nationwide, who shall be duly qualified and licensed as agents
(the "Agents"), in accordance with applicable state insurance
authority.
2. NISC shall be the exclusive National Distributor of the
Products.
<PAGE> 2
3. Appointment and Termination of Agents
Appointment and termination of Agents shall be processed and
executed by Nationwide. NISC reserves the right to require
Nationwide to consult with it regarding licensing decisions.
4. Advertising
NISC shall not print, publish or distribute any advertisement,
circular or document relating to the Products or relating to
Nationwide unless such advertisement, circular or document has
been approved in writing by Nationwide. Such approval shall
not be unreasonably withheld, and shall be given promptly,
normally within five (5) business days. Neither Nationwide nor
any of its affiliates shall print, publish or distribute any
advertisement, circular or document relating to the Products
or relating to NISC unless such advertisement, circular or
document has been approved in writing by NISC. Such approval
shall not be unreasonably withheld, and shall be given
promptly, normally within five (5) business days. However,
nothing herein shall prohibit any person from advertising the
Products on a generic basis.
5. Marketing Conduct
The parties will jointly develop standards, practices and
procedures respecting the marketing of the Products. Such
standards, practices and procedures are intended to help
Nationwide meet its obligations as an issuer under the
securities laws, to assure compliance with state insurance
laws, and to help NISC meet its obligations under the
securities laws as National Distributor. These standards,
practices and procedures are subject to continuing review and
neither Nationwide nor NISC will object unreasonably to
changes to such standards, practices and procedures
recommended by the other to comply with the intent of this
provision.
6. Sales Material and Other Documents
a. Sales Material
1) Nationwide shall develop and prepare all
promotional material to be used in the
distribution of the Products, in
consultation with NISC.
2) Nationwide is responsible for the printing
and the expense of providing such
promotional material.
3) Nationwide is responsible for approval of
such promotional material by state insurance
regulators, where required.
<PAGE> 3
4) NISC and Nationwide agree to abide by the
Advertising and Sales Promotion Material
Guidelines, attached hereto as EXHIBIT B,
and incorporated herein by reference.
b. Prospectuses
1) Nationwide is responsible for the
preparation and regulatory clearance of any
required registration statements and
prospectuses for the Products.
2) Nationwide is responsible for the printing
of Product prospectuses in such quantities
as the parties agree are necessary to assure
sufficient supplies.
3) Nationwide is responsible for supplying
Agents with sufficient quantities of Product
prospectuses.
c. Contracts, Applications and Related Forms
1) Nationwide, in consultation with NISC, is
responsible for the design and printing of
adequate supplies of Product applications,
contracts, related forms, and such service
forms as the parties agree are necessary.
2) Nationwide is responsible for supplying
adequate quantities of all such forms to the
Agents.
7. Appointment of Agents
a. NISC will assist Nationwide in facilitating the
appointment of Agents by Nationwide.
b. Nationwide will forward all appointment forms and
applications to the appropriate states and maintain
all contacts with the states.
c. Nationwide will maintain appointment files on Agents,
and NISC will have access to such files as needed.
8. Licensing and Appointment Guide
Nationwide shall provide to NISC a Licensing and Appointment
Guide (as well periodic updates thereto), setting forth the
requirements for licensing and appointment, in such quantities
as NISC may reasonably require.
<PAGE> 4
9. Other
a. Product Training
Nationwide is responsible for any Product training
for the Agents.
b. Field Sales Material
1) Nationwide, in consultation with NISC, is
responsible for the development, printing
and distribution of non-public field sales
material to be used by Agents.
2) NISC shall have the right to review all
field sales materials and to require any
modification mandated by regulatory
requirements.
c. Production Reports
Nationwide will deliver to NISC the items listed in
Production Reports to be Provided, attached hereto as
EXHIBIT C, and incorporated herein by reference.
d. Customer Service
Each party will notify the other of all material
pertinent inquiries and complaints it receives, from
whatever source and to whomever directed, and will
consult with the other in responding to such
inquiries and complaints.
e. Records and Books
All books and records maintained by Nationwide in
connection with the offer and sale of variable
annuity interests funded by a Separate Account are
maintained and preserved in conformity with the
requirements of Rule 17a-3 and 17a-4 under the 1934
Exchange Act, to the extent such requirements are
applicable to the variable annuity operations.
All such books and records are maintained and held by
Nationwide on behalf of and as agent for NISC, whose
property they are and shall remain. Such books and
records are at all times subject to inspection by the
Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
<PAGE> 5
C. GENERAL PROVISIONS
1. Waiver
The forbearance or neglect of either party to insist upon
strict compliance by the other with any of the provisions of
this Agreement, whether continuing or not, or to declare a
forfeiture of termination against the other, shall not be
construed as a waiver of any rights or privileges of the
forbearing party in the event of a further default or failure
of performance.
2. Limitations
Neither party shall have authority on behalf of the other to:
make, alter or discharge any contractual terms of the
Products; waive any forfeiture; extend the time of making any
contributions to the products; guarantee dividends; alter the
forms which either may prescribe; nor substitute other forms
in place of those prescribed by the other.
3. Binding Effect
This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective successors
and assigns, provided that neither party shall assign or
sub-contract this Agreement or any rights or obligations
hereunder without prior written consent of the other.
4. Indemnification
Each party ("Indemnifying Party") hereby agrees to release,
indemnify and hold harmless the other party, its officers,
directors, employers, agents, servants, predecessors or
successors from any claims or liability arising out of the
acts or omissions of the Indemnifying Party not authorized by
this Agreement, including the violation of any federal or
state law or regulation.
5. Notices
All notices, requests, demands and other communication under
this Agreement shall be in writing and shall be deemed to have
been given on the date of service if served personally on the
party to whom notice is to be given, or on the date of mailing
if sent postage prepaid by First Class Mail, Registered or
Certified mail, by overnight mail, properly addressed as
follows:
TO NATIONWIDE:
Nationwide Life Insurance Company
Michael C. Butler, Vice President-Sales
Three Nationwide Plaza
Columbus, Ohio 43215
<PAGE> 6
TO NISC:
Nationwide Investment Services Corporation
Barbara Shane, Vice President-Compliance Officer
Two Nationwide Plaza
Columbus, Ohio 43215
6. Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio.
7. Arbitration
The parties agree that misunderstandings or disputes arising
from this Agreement shall be decided by arbitration, conducted
upon request of either party before three arbitrators (unless
the parties agree on a single arbitrator) designated by the
American Arbitration Association, and in accordance with the
rules of such Association. The expenses of the arbitration
proceedings conducted hereunder shall be borne equally by both
parties.
8. Confidentiality
Any information, documents and materials, whether printed or
oral, furnished by either party or its agents or employees to
the other shall be held in confidence. No such information
shall be given to any third party, other than to such
sub-contractors of NISC as may be permitted herein, or under
requirements of a lawful authority, without the express
written consent of the other party.
D. TERM OF AGREEMENT
This Agreement, including the Exhibits attached hereto, shall remain in
full force and effect until terminated, and may be amended only by
mutual agreement of the parties in writing. Any decision by either
party to cease issuance or distribution of any specific Product shall
not effect a termination of the Agreement unless such termination is
mutually agreed upon, or unless notice is given pursuant to Section
E.2. hereof.
E. TERMINATION
1. Either party may terminate this Agreement for cause at any
time, upon written notice to the other, if the other knowingly
and willfully: (a) fails to comply with the laws or
regulations of any state or governmental agency or body having
jurisdiction over the sale of insurance or securities; (b)
misappropriates any money or property belonging to the other;
(c) subjects the other to any actual or potential liability
due to misfeasance, malfeasance, or nonfeasance; (d) commits
any fraud upon the other; (e) has an assignment for the
benefit of creditors; (f) incurs bankruptcy; or (g) commits a
material breach of this Agreement.
<PAGE> 7
2. Either party may terminate this Agreement, without regard to
cause, upon six months prior written notice to the other.
3. In the event of termination of this Agreement, the following
conditions shall apply:
a) The parties irrevocably acknowledge the continuing
right to use any Product trademark that might then be
associated with any Products, but only with respect
to all business in force at the time of termination.
b) In the event this Agreement is terminated the parties
will use their best efforts to preserve in force the
business issued pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
NATIONWIDE LIFE INSURANCE
COMPANY
By: __________________________
Michael C. Butler
Title: Vice President - Sales
NATIONWIDE INVESTMENT SERVICES
CORPORATION
By: ________________________
Barbara Shane
Title: Vice President - Compliance Officer
<PAGE> 8
EXHIBIT A
ANALYSIS OF ADMINISTRATIVE FUNCTIONS
A. PRODUCT UNDERWRITING/ISSUE
NATIONWIDE NISC
- - Establishes underwriting criteria for - Consults with regard to new business
application processing and rejections. procedures and processing.
- - Reviews the completed application.
Applies underwriting/issue criteria to
application.
- - Notifies Agent and/or customer of
any error or missing data necessary to
underwrite application and establish
records for owner of Product ("Contract
Owner").
- - Prepares policy data page for
approved business and mails with policy
to Contract Owner.
- - Establishes and maintains all records
required for each Contract Owner, as
applicable.
- - Prepares and mails confirmation and
other statements to Contract Owners and
Agents, as required.
- - Prints, provides all forms ancillary
to issue of contract/policy forms for
Products.
- - Maintains supply of approved specimen
policy forms and all ancillary forms,
distributes same to Agents.
<PAGE> 9
B. BILLING AND COLLECTION
NATIONWIDE
- - Receives premium/purchase payments
and reconciles amount received with
remittance media.
- - Updates Contract Owner records to
reflect receipt of premium/purchase
payment and performs accounting/
investment allocation of each payment
received.
- - Deposits all cash received under the
Products in accordance with the terms
of the Products.
- - Balances, edits, endorses and prepares
daily deposit.
C. BANKING
NATIONWIDE
- - Balances, edits, endorses and prepares
daily deposit
- - Places deposits in depository account
- - Prepares daily cash journal summary
reports and maintains same for review
by NISC
<PAGE> 10
D. PRICING/VALUATION/ACCOUNTING/TRADING
NATIONWIDE NISC
- - Maintains and makes available, as - Cooperates in annual audit of
reasonably requested, records used separate account financials conducted
in determining "Net Amount Available for purposes of financial statement
for Investment." certification and publication.
- - Collects information needed in - Will clear and settle Mutual Fund
determining Variable Account unit trades on behalf of the separate
values from the Funds including daily accounts using the National Securities
net asset value, capital gains or Clearing Corporation FUND/Serv System.
dividend distributions, and the number
of Fund Shares acquired or sold during
the immediately preceding valuation
period.
- - Performs daily unit valuation
calculation.
<PAGE> 11
E. CONTRACT OWNER SERVICE/
RECORD MAINTENANCE
NATIONWIDE NISC
- - Receives and processes all Contract - Accommodates customer service
Owner service requests, including but function by providing any supporting
not limited to informational requests, information or documentation which may
beneficiary changes, and transfers of be in the control of NISC.
Contract Value among eligible
investment options.
- - Maintains daily records of all changes
made to Contract Owner accounts.
- - Researches and responds to all
Contract Owner/Agent inquiries.
- - Keeps all required Contract Owner
records.
- - Maintains adequate number of toll
free lines to service Contract Owner/
Agent inquiries.
F. DISBURSEMENTS (SURRENDERS,
DEATH CLAIMS, LOANS)
NATIONWIDE NISC
- - Receives and processes surrenders,
loans, and death claims in accordance
with established guidelines.
- - Prepares checks for surrenders,
loans, and death claims, and forwards
to Contract Owner or Beneficiary.
Prepares and mails confirmation
statement of disbursement to Contract
Owner/Beneficiary with copy to Agent.
<PAGE> 12
G. COMMISSIONS
NATIONWIDE NISC
- - Ascertains, on receipt of - Receives and performs record
applications, whether writing Agent is keeping for investment company
appropriately licensed. payments made under a 12b-1 Plan.
- - Pays commissions and other fees in
accordance with agreements relating to
same.
H. PROXY PROCESSING
NATIONWIDE NISC
- - Receives record date information from
Funds Receives proxy solicitation
materials from Funds.
- - Prepares Voting Instruction cards and
mails solicitation, if necessary.
- - Tabulates and votes all Fund Shares
in accordance with SEC requirements.
I. PERIODIC REPORTS TO CONTRACT OWNERS
NATIONWIDE NISC
- - Prepares and mails quarterly and
annual Statements of Account to Contract
Owners.
- - Prepares and mails all semi-annual
and annual reports of Variable Account(s)
to Contract Owners.
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J. REGULATORY/STATEMENT REPORTS
NATIONWIDE NISC
- - Prepares and files Separate Account - Prepares and files periodic FOCUS
Annual Statements. Reports with the NASDR and SEC,
as applicable.
- - Prepares and mails the appropriate, - Prepares and files annual audited
required IRS reports at the Contract financial statements with required
Owner level. Files same with required regulatory agencies.
regulatory agencies.
- - Prepares and files form N-SAR for
the Separate Account.
K. PREMIUM TAXES
NATIONWIDE NISC
- - Collects, pays and accounts for
premium taxes as appropriate.
- - Prepares and maintains all premium
tax records by state.
- - Maintains liabilities in General
Account ledger for accrual of premium
tax collected.
- - Integrates all company premium taxes
due and performs related accounting.
L. FINANCIAL AND MANAGEMENT REPORTS
NATIONWIDE NISC
- - Provides periodic reports in - Provides periodic reports in
accordance with the Schedule of Reports accordance with the Schedule of
to be prepared jointly by Nationwide and Reports to be prepared jointly by
NISC. (See EXHIBIT C) Nationwide and NISC. (See EXHIBIT C)
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M. AGENT LICENSE RECORDKEEPING
NATIONWIDE NISC
- - Receives, establishes, processes, - Maintains securities registrations
and maintains Agent appointment and assumes supervisory responsibility
records. for representatives of affiliated
sales and marketing companies involved
in the wholesale distribution of
Nationwide variable contract products.
- Maintains training, supervisory, and
other required records for and on
behalf of registered representatives
of NISC.
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EXHIBIT B
ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES
FOR APPROVAL BY NATIONWIDE AND NISC
In order to assure compliance with state and federal regulatory requirements and
to maintain control over the distribution of promotional materials dealing with
the Products, Nationwide and NISC require that all variable contract promotional
materials be reviewed and approved by both Nationwide and NISC prior to their
use. These guidelines are intended to provide appropriate regulatory and
distribution controls.
1. Sufficient lead time must be allowed in the submission of all
promotional material. Nationwide and NISC shall approve in writing all
promotional material. Such approval shall not be unreasonably withheld,
and shall be given promptly, normally within five (5) days.
2. All promotional material will be submitted in "draft" form to permit
any changes or corrections to be made prior to the printing.
3. Nationwide and NISC will provide each other with details as to each and
every use of all promotional material submitted. Approval for one use
will not constitute approval for any other use. Different standards of
review may apply when the same advertising material is intended for
different uses. The following information will be provided for each
item of promotional material:
a. In what jurisdiction(s) the material will be used.
b. Whether distribution will be to broker/dealer, entity,
participant, etc.
c. How the material will be used (e.g., brochure, mailing, web
site, etc.).
d. The projected date of initial use.
4. Each party will advise the other of the date it discontinues the use of
any material.
5. Any changes to previously approved promotional material must be
resubmitted, following these procedures. When approved material is to
be put to a different use, request for approval of the material for the
new use must be submitted.
6. Nationwide will assign a form number to each item of advertising and
sales promotional material. This number will appear on each piece of
advertising and sales promotional material. It will be used to aid in
necessary filings, and to maintain appropriate controls.
7. Nationwide and NISC will provide written approval for all material to
be used.
8. Nationwide will be responsible to effect necessary state filings.
9 NISC will coordinate SEC/NASD filings of sales and promotional
material.
10. All telephone communication and written correspondence regarding
promotional materials should be directed to Office of Product and
Market Compliance, Nationwide Life Insurance Company, One Nationwide
Plaza, Columbus, Ohio 43215
<PAGE> 16
EXHIBIT C
PRODUCTION REPORTS TO BE PROVIDED
Nationwide agrees to provide the following reports to NISC:
1. Daily Receipt Report: Indicates which Agents are generating sales
2. Daily Approval Report: Indicates which applications have been approved
3. Daily Activity Summary: Indicates top firms' sales and liquidation by month,
year-to-date as well as total assets by firm.
4. Dealer Activity Indicates top firms' sales and liquidation by month,
Summary by Territory: year-to-date
5. Summary of Sales by Indicates sales by territory/dealer/branch,
Territory and Dealer: including non-commissionable amounts and actual
commission payments, as well as chargebacks
(Internal use only)
6. Commission Report: Indicates commission paid and chargebacks, matched
to Commission checks.
In addition, Nationwide will provide reports detailing current appointments and
other information, as reasonably requested by NISC.
