<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-82370
'40 Act File No. 811-8684
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 7 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO.7 [x]
NATIONWIDE VARIABLE ACCOUNT-6
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus, Statement of Additional Information and Financial Statements.
It is proposed that this filing will become effective (Check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on May 1, 1999 pursuant to paragraph of (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.
================================================================================
1 of 109
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-6
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page........................................................................................3
Item 2. Definitions.......................................................................................4
Item 3. Synopsis or Highlights...........................................................................11
Item 4. Condensed Financial Information..................................................................12
Item 5. General Description of Registrant, Depositor, and Portfolio Companies............................15
Item 6. Deductions and Expenses..........................................................................17
Item 7. General Description of Variable Annuity Contracts................................................20
Item 8. Annuity Period...................................................................................27
Item 9. Death Benefit....................................................................................29
Item 10. Purchases and Contract Value.....................................................................21
Item 11. Redemptions......................................................................................23
Item 12. Taxes............................................................................................33
Item 13. Legal Proceedings................................................................................40
Item 14. Table of Contents of the Statement of Additional Information.....................................45
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page.......................................................................................49
Item 16. Table of Contents................................................................................49
Item 17. General Information and History..................................................................49
Item 18. Services.........................................................................................49
Item 19. Purchase of Securities Being Offered.............................................................49
Item 20. Underwriters.....................................................................................50
Item 21. Calculation of Performance.......................................................................50
Item 22. Annuity Payments.................................................................................51
Item 23. Financial Statements ............................................................................52
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits................................................................90
Item 25. Directors and Officers of the Depositor..........................................................92
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant...................94
Item 27. Number of Contract Owners.......................................................................104
Item 28. Indemnification.................................................................................104
Item 29. Principal Underwriter...........................................................................104
Item 30. Location of Accounts and Records................................................................106
Item 31. Management Services.............................................................................106
Item 32. Undertakings....................................................................................106
</TABLE>
2 of 109
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its Nationwide Variable
Account-6
The date of this prospectus is May 1, 1999.
- --------------------------------------------------------------------------------
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE AVAILABLE UNDER THE CONTRACTS:
EVERGREEN VARIABLE TRUST
- Evergreen VA Aggressive Growth Fund
- Evergreen VA Foundation Fund Evergreen VA Fund
- Evergreen VA Fund
- Evergreen VA Global Leaders Fund
- Evergreen VA Growth and Income Fund*
- Evergreen VA Small Cap Equity Income Fund
- Evergreen VA Strategic Income Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- VIP High Income Portfolio*
- VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
- VIP II Asset Manager Portfolio
- VIP II Contrafund Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Growth Opportunities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
- Government Bond Fund
- Money Market Fund
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Variable Account-6 may be allocated to the fixed account.
The Statement of Additional Information (dated May 1, 1999) which contains
additional information about the contracts and the variable account, has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The table of contents for the Statement of Additional
Information is on page 43.
For general information or to obtain FREE copies of the:
- Statement of Additional Information
- prospectus for any underlying mutual fund
- required Nationwide forms,
call: 1-800-243-6295
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, 1-05-P1
COLUMBUS, OHIO 43215
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 EVERY
OR GOVERNMENT AGENCY 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.
1
3 of 109
<PAGE> 4
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit used to calculate the variable payment annuity
payments.
CONTRACT VALUE- The total of all accumulation units in a contract and 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 Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option that is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
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 Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
Simple IRA, or Tax Sheltered Annuity.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Internal Revenue Code.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408(k) of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
TAX SHELTERED ANNUITY- An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide Variable Account-6, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
2
4 of 109
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.........................2
SUMMARY OF CONTRACT
EXPENSES.....................................5
UNDERLYING MUTUAL FUND ANNUAL
EXPENSES.....................................6
EXAMPLE...........................................8
SYNOPSIS OF THE CONTRACTS.........................9
FINANCIAL STATEMENTS..............................9
CONDENSED FINANCIAL INFORMATION..................10
NATIONWIDE LIFE INSURANCE COMPANY................13
NATIONWIDE ADVISORY SERVICES, INC................13
INVESTING IN THE CONTRACT........................13
The Variable Account and Underlying
Mutual Funds
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS..................15
Mortality and Expense Risk Charges
Administration Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP...............................17
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT........................18
Minimum Initial and Subsequent Purchase
Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE..................................21
SURRENDER (REDEMPTION)...........................21
Surrenders Under a 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..........................24
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 Tax Sheltered
Annuities
Required Distributions for Individual
Retirement Annuities
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS.......................31
Federal Income Taxes
Individual Retirement Annuities and Tax
Sheltered Annuities
Roth IRAs
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation
Skipping Transfer Taxes
</TABLE>
3
5 of 109
<PAGE> 6
<TABLE>
<S> <C>
Puerto Rico
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS...........................37
YEAR 2000 COMPLIANCE ISSUES......................37
LEGAL PROCEEDINGS................................38
ADVERTISING AND SUB-ACCOUNT PERFORMANCE
SUMMARY.....................................39
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION......................43
APPENDIX A: OBJECTIVES FOR UNDERLYING
MUTUAL FUNDS................................44
</TABLE>
4
6 of 109
<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contract owners unless the contract
owner meets an available exception.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments surrendered)....................7%(1)
Range of CDSC over time:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CDSC
YEARS FROM DATE OF PERCENTAGE
PURCHASE PAYMENT
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
(1)Each contract year, the contract owner may withdraw without a CDSC the
greater of:
a) 10% of all purchase payments made to the contract; or
b) any amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code
This free withdrawal privilege is non-cumulative. Free amounts not taken during
any given contract year cannot be taken as free amounts in a subsequent contract
year (see "Contingent Deferred Sales Charge").
Withdrawals may be restricted for contracts issued to fund a Tax Sheltered
Annuity plan.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of average account value)
Administration Charge.........................0.15%
Mortality and Expense Risk Charges............1.25%
Total Variable Account Charges...........1.40%
(2)These charges do not apply to allocations made to the fixed account. They are
charged on a daily basis at the annual rate noted above.
5
7 of 109
<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund average net assets, after expense
reimbursement)
<TABLE>
<CAPTION>
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
<S> <C> <C> <C> <C>
Evergreen Variable Trust - Evergreen VA Aggressive 0.05% 0.95 0.00% 1.00%
Growth Fund(1)
Evergreen Variable Trust - Evergreen VA Foundation 0.83% 0.17% 0.00% 1.00%
Fund
Evergreen Variable Trust - Evergreen VA Fund 0.81% 0.19% 0.00% 1.00%
Evergreen Variable Trust - Evergreen VA Global 0.39% 0.61% 0.00% 1.00%
Leaders Fund(1)
Evergreen Variable Trust - Evergreen VA Growth and 0.79% 0.21% 0.00% 1.00%
Income Fund(1)
Evergreen Variable Trust - Evergreen VA Small Cap 0.00% 1.00% 0.00% 1.00%
Equity Income Fund
Evergreen Variable Trust - Evergreen VA Strategic 0.43% 0.57% 0.00% 1.00%
Income Fund(1)
Fidelity VIP High Income Portfolio 0.58% 0.12% 0.00% 0.70%
Fidelity VIP Overseas Portfolio 0.74% 0.15% 0.00% 0.89%
Fidelity VIP II Asset Manager Portfolio 0.54% 0.09% 0.00% 0.63%
Fidelity VIP II Contrafund Portfolio 0.59% 0.07% 0.00% 0.66%
Fidelity VIP III Growth Opportunities Portfolio 0.59% 0.11% 0.00% 0.70%
NSAT - Government Bond Fund 0.50% 0.07% 0.00% 0.57%
NSAT - Money Market Fund 0.40% 0.06% 0.00% 0.46%
</TABLE>
(1) Reflects an agreement to voluntarily limit aggregate operating expenses
(including investment advisory fees, but excluding interest, brokerage
commissions and extraordinary expenses) to 1.00% of average daily net assets.
Absent such an agreement, the actual management fees, other expenses and total
mutual fund expenses for the period from January 1, 1998 to December 31, 1998
are shown below.
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
6
8 of 109
<PAGE> 9
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>
Evergreen Variable Trust - Evergreen VA Aggressive 0.60% 0.95% 0.00% 1.55%
Growth Fund
Evergreen Variable Trust - Evergreen VA Foundation 0.83% 0.18% 0.00% 1.01%
Fund
Evergreen Variable Trust - Evergreen VA Fund 0.95% 0.19% 0.00% 1.14%
Evergreen Variable Trust - Evergreen VA Global 0.95% 0.61% 0.00% 1.56%
Leaders Fund
Evergreen Variable Trust - Evergreen VA Growth and 0.95% 0.21% 0.00% 1.16%
Income Fund
Evergreen Variable Trust - Evergreen VA Strategic 0.45% 0.57% 0.00% 1.02%
Income Fund
Fidelity VIP Overseas Portfolio 0.74% 0.17% 0.00% 0.91%
Fidelity VIP II Asset Manager Portfolio 0.54% 0.10% 0.00% 0.64%
Fidelity VIP II Contrafund Portfolio 0.59% 0.11% 0.00% 0.70%
Fidelity VIP III Growth Opportunities Portfolio 0.59% 0.12% 0.00% 0.71%
</TABLE>
7
9 of 109
<PAGE> 10
EXAMPLE
The following chart shows the amount of 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 example reflects expenses of both
the variable account and the underlying mutual funds. The example reflects the
standard 7 year CDSC schedule and the maximum amount of variable account charges
that could be assessed to a contract (1.40%). Deductions for premium taxes are
not reflected but may apply.
The summary of contract expenses and example are to help contract owners
understand the expenses associated with the contract.
<TABLE>
<CAPTION>
If you surrender your If you do not surrender your If you annuitize your contract
contract at the end of the contract at the end of the at the end of the applicable
applicable time period applicable time period time period
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Evergreen Variable Trust- 88 122 159 282 25 77 132 282 * 77 132 282
Evergreen VA Aggressive Growth
Fund
Evergreen Variable 88 122 159 282 25 77 132 282 * 77 132 282
Trust-Evergreen VA Foundation
Fund
Evergreen Variable 88 122 159 282 25 77 132 282 * 77 132 282
Trust-Evergreen VA Fund
Evergreen Variable Trust- 88 122 159 282 25 77 132 282 * 77 132 282
Evergreen VA Global Leaders
Fund
Evergreen Variable 88 122 159 282 25 77 132 282 * 77 132 282
Trust-Evergreen VA Growth and
Income Fund
Evergreen Variable Trust- 88 122 159 282 25 77 132 282 * 77 132 282
Evergreen VA Small Cap Equity
Income Fund
Evergreen Variable Trust- 88 122 159 282 25 77 132 282 * 77 132 282
Evergreen VA Strategic Income
Fund
Fidelity Variable Insurance 85 113 144 250 22 68 117 250 * 68 117 250
Products Fund- High
Income Portfolio
Fidelity Variable Insurance 87 119 154 271 24 74 127 271 * 74 127 271
Products Fund- Overseas
Portfolio
Fidelity Variable Insurance 84 111 140 243 21 66 113 243 * 66 113 243
Products Fund II- Asset
Manager Portfolio
Fidelity Variable Insurance 85 112 141 246 22 67 114 246 * 67 114 246
Products Fund II- Contrafund
Portfolio
Fidelity Variable Insurance 85 113 144 250 22 68 117 250 * 68 117 250
Products Fund III-
Growth Opportunities Portfolio
NSAT- Government Bond Fund 84 109 137 236 21 64 110 236 * 64 110 236
NSAT- Money Market Fund 83 105 131 224 20 30 104 224 * 60 104 224
</TABLE>
*The contracts sold under this prospectus do not permit annuitizations during
the first two contract years.
8
10 of 109
<PAGE> 11
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)." and
references to "contract owner" will also 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 purchased with contributions rolled
over or transferred from Qualified Plans, Tax Sheltered Annuities or
IRAs
- Roth IRAs
- SEP IRAs
- Tax Sheltered Annuities with contributions rolled over or transferred
from another Tax Sheltered Annuity or Custodial Account.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
MINIMUM
CONTRACT MINIMUM INITIAL SUBSEQUENT
TYPE PURCHASE PAYMENT PAYMENTS
<S> <C> <C>
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
</TABLE>
Subsequent purchase payments are not permitted for contracts purchased in the
states of New York, Oregon, and Washington and may not be permitted in other
states under certain circumstances.
CHARGES AND EXPENSES
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 1.25% and an Administration Charge equal to 0.15% of the daily net assets of
the variable account. Nationwide assesses these charges in return for bearing
certain mortality and administrative risks.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained without charge by contacting Nationwide's home
office at the telephone number listed on page 1 of this prospectus.
9
11 of 109
<PAGE> 12
CONDENSED FINANCIAL INFORMATION
Accumulation unit values for an accumulation unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
Evergreen Variable Trust - Evergreen VA 10.970866 13.224364 20.54% 68,030 1998
Aggressive Growth Fund-Q 10.000000 10.970866 9.71% 32,233 1997(3)
Evergreen Variable Trust - Evergreen VA 10.970866 13.224364 20.54% 134,748 1998
Aggressive Growth Fund-NQ 10.000000 10.970866 9.71% 36,965 1997(3)
Evergreen Variable Trust- Evergreen VA 11.100000 13.570000 22.25% 100,000 1998
Aggressive Growth Fund-Initial Funding by 10.000000 11.100000 11.00% 100,000 1997(3)
Depositor
Evergreen Variable Trust- 14.357474 15.661734 9.08% 1,231,590 1998
Evergreen VA Foundation Fund - Q 11.393285 14.357474 26.02% 513,556 1997
10.000000 11.393285 13.93% 291,176 1996(1)
Evergreen Variable Trust- 14.357474 15.661734 9.08% 3,082,969 1998
Evergreen VA Foundation Fund - NQ 11.393285 14.357474 26.02% 1,362,798 1997
10.000000 11.393285 13.93% 835,841 1996(1)
Evergreen Variable Trust - 14.733127 16.299610 10.63% 100,000 1998
Evergreen VA Foundation Fund - Initial 11.527881 14.733127 27.80% 100,000 1997
Funding by Depositor 10.000000 11.527881 15.28% 100,000 1996(1)
Evergreen Variable Trust - 15.352653 16.112386 4.95% 611,181 1998
Evergreen VA Fund - Q 11.351897 15.352653 35.24% 253,280 1997
10.000000 11.351897 13.52% 121,148 1996(1)
Evergreen Variable Trust - 15.352653 16.112386 4.95% 1,639,136 1998
Evergreen VA Fund - NQ 11.351897 15.352653 35.24% 772,073 1997
10.000000 11.351897 13.52% 419,319 1996(1)
Evergreen Variable Trust - 15.754272 16.768642 6.44% 100,000 1998
Evergreen VA Fund-Initial Funding 11.486000 15.754272 37.16% 100,000 1997
by Depositor 10.000000 11.486000 14.86% 100,000 1996(1)
Evergreen Variable Trust - Evergreen VA 10.753040 12.608870 17.26% 187,738 1998
Global Leaders Fund-Q 10.000000 10.753040 7.53% 61,612 1997(3)
Evergreen Variable Trust - Evergreen VA 10.753040 12.608870 17.26% 469,605 1998
Global Leaders Fund-NQ 10.000000 10.753040 7.53% 106,774 1997(3)
Evergreen Variable Trust - Evergreen 10.879585 12.938210 18.92% 100,000 1998
Global Leaders Fund - Initial Funding by 10.000000 10.879585 8.80% 100,000 1997(3)
Depositor
Evergreen Variable Trust - 15.614450 16.130864 3.31% 893,262 1998
Evergreen VA Growth and Income Fund - Q 11.759862 15.614450 32.78% 406,022 1997
10.000000 11.759862 17.60% 200,982 1996(1)
Evergreen Variable Trust - 15.614450 16.130864 3.31% 2,453,682 1998
Evergreen VA Growth and Income 11.759862 15.614450 32.78% 1,206,385 1997
Fund - NQ 10.000000 11.759862 17.60% 621,484 1996(1)
</TABLE>
10
12 of 109
<PAGE> 13
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
Evergreen Variable Trust - 16.022979 16.787932 4.77% 100,000 1998
Evergreen VA Growth and Income Fund- 11.898767 16.022979 34.66% 100,000 1997
Initial Funding by Depositor 10.000000 11.898767 18.99% 100,000 1996(1)
Evergreen Variable Trust - 10.000000 9.623143 -3.77% 30,706 1998(4)
Evergreen VA Small Cap Equity Income
Fund - Q
Evergreen Variable Trust - 10.000000 9.623143 -3.77% 105,451 1998(4)
Evergreen VA Small Cap Equity Income
Fund - NQ
Evergreen Variable Trust - 10.000000 9.714315 -2.86% 100,000 1998(4)
Evergreen VA Small Cap Equity Income
Fund - Initial Funding by Depositor
Evergreen Variable Trust - Evergreen VA 10.405791 10.866478 4.43% 294,309 1998
Strategic Income Fund-Q 10.000000 10.405791 4.06% 30,744 1997(3)
Evergreen Variable Trust - Evergreen VA 10.405791 10.866478 4.43% 632,171 1998
Strategic Income Fund-NQ 10.000000 10.405791 4.06% 79,968 1997(3)
Evergreen Variable Trust- Evergreen VA 10.528287 11.150478 5.91% 100,000 1998
Strategic Income Fund-Initial Funding by 10.000000 10.528287 5.28% 100,000 1997(3)
Depositor
Fidelity Variable Insurance Products Fund 12.549013 11.837723 -5.67% 36,899 1998
High Income Portfolio - Q 10.816268 12.549013 16.02% 31,204 1997
10.000000 10.816268 8.16% 26,822 1996(1)
Fidelity Variable Insurance 12.549013 11.837723 -5.67% 139,559 1998
Products Fund - High Income Portfolio - NQ 10.816268 12.549013 16.02% 133,009 1997
10.000000 10.816268 8.16% 77,056 1996(1)
Fidelity Variable Insurance 11.984120 13.323057 11.17% 34,092 1998
Products Fund - Overseas Portfolio - Q 10.895270 11.984120 9.99% 32,632 1997
10.000000 10.895270 8.95% 22,959 1996(1)
Fidelity Variable Insurance 11.984120 13.323057 11.17% 184,444 1998
Products Fund - Overseas Portfolio - NQ 10.895270 11.984120 9.99% 189,428 1997
10.000000 10.895270 8.95% 99,000 1996(1)
Fidelity Variable Insurance 13.208527 14.983855 13.44% 35,587 1998
Products Fund II - Asset Manager 11.103069 13.208527 18.96% 35,177 1997
Portfolio - Q 10.000000 11.103069 11.03% 32,538 1996(1)
Fidelity Variable Insurance 13.208527 14.983855 13.44% 108,376 1998
Products Fund II - Asset Manager 11.103069 13.208527 18.96% 1,422,202 1997
Portfolio - NQ 10.000000 11.103069 11.03% 77,328 1996(1)
Fidelity Variable Insurance 11.841787 15.176535 28.16% 17,867 1998
Products Fund II- Contrafund 10.000000 11.841787 18.42% 10,250 1997(2)
Portfolio-Q
Fidelity Variable Insurance 11.841787 15.176535 28.16% 120,560 1998
Products Fund II- Contrafund 10.000000 11.841787 18.42% 90,497 1997(2)
Portfolio-NQ
</TABLE>
11
13 of 109
<PAGE> 14
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
Fidelity Variable Insurance 12.196412 14.985852 22.87% 38,197 1998
Products Fund III- Growth 10.000000 12.196412 21.96% 14,976 1997(2)
Opportunities Portfolio- Q
Fidelity Variable Insurance 12.196412 14.985852 22.87% 175,401 1998
Products Fund III- Growth 10.000000 12.196412 21.96% 108,817 1997(2)
Opportunities Portfolio-NQ
Nationwide Separate Account 11.157782 11.981662 7.38% 9,045 1998
Trust- Government Bond 10.318689 11.157782 8.13% 7,513 1997
Fund - Q 10.000000 10.318689 3.19% 8,959 1996(1)
Nationwide Separate Account 11.157782 11.981662 7.38% 105,464 1998
Trust- Government Bond 10.318689 11.157782 8.13% 18,506 1997
Fund - NQ 10.000000 10.318689 3.19% 12,014 1996(1)
Nationwide Separate Account 10.691554 11.097664 3.80% 189,512 1998
Trust- Money Market 10.301567 10.691554 3.79% 64,006 1997
Fund - Q* 10.000000 10.301567 3.02% 25,641 1996(1)
Nationwide Separate Account 10.691554 11.097664 3.80% 290,059 1998
Trust- Money Market 10.301567 10.691554 3.79% 96,090 1997
Fund - NQ* 10.000000 10.301567 3.02% 88,440 1996(1)
</TABLE>
*The 7-day yield on the Nationwide Separate Account Trust - Money Market Fund as
of December 31, 1998 was 3.42%.
(1)This product first became effective on February 28, 1996. Consequently, the
condensed financial information reflects the reporting period from February 28,
1996 through December 31, 1996.
(2)These underlying mutual funds were added to the variable account on February
3, 1997. Consequently, the condensed financial information reflects the
reporting period from February 3, 1997 through December 31, 1997.
(3)These underlying mutual funds were added to the variable account on March 3,
1997. Consequently, the condensed financial information reflects the reporting
period from March 3, 1997 through December 31, 1997.
(4)The Evergreen Variable Trust - Evergreen VA Small Cap Equity Income Fund was
added to the variable account on May 1, 1998. Consequently, the condensed
financial information reflects the reporting period from May 1, 1998 through
December 31, 1998.
12
14 of 109
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929, with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-6 is a separate account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
separate account on February 2, 1994, pursuant to Ohio law. Although the
separate account is registered with the SEC as a unit investment trust pursuant
to the Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise
the management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions. There are two sub-accounts for each underlying mutual fund.
One sub-account contains shares attributable to accumulation units under
Non-Qualified Contracts. The other contains shares attributable to accumulation
units under Individual Retirement Annuities, Roth IRAs, and Tax Sheltered
Annuities.
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.
13
15 of 109
<PAGE> 16
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. 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.
14
16 of 109
<PAGE> 17
- - Dollar Cost Averaging Rate - From time to time, Nationwide may offer a more
favorable rate for an initial purchase payment into a new contract when
used in conjunction with a Dollar Cost Averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during the12 month anniversary in which the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3% per
year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any applicable charges including
CDSC.
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGES
Nationwide deducts a Mortality and Expense Risk Charge from the variable
account. This amount is computed on a daily basis, and is equal to an annual
rate of 1.25% of the daily net assets of the variable account.
The mortality risk charges compensate Nationwide for guaranteeing the annuity
rate of the contracts. This guarantee ensures that the annuity rates will not
change regardless of the death rates of annuity payees or the general
population.
The expense risk charges compensate Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charge is insufficient to cover actual
expenses, the loss is borne by Nationwide.
ADMINISTRATION CHARGE
Nationwide deducts an Administration Charge from the variable account. This
amount is computed on a daily basis and is equal to an annual rate of to 0.15%
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.
If the Administration Charge is insufficient to cover actual expenses, the loss
is borne by Nationwide.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will deduct a CDSC. The CDSC will not exceed 7% of
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the amount of purchase payments surrendered. For purposes of
calculating the CDSC, surrenders are considered to come first from the oldest
purchase payment made to the contract, then the next oldest purchase payment,
and so forth. For tax purposes, a surrender is usually treated as a withdrawal
of earnings first.
The CDSC applies as follows:
<TABLE>
<CAPTION>
NUMBER OF YEARS FROM DATE CDSC
OF PURCHASE PAYMENT PERCENTAGE
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
</TABLE>
15
17 of 109
<PAGE> 18
The CDSC is used to cover sales expenses, including commissions, 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 variable account charges, since Nationwide may
generate a profit from these charges.
The maximum amount paid to selling agents on these contracts is 6.25% of
purchase payments. In addition to commissions paid by Nationwide, additional
forms of compensation or incentives may be paid to sales agents by the
broker-dealer firm with which they are associated. Incentives may include
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances; or payment for travel, lodging and entertainment expenses incurred
with travel by sales agents and their immediate families. Sales agents may elect
to receive cash incentives of equivalent amounts in lieu of such payments.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes (see "Non-Qualified Contracts - Natural Persons as Contract
Owners").
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the greater
of:
(a) 10% of all purchase payments; or
(b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This CDSC-free privilege is non-cumulative. Free amounts not taken during any
given contract year cannot be taken as free amounts in a subsequent contract
year.
In addition, no CDSC will be deducted:
(1) upon the annuitization of contracts which have been in force for at
least two years;
(2) upon payment of a death benefit; or
(3) from any values which have been held under a contract for at least 7
years.
No CDSC applies to transfers among sub-accounts or between or among 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. Sales without commissions or other standard
distribution expenses can result in the waiver or reduction of CDSC.
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.
The contract owner may be subject to income tax on all or a portion of any such
withdrawals and to a tax penalty if the contract owner takes withdrawals prior
to age 59 1/2 (see "Non-Qualified Contracts- Natural Persons as Contract
Owners").
The CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
16
18 of 109
<PAGE> 19
(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,
contingent annuitant, beneficiary, contingent beneficiary, annuity payment
option, and annuity commencement date. Purchasers who name someone other than
themselves as the contract owner will have no rights under the contract.
Contract owners of Non-Qualified Contracts may name a new contract owner at any
time before the annuitization date. Any change of contract owner automatically
revokes any prior contract owner designation. Changes in contract ownership may
result in federal income taxation and may be subject to state and federal gift
taxes.
A change in contract ownership must be submitted in writing and recorded at
Nationwide's home office. Once recorded, the change will be effective as of the
date signed. However, the change will not affect any payments made or actions
taken by Nationwide before it was recorded.
The contract owner may also request a change in the annuitant, contingent
annuitant, contingent owner, 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.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
- Joint owners can only be named for Non-Qualified Contracts;
- Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint
owners;
- The exercise of any ownership right in the contract will generally
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 of either joint owner; and
- Nationwide will not be liable for any loss, liability, cost, or
expense for acting in accordance with the instructions of either joint
owner.
CONTINGENT OWNERSHIP
The contingent owner is entitled to certain benefits under the contract, if a
contract owner who is NOT the annuitant dies before the annuitization date, and
there is no surviving joint owner.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not affect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person designated to receive annuity payments during
annuitization of the contract and upon whose continuation of life any
17
19 of 109
<PAGE> 20
annuity payment involving life contingencies depends. This person must be age 85
or younger at the time of contract issuance, unless Nationwide approves a
request for an annuitant of greater age. The annuitant may be change prior to
the annuitization date with the consent of Nationwide.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person(s) who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. Multiple beneficiaries will
share the death benefit equally, unless otherwise specified.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
CONTRACT MINIMUM INITIAL MINIMUM
TYPE PURCHASE PAYMENT SUBSEQUENT
PAYMENTS
<S> <C> <C>
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
</TABLE>
Subsequent purchase payments are not permitted for contracts purchased in the
states of New York, Oregon, and Washington and may not be permitted in other
sates under certain circumstances.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
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
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial 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 the 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 would not have access to
their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to the sub-accounts and the fixed account
as instructed by the contract owner. Shares of the underlying mutual funds
allocated to the sub-accounts are purchased at net asset value, then converted
into
18
20 of 109
<PAGE> 21
accumulation units. Contract owners can change allocations or make exchanges
among the sub-accounts or the fixed account. However, no change may be made that
would result in an amount less than 1% of the purchase payments being allocated
to any sub-account for any contract owner. 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. The factor is
equal to an annual rate of 1.40% of the daily net assets of the variable
account.
Based on the net investment factor, the value of an accumulation unit may
increase or decrease. Changes in the net investment factor may not be directly
proportional to changes in the net asset value of the underlying mutual fund
shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
2) adding any interest earned on the amounts allocated.
TRANSFERS
Transfers from the Fixed Account to the Variable Account
Fixed account allocations may be transferred to the variable account only upon
reaching the end of an Interest Rate Guarantee Period. Normally, Nationwide will
permit 100% of such fixed account allocations to be transferred to the variable
account; however Nationwide may, under certain economic conditions and at its
19
21 of 109
<PAGE> 22
discretion, limit the maximum transferable amount. Under no circumstances will
the maximum transferable amount be less than 10% 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.
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").
Transfers 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. Except as noted below, 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, where permitted by state law,
Nationwide reserves the right to refuse transfers or purchase payments to the
fixed account from the variable 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.
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.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
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.
For new purchase payments allocated to the fixed account, or 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 and exchange
rights of contract owners who use market timing firms (or other third parties)
to transfer or exchange 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 exchange and transfer
requests:
20
22 of 109
<PAGE> 23
- - 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 exchange 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. The refunded contract value will reflect the deduction of any contract
charges, unless otherwise required by law. All IRA, SEP IRA and Roth IRA refunds
will be a return of purchase payments. State and/or federal law may provide
additional free look privileges.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded to the contract owner will be paid by Nationwide.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
Nationwide will pay any amount surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
Partial Surrenders (Partial Redemption)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account. The amount withdrawn from each investment option will be
in proportion to the value in each option at the time of the surrender request.
A CDSC may apply. The contract owner may direct Nationwide to deduct the CDSC
either from:
a) the amount requested; or
b) the contract value remaining after the contract owner has received the
amount requested.
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 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
21
23 of 109
<PAGE> 24
of Internal Revenue Code Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may
NOT include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year beginning
before January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except that
earnings and employer contributions as 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 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 stated above.
LOAN PRIVILEGE
The loan privilege is ONLY available to owners of Qualified Contracts and Tax
Sheltered Annuities. These contract owners can take loans from the contract
value beginning 30 days after the contract is issued up to the annuitization
date. Loans are subject to the terms of the contract, the plan, and the Internal
Revenue Code. Nationwide may modify the terms of a loan to comply with changes
in applicable law.
MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
<TABLE>
<CAPTION>
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
<S> <C> <C>
NON-ERISA up to up to 80% of contract
PLANS $20,000 value (not more than
$10,000)
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
</TABLE>
*The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide may charge a Loan Processing Fee at the time each new loan is
processed. If assessed it compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not allow Nationwide to assess a Loan Processing Fee.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount,
22
24 of 109
<PAGE> 25
Nationwide next transfers contract value from the fixed account. No CDSC will be
deducted on transfers related to loan processing.
INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. It is guaranteed never to fall
below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
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, Roth IRAs 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
23
25 of 109
<PAGE> 26
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 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 Tax Sheltered Annuity plan. Contract owners should consult
a financial adviser to discuss the use of asset rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from certain sub-accounts and the fixed account into other
sub-accounts. Nationwide does not guarantee that this program will result in
profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account and the following underlying mutual funds: Fidelity VIP
High Income Portfolio, NSAT-Government Bond Fund, and the NSAT-Money Market Fund
to any other underlying mutual fund. The minimum monthly transfer is $100.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be less than or 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 owner that wish to utilize dollar cost averaging from the
fixed account should first inquire as to whether any enhanced rate dollar cost
averaging programs are available.
Enhanced Rate Dollar Cost Averaging Program
Nationwide may, from time to time, offer enhanced rate dollar cost averaging
programs. Dollar cost averaging transfers for this program may only be made from
the fixed account. Such enhanced rate dollar cost averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
24
26 of 109
<PAGE> 27
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. A CDSC may apply.
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.
If the contract owner takes systematic withdrawals, 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;
2) an amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
3) a percentage of the contract value based on the contract owner's age,
as shown in the table below:
<TABLE>
<CAPTION>
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
<S> <C>
Under age 59 1/2 5%
Age 59 1/2through age 61 7%
Age 62 through age 64 8%
Age 65 through age 74 10%
Age 75 and over 13%
</TABLE>
Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office. For
joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any contract year exceed the CDSC-free amount
described above, those amounts will only be eligible for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section. The total amount of CDSC for that contract year will be
determined in accordance with that provision.
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.
25
27 of 109
<PAGE> 28
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payment
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday basis" by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday basis" by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent 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 $5,000, in which case
Nationwide may make
26
28 of 109
<PAGE> 29
one lump sum payment of the contract value; or
- an annuity payment would be less than $50, in which case Nationwide
can change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for Non-Qualified Contracts will be made until an annuity
payment option has been elected. IRAs 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 contingent owner becomes the contract owner. If no contingent owner is
named, the last surviving contract owner's estate becomes the contract owner.
If the contract owner and annuitant are the same, and the contract
owner/annuitant dies before the annuitization date, the contingent owner will
not have any rights in the contract unless the contingent owner is also the
beneficiary.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary unless a contingent
annuitant is named. If a contingent annuitant is named, the contingent annuitant
becomes the annuitant and no death benefit is payable.
If no beneficiaries survive the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
27
29 of 109
<PAGE> 30
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 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 Nationwide receives:
(1) proper proof of the annuitant's death;
(2) an election specifying the distribution method; and
(3) any state required form(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.
DEATH BENEFIT PAYMENT
For contracts issued on or after May 1, 1998 or the date on which state
insurance authorities approved applicable contract modifications,
- If the annuitant dies prior to his or her 86th birthday, the dollar
amount of the death benefit will be the greatest of:
1) the contract value;
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
five year contract anniversary.
- If the annuitant dies on or after his or her 86th birthday and prior
to annuitization, the death benefit will equal the contract value.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
For contracts issued prior to May 1, 1998 or a date prior to which state
insurance authorities approved applicable contract modifications:
- If the annuitant dies prior to his or her 86th birthday, the dollar
amount of the death benefit will be the greatest of:
1) the contract value;
2) the sum of all purchase payments, less amounts surrendered; or
3) the contract value as of the most recent five year contract
anniversary, less amounts surrendered since that five year contract
anniversary.
- If the annuitant dies on or after his or her 86th birthday and prior
to annuitization, the death benefit will equal the contract value
If the annuitant dies after the annuitization date, any payment that may be
payable will be determined according to the selected annuity payment option.
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
28
30 of 109
<PAGE> 31
the contract (consisting of either the death benefit or the contract value
reduced by charges set forth elsewhere in the contract) will be distributed
within 5 years of the contract owner's death, provided however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be distributed
over the life of the designated beneficiary or over a period not
longer than the life expectancy of the designated beneficiary.
Payments must begin within one year of the contract owner's death
unless otherwise permitted by federal income tax regulations;
b) if the designated beneficiary is the surviving spouse of the deceased
contract owner, the spouse can choose to become the contract owner
instead of receiving a death benefit. Any distributions required under
these distribution rules will be made upon that spouse's death.
In the event that the contract owner is not a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a contract
owner;
b) any change of annuitant will be treated as the death of a contract
owner; and
c) in either case, the appropriate distribution will be made upon the
death or change, as the case may be.
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 TAX SHELTERED ANNUITIES
Distributions from Tax Sheltered Annuities will be made according to the Minimum
Distribution and Incidental Benefit ("MDIB") provisions of Section 401(a)(9) of
the Internal Revenue Code. Distributions will be made to the annuitant according
to the selected annuity payment option over a period not longer than:
a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
b) a period not longer than the life expectancy of the annuitant or the
joint life expectancies of the annuitant and the annuitant's
designated beneficiary.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a 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.
29
31 of 109
<PAGE> 32
If the annuitant dies before distributions begin, the interest in the Qualified
Contract or Tax Sheltered Annuity must be distributed by December 31 of the
calendar year in which the fifth anniversary of the annuitant's death occurs
unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no later than
December 31 of the year in which the annuitant would have attained age
70 1/2; or
b) the annuitant names a beneficiary other than his or her surviving
spouse and the beneficiary elects to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the annuitant
dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distributions from an Individual Retirement Annuity must begin no later than
April 1 of the calendar year following the calendar year in which the contract
owner reaches age 70 1/2. Distribution may be paid in a lump sum or in
substantially equal payments over:
a) the contract owner's life or the lives of the contract owner and his
or her spouse or designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity must be distributed by December 31 of the calendar
year in which the fifth anniversary of the contract owner's death occurs,
unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and such spouse chooses to:
1) treat the contract as an Individual Retirement Annuity
established for his or her benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year in which the contract owner would have reached age 70
1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract
owner's death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity or Individual
Retirement Account of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a surviving spouse who is the beneficiary under
the annuity payment option may treat the contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
30
32 of 109
<PAGE> 33
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The owner of an Individual Retirement
Annuity must annually report the amount of non-deductible purchase payments, the
amount of any distribution, the amount by which non-deductible purchase payments
for all years exceed non-taxable distributions for all years, and the total
balance of all Individual Retirement Annuities.
Individual Retirement Annuity 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.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and the spouse chooses to:
1) treat the contract as a Roth IRA established for his or her
benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year following the year in which the contract owner would
have reached age 70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the contract
owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "nonqualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
Contract owners should consult a financial consultant, legal counsel or tax
adviser to discuss in detail the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Section 72 of the Internal Revenue Code governs federal income taxation of
annuities in general. That section sets forth different rules for: (1)
Individual Retirement Annuities and Individual Retirement Accounts; (2) Roth
IRAs; (3) SEP IRAs; (4) Tax Sheltered Annuities; and (5) Non-Qualified
Contracts. Each type of annuity is discussed below.
Individual Retirement Annuities, SEP IRAs and Individual Retirement Accounts
Distributions from Individual Retirement Annuities, SEP IRAs and contracts owned
by Individual Retirement Accounts are generally taxed when received. The
excludable portion of each payment is based on the ratio between the amount by
which non-deductible purchase payments to all the contracts exceeds prior
non-taxable distributions from the contracts, and the total account balances in
the contracts at the time of the distribution. The owner of these Individual
Retirement Annuities or SEP IRAs, or the annuitant under contracts held by
Individual Retirement Accounts must annually report to the Internal Revenue
Service:
- the amount of nondeductible purchase payments;
31
33 of 109
<PAGE> 34
- the amount of any distributions;
- the amount by which nondeductible purchase payments for all years
exceed non-taxable distributions for all years; and
- the total balance in all Individual Retirement Annuities, SEP IRAs and
Individual Retirement Accounts.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "nonqualified distributions."
A "qualified distribution" is one that satisfies the five-year rule and meets
one of the following requirements:
(i) it is made on or after the date on which the contract owner attains
age 59 1/2;
(ii) it is made to a beneficiary (or the contract owner's estate) on or
after the death of the contract owner;
(iii) it is attributable to the contract owner's disability; or
(iv) it is a qualified first-time homebuyer distribution (as defined in
Section 72(t)(2)(F) of the Internal Revenue Code).
If the Roth IRA does not have any qualified rollover contributions from a
retirement plan other than a Roth IRA (or income allocable thereto), the five
year rule is satisfied if the distribution is not made within the five year
period beginning with the first contribution to the Roth IRA. If the Roth IRA
contains qualified rollover contributions from a retirement plan other than a
Roth IRA (or income allocable thereto), the five year rule is satisfied if the
distribution is not made within the five taxable year period commencing with the
taxable year in which the qualified rollover contribution was made.
A non-qualified distribution is any distribution that is not a qualified
distribution.
A qualified distribution is not included in gross income for federal income tax
purposes. A 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.
Taxable distributions will not receive the same favorable tax treatment of a
lump sum distribution from a Qualified Plan. If the contract owner dies before
the contract is completely distributed, the balance will also be included in the
contract owner's gross estate for tax purposes.
A change of the annuitant or contingent annuitant may be treated by the Internal
Revenue Service as a taxable transaction.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
required by the Internal Revenue Code. The formula excludes from income the
amount invested in the contract divided by the number of anticipated payments
(as determined pursuant to Section 72(d) of the Internal Revenue Code) until the
full investment in the contract is recovered.
Thereafter all distributions are fully taxable.
Non-Qualified Contracts - Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment is excludable from taxable income based on the ratio between the
contract owner's investment in the contract and the expected return on the
contract until the investment has been recovered. Thereafter the entire amount
is includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income, and no additional payments are
due after his or her death, then he or she may be entitled to a deduction for
the balance of the investment on his or her final income tax return.
32
34 of 109
<PAGE> 35
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, dividends, loans, or any portion of the contract
that is assigned or pledged; or for contracts issued after April 22, 1987, any
portion of the contract transferred by gift. For these purposes, a transfer by
gift may occur upon annuitization if the contract owner and the annuitant are
not the same individual.
In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during any 12-month period will be treated as one annuity contract. Additional
limitations on the use of multiple contracts may be imposed by Treasury
Regulations.
Distributions before the annuitization date allocable to a portion of the
contract invested prior to August 14, 1982, are treated first as a recovery of
the investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
non-qualified contracts held by entities other than individuals. Such entities
are taxed currently on earnings from contributions made to the contract after
February 28, 1986. There are exceptions for immediate annuities and certain
contracts owned for the benefit of an individual. An immediate annuity, for
purposes of this discussion, is a single premium contract on which payments
begin within one year of purchase. If this contract is issued as the result of
an exchange described in Section 1035 of the Internal Revenue Code, for purposes
of determining whether the contract is an immediate annuity, it will generally
be considered to have been purchased on the purchase date of the contract given
up in the exchange.
Internal Revenue Code Section 72 also assesses a penalty tax if a distribution
is made before the contract owner reaches age 59 1/2. The amount of the penalty
is 10% of the portion of any distribution that is includible in gross income.
The penalty tax does not apply if the distribution
1) is the result of a contract owner's death;
2) is the result of a contract owner's disability;
3) is one of a series of substantially equal periodic payments made over
the life or life expectancy of the contract owner (or the joint lives
or joint life expectancies of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner),
4) is for the purchase of an immediate annuity;
5) is allocable to an investment in the contract before August 14, 1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death. These rules are described in "Required
Distributions for Non-Qualified Contracts."
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to
33
35 of 109
<PAGE> 36
immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code, deemed to be owned)
by individuals. Different rules apply if the contract owner is not a natural
person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities ("non-natural persons") are not treated as annuity contracts under the
Internal Revenue Code. Specifically, they are not treated as annuity contracts
for purposes of Section 72. Therefore, income earned under a Non-Qualified
Contract that is owned by a non-natural person is taxed as ordinary income
during the taxable year that it is earned. Taxation is not deferred, even if the
income is not distributed out of the contract to the contract owner.
This non-natural person rule does not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent for an individual is
treated as owned by the individual. This would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred compensation arrangement for one or more employees.
The non-natural person rule also does not apply to contracts that are:
a) acquired by the estate of a decedent by reason of the death of the
decedent;
b) issued in connection with certain qualified retirement plans and
individual retirement plans;
c) used in connection with certain structured settlements;
d) purchased by an employer upon the termination of certain qualified
retirement plans; or
e) an immediate annuity.
INDIVIDUAL RETIREMENT ANNUITIES AND TAX SHELTERED ANNUITIES
Contract owners looking for information on eligibility, limitations on
permissible amounts of purchase payments, and the tax consequences of
distributions from Individual Retirement Annuities and Tax Sheltered Annuities
should contact a qualified adviser. The terms of each plan may limit the rights
available under the contracts.
Section 403(b)(1)(E) of the Internal Revenue Code requires a contract issued as
a Tax Sheltered Annuity to limit purchase payments for any year to an amount
that does not exceed the limit set forth in Section 402(g) of the Internal
Revenue Code. This limit is increased from time to time to reflect increases in
the cost of living. This limit may be reduced by deposits, contributions or
payments made to another Tax Sheltered Annuity or other plan, contract or
arrangement by or on behalf of the contract owner.
The Internal Revenue Code allows most distributions from Qualified Plans to be
rolled into other Qualified Plans or Individual Retirement Annuities. Most
distributions from Tax Sheltered Annuities may be rolled into another Tax
Sheltered Annuity, Individual Retirement Annuity, or an Individual Retirement
Account. Distributions that may NOT be rolled over are those that are:
a) one of a series of substantially equal annual (or more frequent)
payments made:
1) over the life (or life expectancy) of the contract owner;
2) over the joint lives (or joint life expectancies) of the contract
owner and the contract owner's designated beneficiary;
3) for a specified period of ten years or more; or
b) a required minimum distribution.
Any distribution that is eligible for rollover will be subject to federal tax
withholding of 20% if the distribution is not rolled into an appropriate plan as
described above.
34
36 of 109
<PAGE> 37
Individual Retirement Accounts and Individual Retirement Annuities may not
provide life insurance benefits. If the death benefit exceeds the greater of the
contract's cash value or the sum of all purchase payments (less any surrenders),
the contract could be considered life insurance. Consequently, the Internal
Revenue Service could determine that the Individual Retirement Account, or
Individual Retirement Annuity does not qualify for the desired tax treatment.
ROTH IRAS
The contract may be purchased as a Roth IRA. For detailed information on
purchasing and holding this contract as a Roth IRA, the contract owner should
contact a financial adviser.
The Internal Revenue Code allows distributions from Individual Retirement
Accounts and Individual Retirement Annuities to be rolled into Roth IRAs. The
rollovers are subject to federal income tax as distributions from the Individual
Retirement Account or Individual Retirement Annuity.
For rollovers from Individual Retirement Accounts or Individual Retirement
Annuities, all of the income from the rollover will be required to be included
in income in the year of the rollover distribution from the Individual
Retirement Account or Individual Retirement Annuity.
A distribution from a Roth IRA that contains the proceeds of a rollover from an
Individual Retirement Account or Individual Retirement Annuity within the
preceding five years could be subject to a 10% penalty, even if the distribution
is not taxable. In addition, if the rollover from the Individual Retirement
Account or Individual Retirement Annuity was made in 1998, and the income from
that rollover was included in income ratably over a four year period, a
distribution from the Roth IRA within four years of the rollover may result in
the loss of all or a portion of the four year spread, subjecting the amount
deferred under the four year election to current taxation.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required) or if it is
an eligible rollover distribution. Mandatory back-up withholding rates are 31%
of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
35
37 of 109
<PAGE> 38
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may be subject to
estate taxes, even if all or a portion of the value is also subject to federal
income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- who would be required to include the contract, death benefit,
distribution, or other payment in his or her federal gross estate at
his or her death; or
- who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
PUERTO RICO
Under the Puerto Rico tax code, distributions from a Non-Qualified Contract
before annuitization are treated as nontaxable return of principal until the
principal is fully recovered. Thereafter all distributions are fully taxable.
Distributions after annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
annuitization is equal to the amount of the distribution in excess of 3% of the
total purchase payments paid, until an amount equal to the total purchase
payments paid has been excluded. Thereafter, the entire distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
distributions of income. A personal adviser should be consulted in these
situations.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless
- the failure to diversify was accidental;
- the failure is corrected; and
- a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide
36
38 of 109
<PAGE> 39
believes that the investments underlying this contract meet these
diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
adviser.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., dollar cost averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
- annual and semi-annual reports containing all applicable information
and financial statements or their equivalent, which must be sent to
the underlying mutual fund beneficial shareholders as required by the
rules under the Investment Company Act of 1940 for the variable
account
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999. Like many
organizations, Nationwide is required to renovate or replace many computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. Conversions of existing
traditional life policies will continue through second quarter, 1999. In
addition, the shareholder services system that support our mutual fund products
will be fully deployed in the first quarter of 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners including electronic interfaces. Processes
have been put in place and programs initiated to process data irrespective of
the format by converting non-compliant data into a Year 2000 compliant format.
Systems supporting Nationwide's infrastructure such as telecommunications, voice
and networks will be compliant by March 1999. Nationwide's assessment of Year
2000 issues has also included non-information technology systems
37
39 of 109
<PAGE> 40
with embedded computer chips. Nationwide's building systems such as fire,
security, elevators and escalators supporting facilities in Columbus, Ohio have
been tested and are Year 2000 compliant.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, Nationwide has contacted mutual fund
organizations that provide funds for our variable annuity and life products. The
same action will continue during the first quarter of 1999 with wholesale
producers. Nationwide continues its efforts to identify external risk factors
and is planning to develop contingency plans as part of its ongoing risk
management strategy.
Operating expenses in 1998 and 1997 included approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Nationwide anticipates spending approximately $5 million on Year 2000
activities in 1999. These expenses do not have an effect on the assets of the
variable account and are not charged through to the contract owner.
Management does not anticipate that the completion of Year 2000 renovation and
replacement activities will result in a reduction in operating expenses. Rather,
personnel and resources currently allocated to Year 2000 issues will be assigned
to other technology-related projects.
LEGAL PROCEEDINGS
Nationwide 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.
The general distributor, Nationwide Advisory Services, Inc. is not engaged in
any litigation of any material nature.
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.
In February 1997, Nationwide was named as a defendant in a lawsuit filed in New
York state court related to the sale of whole life policies on a "vanishing
premium" basis (John H. Snyder v. Nationwide Life Insurance Company). In April
1998, Nationwide was named as a defendant in a lawsuit filed in Ohio state court
similar to the Snyder case (David and Joan Mishler v. Nationwide Life Insurance
Company). In August 1998, Nationwide Mutual Insurance Company and Nationwide and
the plaintiffs executed a stipulation of settlement and submitted it to the New
York state court for approval. On August 20, 1998, the court in the Snyder case
signed an order preliminarily approving a class for settlement purposes (which
would include the Mishler case) and scheduled a fairness hearing for December
17, 1998. At the hearing, the court reviewed the fairness and reasonableness of
the proposed settlement and issued a final order and judgment. The approved
settlement provides for dismissal of both the Snyder and Mishler cases, bars
class members from pursuing litigation against Nationwide Mutual Insurance
Company and its affiliates, including Nationwide and its subsidiaries, relating
to the allegations in the Snyder case, and provides class members with a
potential value of approximately $100 million in policy adjustments, discounted
premiums and discounted products.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance policy and the other who was the owner of a variable annuity contract,
commenced a lawsuit in a federal court in Texas against Nationwide and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs seek to
represent a class of variable life insurance policy owners and variable annuity
contract owners whom they claim were allegedly misled when purchasing these
variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a
38
40 of 109
<PAGE> 41
mutual fund, also managed by American Century, whose shares are publicly traded.
The amended complaint seeks unspecified compensatory and punitive damages. On
April 27, 1998, the district court denied, in part, and granted, in part,
Nationwide and American Century's motions to dismiss the complaint. The
remaining claims against Nationwide allege securities fraud, common law fraud,
civil conspiracy and breach of contract. On December 2, 1998, the district court
issued an order denying plaintiffs' motion for class certification. On December
10, 1998, the district court stayed the lawsuit pending plaintiffs'petition to
the federal appeals court for interlocutory review of the order denying class
certification. On December 14, 1998, plaintiffs filed their petition for
interlocutory review, on which the federal appeals court has not yet ruled.
Nationwide intends to defend the case vigorously.
On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified compensatory and punitive damages. Nationwide
currently is evaluating this lawsuit, which has not been certified as a class.
Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY
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.,
39
41 of 109
<PAGE> 42
- CDA/Wiesenberger;
- Morningstar;
- Donoghue's;
- magazines such as:
+ Money;
+ Forbes;
+ Kiplinger's Personal Finance Magazine;
+ Financial World;
+ Consumer Reports;
+ Business Week;
+ Time;
+ Newsweek;
+ National Underwriter; and
+ News and World Report;
- LIMRA;
- Value;
- Best's Agent Guide;
- Western Annuity Guide;
- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
- Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total return shows the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year periods (or for a period covering the time the underlying mutual fund has
been available in the variable account if it has not been available for one of
the prescribed periods). This calculation reflects the standard 7-year CDSC
schedule and the deduction of all charges that could be made to the contracts,
except for premium taxes, which may be imposed by certain states.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," shows the percentage rate of return of a hypothetical
initial investment of $10,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been in
existence). For those underlying mutual funds which have not been available for
one of the prescribed periods, the nonstandardized total return illustrations
will show the investment performance the underlying mutual funds would have
achieved (reduced by the same charges except the CDSC) had they been available
in the variable account for one of the periods. The CDSC is not reflected
because the contracts are designed for long term investment. The CDSC, if
reflected, would decrease the level of performance shown. An initial investment
of $10,000 is assumed because that amount is closer to the size of a typical
contract than $1,000, which was used in calculating the standardized average
annual total return.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1998.
However, Nationwide generally provides performance information more frequently.
Information relating to
40
42 of 109
<PAGE> 43
performance of the sub-accounts is based on historical earnings and does not
represent or guarantee future results.
41
43 of 109
<PAGE> 44
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 YEARS OR DATE DATE FUND
FUND AVAILABLE IN ADDED TO
5 YEARS TO VARIABLE ACCOUNT VARIABLE
SUB-ACCOUNT OPTION 1 YEAR TO 12/31/98 12/31/98 TO 12/31/98 ACCOUNT
<S> <C> <C> <C> <C>
Evergreen Variable Trust- Evergreen VA 14.24% N/A 13.44% 03-03-97
Aggressive Growth Fund
Evergreen Variable Trust- Evergreen VA -1.53% N/A 16.92% 03-01-96
Fund
Evergreen Variable Trust- Evergreen VA 2.78% N/A 15.71% 03-01-96
Foundation Fund
Evergreen Variable Trust- Evergreen VA -2.99% N/A 16.97% 03-01-96
Growth and Income Fund
Evergreen Variable Trust - Evergreen VA 10.96% N/A 10.38% 03-03-97
Global Leaders Fund
Evergreen Variable Trust - Evergreen VA N/A N/A -12.20% 05/01/98
Small Cap Equity Income Fund
Evergreen Variable Trust- Evergreen VA -1.87% N/A 1.29% 03-03-97
Strategic Income Fund
Fidelity VIP High Income Portfolio -11.57% N/A 4.40% 03-01-96
Fidelity VIP Overseas Portfolio 4.87% N/A 9.05% 03-01-96
Fidelity VIP II Asset Manager Portfolio 7.14% N/A 13.85% 03-01-96
Fidelity VIP II Contrafund Portfolio 21.86% N/A 21.73% 02-03-97
Fidelity VIP III Growth Opportunities 16.57% N/A 20.89% 02-03-97
Portfolio
NSAT- Government Bond Fund 1.08% N/A 4.87% 03-01-96
NSAT- Money Market Fund -2.50% N/A 1.93% 02-29-96
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 YEARS TO
5 YEARS TO 12/31/98 OR LIFE DATE FUND
SUB-ACCOUNT OPTION 1 YEAR TO 12/31/98 12/31/98 OF FUND EFFECTIVE
<S> <C> <C> <C> <C>
Evergreen Variable Trust- Evergreen VA 20.54% N/A 16.43% 02-28-97
Aggressive Growth Fund
Evergreen Variable Trust- Evergreen VA 4.95% N/A 18.33% 03-01-96
Fund
Evergreen Variable Trust- Evergreen VA 9.08% N/A 17.15% 03-01-96
Foundation Fund
Evergreen Variable Trust- Evergreen VA 3.31% N/A 18.38% 03-01-96
Growth and Income Fund
Evergreen Variable Trust- Evergreen VA 17.26% N/A 13.45% 02-28-97
Global Leaders Fund
Evergreen Variable Trust - Evergreen VA -3.77% N/A N/A 05-01-98
Small Cap Equity Income Fund
Evergreen Variable Trust- Evergreen VA 4.43% N/A 4.63% 02-28-97
Strategic Income Fund
Fidelity VIP High Income Portfolio -5.67% 7.28% 9.53% 09-19-85
Fidelity VIP Overseas Portfolio 11.17% 8.17% 8.55% 01-28-87
Fidelity VIP II Asset Manager Portfolio 13.44% 10.25% 11.41% 02-28-97
Fidelity VIP II Contrafund Portfolio 28.16% N/A 26.86% 01-03-95
Fidelity VIP III Growth Opportunities 22.87% N/A 9.53% 01-03-95
Portfolio
NSAT- Government Bond Fund 7.38% 5.77% 7.82% 11-08-82
NSAT- Money Market Fund 3.80% 3.57% 3.94% 11-10-81
</TABLE>
42
44 of 109
<PAGE> 45
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History...................................................................................1
Services..........................................................................................................1
Purchase of Securities Being Offered..............................................................................1
Underwriters......................................................................................................2
Calculations of Performance.......................................................................................2
Annuity Payments..................................................................................................3
Financial Statements..............................................................................................4
</TABLE>
43
45 of 109
<PAGE> 46
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.
EVERGREEN VARIABLE TRUST
The Evergreen Variable Trust ("Trust") is an open-end management investment
company commonly referred to as a Mutual Fund. The Trust is designed to provide
investors with a selection of investment alternatives which seek to provide
capital growth, income and diversification through its investment series (the
"Funds"). Shares of the Funds are sold to separate accounts funding variable
annuity contracts and variable life insurance policies issued by life insurance
companies.
The investment adviser to the Evergreen VA Fund, Evergreen VA Foundation Fund,
Evergreen VA Growth and Income Fund and Evergreen VA Global Leaders Fund is
Evergreen Asset Management Corp., a wholly-owned subsidiary of First Union
National Bank of North Carolina ("FUNB"), which in turn is a subsidiary of First
Union Corporation. The Capital Management Group of FUNB serves as investment
adviser to Evergreen VA Aggressive Growth Fund. The investment adviser to the
Evergreen VA Strategic Income Fund is Keystone Investment Management Company, a
wholly-owned subsidiary of FUNB.
-EVERGREEN VA AGGRESSIVE GROWTH FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in common stocks of emerging growth companies and in larger, more
well established companies, all of which are viewed by the Fund's investment
adviser as having above average appreciation potential.
-EVERGREEN VA FOUNDATION FUND
Investment Objective: Seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation by investing principally in
income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Adviser have potential for capital
enhancement. The Fund may also invest up to 25% of its assets in foreign
securities. While income will be a factor in the selection of equity
securities, the Adviser will attempt to identify securities that offer
potential for long term capital appreciation, but that do not exhibit any
speculative characteristics.
-EVERGREEN VA FUND
Investment Objective: Seeks to achieve capital appreciation by primarily
investing in common stock and securities convertible into or exchangeable for
common stock of little-known or relatively small companies, or companies
undergoing changes which the Adviser believes will have favorable
consequences. Income will not be a factor in the selection of portfolio
investments.
-EVERGREEN VA GLOBAL LEADERS FUND
Investment Objective: Seeks to achieve capital appreciation by investing
primarily in a diversified portfolio of U.S. and non-U.S. equity securities
of companies located in the world's major industrialized countries. The
Fund's investment adviser will attempt to screen the largest companies in the
world's major industrialized countries and cause the Fund to invest, in the
opinion of the Fund's investment adviser, in the 100 best based on certain
qualitative and quantitative criteria.
-EVERGREEN VA GROWTH AND INCOME FUND
Investment Objective: Seeks to achieve a return composed of capital
appreciation in the value of its shares and current income. The Fund will
attempt to meet its objective by investing primarily in common stock and
securities convertible into or exchangeable for common stock of companies
which are undervalued in the market place relative to those companies'
assets, breakup value, earnings, or potential growth earnings. These
44
46 of 109
<PAGE> 47
companies are often found among those which have had a record of financial
success but are currently in disfavor in the market place for reasons the
Adviser perceives as temporary or erroneous. The Fund may invest up to 25% of
its assets in foreign securities, as well as invest up to 5% of its total
assets in debt securities which are rated below investment grade, commonly
known as "junk bonds." There can be no assurance that the Fund's investment
objective will be achieved.
-EVERGREEN VA SMALL CAP EQUITY INCOME FUND
Investment Objective: Seeks to maximize the total return on its portfolio of
investments by investing in common and preferred stocks, securities
convertible into or exchangeable for common stocks and fixed income
securities. In attempting to achieve its objective, the Fund invests
primarily in companies with total market capitalization of less than $500
million.
-EVERGREEN VA STRATEGIC INCOME FUND
Investment Objective: Seeks high current income from interest on debt
securities and secondarily, considers potential for growth of capital in
selecting securities.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
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 life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
-VIP HIGH INCOME PORTFOLIO
Investment Objective: High level of current income by investing primarily in
high-risk, lower-rated, high-yielding, fixed-income securities, while also
considering growth of capital. FMR will seek high current income normally by
investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred stocks,
including convertible securities
- up to 20% in common stocks and other equity securities when consistent
with the Portfolio's primary objective or acquired as part of a unit
combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's Investor Services, Inc. ("Moody's"); BB or lower by Standard &
Poor's and may be deemed to be of a speculative nature. The Portfolio may
also purchase lower-quality bonds such as those rated Ca3 by Moody's or C- by
Standard & Poor's which provide poor protection for payment of principal and
interest (commonly referred to as "junk bonds"). For a further discussion of
lower-rated securities, please see the "Risks of Lower-Rated Debt Securities"
section of the Portfolio's prospectus.
-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.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
-VIP II ASSET MANAGER PORTFOLIO
Investment Objective: High total return with reduced risk over the long-term
by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed income instruments.
45
47 of 109
<PAGE> 48
-VIP II CONTRAFUND PORTFOLIO
Investment Objective: Capital appreciation by investing primarily in
companies that the FMR believes to be undervalued due to an overly
pessimistic appraisal by the public. This strategy can lead to investments in
domestic or foreign companies, small and large, many of which may not be well
known. The Portfolio primarily invests in common stock and securities
convertible into common stock, but it has the flexibility to invest in any
type of security that may produce capital appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and its portfolios.
-VIP III GROWTH OPPORTUNITIES PORTFOLIO
Investment Objective: Capital growth by investing primarily in common stocks
and securities convertible into common stocks. The Portfolio, under normal
conditions, will invest at least 65% of its total assets in securities of
companies that FMR believes have long-term growth potential. Although the
Portfolio invests primarily in common stock and securities convertible into
common stock, it has the ability to purchase other securities, such as
preferred stock and bonds, that may produce capital growth. The Portfolio may
invest in foreign securities without limitation.
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 funds listed below, each with its own investment objectives. Shares of
NSAT will be sold primarily to life insurance company separate accounts to fund
the benefits under variable life insurance policies and variable annuity
contracts issued by life insurance companies. The assets of NSAT are managed by
Nationwide Advisory Services, Inc. ("NAS"), a wholly-owned subsidiary of
Nationwide Life Insurance Company.
-NSAT-GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of securities
issued or backed by the U.S. Government, its agencies or instrumentalities.
-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.
46
48 of 109
<PAGE> 49
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY NATIONWIDE LIFE INSURANCE COMPANY THROUGH ITS
NATIONWIDE VARIABLE ACCOUNT-6
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 1999. The
prospectus may be obtained from Nationwide Life Insurance Company by writing P.
O. Box 182008, Columbus, Ohio 43218-2008, or calling 1-800-240-5054, TDD
1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.......................................................................................1
Services..............................................................................................................1
Purchase of Securities Being Offered..................................................................................1
Underwriters..........................................................................................................2
Calculation of Performance............................................................................................2
Annuity Payments......................................................................................................3
Financial Statements..................................................................................................4
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide Variable Account-6 is a separate investment account of Nationwide
Life Insurance Company ("Nationwide"). 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 Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise
is one of America's largest insurance and financial services family of
companies, with combined assets of over $98.28 billion as of December 31, 1998.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each contract owner and records
with respect to the contract value of each contract.
Nationwide is the Custodian of the assets of the variable account. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds.
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").
When a contract described in the prospectus is exchanged for another contract
issued by Nationwide or any of its affiliated insurance companies of the type
and class which Nationwide determines is eligible for such an exchange,
Nationwide may waive any remaining CDSC on the first contract. A CDSC may apply
to the contract received in the exchange.
1
49 of 109
<PAGE> 50
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"). One Nationwide Plaza, Columbus, Ohio 43215, an
affiliate of Nationwide. During the fiscal years ended 1998, 1997 and 1996, no
underwriting commissions have been paid by Nationwide to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1998, the
NSAT- Money Market Fund's seven-day current unit value yield was 3.42%. The
NSAT-Money Market Fund's seven-day effective yield is computed similarly but
includes the effect of assumed compounding on an annualized basis of the current
unit value yield quotations of the Fund. At December 31, 1998, the seven-day
effective yield was 3.47%.
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
Fund's portfolio, portfolio quality and average maturity, changes in interest
rates, and the Fund's expenses. Although the NSAT-Money Market Fund determines
its yield on the basis of a seven calendar day period, it may use a different
time period on occasion. The yield quotes may reflect the expense limitation
described "Investment Manager and Other Services" in the NSAT-Money Market
Fund's Statement of Additional Information. There is no assurance that the
yields quoted on any given occasion will remain in effect for any period of time
and there is no guarantee that the net asset values will remain constant. It
should be noted that a contract owner's investment in the NSAT-Money Market Fund
is not guaranteed or insured. Yields of other money market funds may not be
comparable if a different base period or another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual return is found by taking a
hypothetical $1,000 investment in each of the sub-accounts' units on the first
day of the period at the offering price, which is the accumulation unit value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
return reflects the deduction of a maximum of a 1.40% mortality, expense risk
and administration charge. The redeemable value also reflects the effect of any
applicable 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 $25,000 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
$25,000 will be used because that figure more closely approximates the size of a
typical contract than does the $1,000 figure used in calculating the
standardized average annual total return quotations. The amount of the
hypothetical initial investment used affects performance because the contract
maintenance charge is fixed per contract charge.
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. Both
the standardized average annual return and 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 available in the variable account for standardized average annual
returns, or the date the underlying mutual fund has been in existence for
nonstandardized average annual total
2
50 of 109
<PAGE> 51
returns, if the mutual fund has not been available in the variable account or in
existence for one of the prescribed periods. Quotations of average annual total
return and total return are based upon historical earnings and will fluctuate.
Any quotation of performance, therefore, would not be considered 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
51 of 109
<PAGE> 52
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-6:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-6 as of December 31,
1998, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Variable
Account-6 as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for each of the years in the two year period
then ended in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
Evergreen - VA Aggressive Growth Fund (EvAggrGro)
297,616 shares (cost $3,279,057) ...................................... $ 4,038,647
Evergreen - VA Foundation Fund (EvFound)
4,779,242 shares (cost $62,546,690) ................................... 69,203,424
Evergreen - VA Fund (EvFund)
2,477,831 shares (cost $35,531,944) ................................... 37,935,587
Evergreen - VA Global Leaders Fund (EvGloLead)
750,959 shares (cost $8,596,500) ...................................... 9,582,231
Evergreen - VA Growth and Income Fund (EvGrInc)
3,573,059 shares (cost $51,423,943) ................................... 55,668,265
Evergreen - VA International Growth Fund (EvIntGr)
151,668 shares (cost $1,454,675) ...................................... 1,424,161
Evergreen - VA Small Cap Equity Income Fund (EvSmCapEI)
238,173 shares (cost $2,280,644) ...................................... 2,281,693
Evergreen - VA Strategic Income Fund (EvStratInc)
1,076,294 shares (cost $11,303,862) ................................... 11,182,696
Fidelity VIP - High Income Portfolio (FidVIPHI)
181,197 shares (cost $2,260,830) ...................................... 2,089,197
Fidelity VIP - Overseas Portfolio (FidVIPOv)
145,241 shares (cost $2,704,463) ...................................... 2,912,087
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
118,800 shares (cost $1,902,227) ...................................... 2,157,416
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
85,968 shares (cost $1,725,140) ....................................... 2,101,061
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
139,913 shares (cost $2,566,577) ...................................... 3,201,213
Nationwide SAT - Government Bond Fund (NSATGvtBd)
117,370 shares (cost $1,364,533) ...................................... 1,372,054
Nationwide SAT - Money Market Fund (NSATMyMkt)
5,321,979 shares (cost $5,321,979) .................................... 5,321,979
------------
Total assets ....................................................... 210,471,711
ACCOUNTS PAYABLE ............................................................... 2,822
------------
CONTRACT OWNERS' EQUITY ........................................................ $210,468,889
============
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(b)
-------- ---------- ---------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
Evergreen - VA Aggressive Growth Fund:
Tax qualified ................................. 68,030 $ 13.224364 $ 899,653 21 %
Non-tax qualified ............................. 134,748 13.224364 1,781,957 21 %
Initial Funding by Depositor (note 1a) ........ 100,000 13.570000 1,357,000 22 %
Evergreen - VA Foundation Fund:
Tax qualified ................................. 1,231,590 15.661734 19,288,835 9 %
Non-tax qualified ............................. 3,082,969 15.661734 48,284,640 9 %
Initial Funding by Depositor (note 1a) ........ 100,000 16.299610 1,629,961 11 %
Evergreen - VA Fund:
Tax qualified ................................. 611,181 16.112386 9,847,584 5 %
Non-tax qualified ............................. 1,639,136 16.112386 26,410,392 5 %
Initial Funding by Depositor (note 1a) ........ 100,000 16.768642 1,676,864 6 %
Evergreen - VA Global Leaders Fund:
Tax qualified ................................. 187,738 12.608870 2,367,164 17 %
Non-tax qualified ............................. 469,605 12.608870 5,921,188 17 %
Initial Funding by Depositor (note 1a) ........ 100,000 12.938210 1,293,821 19 %
Evergreen - VA Growth and Income Fund:
Tax qualified ................................. 893,262 16.130864 14,409,088 3 %
Non-tax qualified ............................. 2,453,682 16.130864 39,580,011 3 %
Initial Funding by Depositor (note 1a) ........ 100,000 16.787932 1,678,793 5 %
Evergreen - VA International Growth Fund:
Tax qualified ................................. 15,381 9.340809 143,671 (7)%(a)
Non-tax qualified ............................. 36,559 9.340809 341,491 (7)%(a)
Initial Funding by Depositor (note 1a) ........ 100,000 9.390000 939,000 (6)%(a)
Evergreen - VA Small Cap Equity Income:
Tax qualified ................................. 30,706 9.623143 295,488 (4)%(a)
Non-tax qualified ............................. 105,451 9.623143 1,014,770 (4)%(a)
Initial Funding by Depositor (note 1a) ........ 100,000 9.714315 971,432 (3)%(a)
Evergreen - VA Strategic Income Fund:
Tax qualified ................................. 294,309 10.866478 3,198,102 4 %
Non-tax qualified ............................. 632,171 10.866478 6,869,472 4 %
Initial Funding by Depositor (note 1a) ........ 100,000 11.150478 1,115,048 6 %
Fidelity VIP - High Income Portfolio:
Tax qualified ................................. 36,899 11.837723 436,800 (6)%
Non-tax qualified ............................. 139,559 11.837723 1,652,061 (6)%
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................. 34,092 13.323057 454,210 11 %
Non-tax qualified ............................. 184,444 13.323057 2,457,358 11 %
</TABLE>
(Continued)
<PAGE> 4
<TABLE>
ANNUAL
UNITS UNIT VALUE RETURN(b)
-------- ---------- ---------
<S> <C> <C> <C> <C>
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ................................. 35,587 14.983855 533,230 13 %
Non-tax qualified ............................. 108,376 14.983855 1,623,890 13 %
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ................................. 17,867 15.176535 271,159 28 %
Non-tax qualified ............................. 120,560 15.176535 1,829,683 28 %
Fidelity VIP-III - Growth Opportunities Portfolio:
Tax qualified ................................. 38,197 14.985852 572,415 23 %
Non-tax qualified ............................. 175,401 14.985852 2,628,533 23 %
Nationwide SAT - Government Bond Fund:
Tax qualified ................................. 9,045 11.981662 108,374 7 %
Non-tax qualified ............................. 105,464 11.981662 1,263,634 7 %
Nationwide SAT - Money Market Fund:
Tax qualified ................................. 189,512 11.097664 2,103,140 4 %
Non-tax qualified ............................. 290,059 11.097664 3,218,977 4 %
========= ======== --------------
$ 210,468,889
=============
</TABLE>
(a) This investment option was not being utilized for the entire period.
Accordingly, the annual return was computed for such period as the
investment option was utilized.
(b) The annual return does not include contract charges satisfied by
surrendering units.
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
TOTAL EvAggrGro
------------------------------- ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... $ 2,674,845 921,552 -- --
Mortality, expense and administration
charges (note 2) ............................ (2,047,220) (718,940) (23,680) (2,625)
------------- ------------- ------------- -------------
Net investment activity ..................... 627,625 202,612 (23,680) (2,625)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 18,362,960 5,439,115 661,548 146,318
Cost of mutual fund shares sold ............... (15,304,263) (5,092,331) (637,865) (130,185)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 3,058,697 346,784 23,683 16,133
Change in unrealized gain (loss) on investments 1,749,886 10,826,924 663,791 95,799
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 4,808,583 11,173,708 687,474 111,932
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 3,792,356 2,934,325 -- --
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 9,228,564 14,310,645 663,794 109,307
------------- ------------- ------------- -------------
Equity transactions:
Purchase payments received from
contract owners ............................. 120,644,969 40,652,403 1,604,948 1,713,176
Transfers between funds ....................... -- -- (22,143) 49,795
Redemptions ................................... (9,976,873) (1,288,100) (76,952) (2,987)
Contingent deferred sales charges (note 2) .... (221,448) (22,638) (169) --
Adjustments to maintain reserves .............. (2,045) (59,518) (30) (129)
------------- ------------- ------------- -------------
Net equity transactions ................... 110,444,603 39,282,147 1,505,654 1,759,855
------------- ------------- ------------- -------------
Net change in contract owners' equity ......... 119,673,167 53,592,792 2,169,448 1,869,162
Contract owners' equity beginning of period ... 90,795,722 37,202,930 1,869,162 --
------------- ------------- ------------- -------------
Contract owners' equity end of period ......... $ 210,468,889 90,795,722 4,038,610 1,869,162
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
EvFound EvFund
-------------------------------- -------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... 1,205,584 432,577 -- 52,250
Mortality, expense and administration
charges (note 2) ............................ (683,822) (240,775) (374,658) (134,972)
------------- ------------- ------------- -------------
Net investment activity ..................... 521,762 191,802 (374,658) (82,722)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 2,201,565 454,441 3,741,560 386,577
Cost of mutual fund shares sold ............... (1,554,017) (345,923) (2,464,952) (280,189)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 647,548 108,518 1,276,608 106,388
Change in unrealized gain (loss) on investments 1,967,032 3,160,540 (993,694) 2,689,609
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 2,614,580 3,269,058 282,914 2,795,997
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 1,011,705 1,140,621 1,170,913 707,913
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 4,148,047 4,601,481 1,079,169 3,421,188
------------- ------------- ------------- -------------
Equity transactions:
Purchase payments received from
contract owners ............................. 40,873,811 9,758,419 21,624,968 6,120,181
Transfers between funds ....................... (345,390) 435,226 (264,570) 677,468
Redemptions ................................... (3,807,693) (349,437) (1,784,878) (170,640)
Contingent deferred sales charges (note 2) .... (78,359) (5,566) (36,780) (3,401)
Adjustments to maintain reserves .............. 3 (20,320) (385) (11,406)
------------- ------------- ------------- -------------
Net equity transactions ................... 36,642,372 9,818,322 19,538,355 6,612,202
------------- ------------- ------------- -------------
Net change in contract owners' equity ......... 40,790,419 14,419,803 20,617,524 10,033,390
Contract owners' equity beginning of period ... 28,413,017 13,993,214 17,317,316 7,283,926
------------- ------------- ------------- -------------
Contract owners' equity end of period ......... 69,203,436 28,413,017 37,934,840 17,317,316
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
EvGloLead EvGrinc
--------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... $ 53,046 13,693 445,613 107,784
Mortality, expense and administration
charges (note 2) ............................ (70,467) (6,316) (589,626) (215,211)
----------- ----------- ----------- -----------
Net investment activity ..................... (17,421) 7,377 (144,013) (107,427)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 333,363 94,457 2,532,809 260,180
Cost of mutual fund shares sold ............... (320,068) (83,425) (1,711,193) (200,097)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 13,295 11,032 821,616 60,083
Change in unrealized gain (loss) on investments 937,511 48,221 (1,097,281) 4,175,082
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 950,806 59,253 (275,665) 4,235,165
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- 6,846 1,025,093 851,646
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 933,385 73,476 605,415 4,979,384
----------- ----------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ............................. 5,846,998 2,688,641 31,886,459 10,489,601
Transfers between funds ....................... 106,880 142,364 (880,523) 774,340
Redemptions ................................... (202,140) (5,540) (2,663,166) (301,923)
Contingent deferred sales charges (note 2) .... (1,289) -- (59,682) (6,093)
Adjustments to maintain reserves .............. (281) (321) 243 (18,127)
----------- ----------- ----------- -----------
Net equity transactions ................... 5,750,168 2,825,144 28,283,331 10,937,798
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 6,683,553 2,898,620 28,888,746 15,917,182
Contract owners' equity beginning of period ... 2,898,620 -- 26,779,146 10,861,964
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... $ 9,582,173 2,898,620 55,667,892 26,779,146
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
EvIntGr EvSmCapEI
-------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... -- -- 26,284 --
Mortality, expense and administration
charges (note 2) ............................ (1,172) -- (6,043) --
----------- ----------- ----------- -----------
Net investment activity ..................... (1,172) -- 20,241 --
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 25,398 -- 61,160 --
Cost of mutual fund shares sold ............... (28,372) -- (66,317) --
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (2,974) -- (5,157) --
Change in unrealized gain (loss) on investments (30,514) -- 1,048 --
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (33,488) -- (4,109) --
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- 2,958 --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (34,660) -- 19,090 --
----------- ----------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ............................. 1,349,323 -- 2,256,250 --
Transfers between funds ....................... 109,498 -- 9,853 --
Redemptions ................................... -- -- (3,501) --
Contingent deferred sales charges (note 2) .... -- -- -- --
Adjustments to maintain reserves .............. 1 -- (2) --
----------- ----------- ----------- -----------
Net equity transactions ................... 1,458,822 -- 2,262,600 --
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 1,424,162 -- 2,281,690 --
Contract owners' equity beginning of period ... -- -- -- --
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... 1,424,162 -- 2,281,690 --
=========== =========== =========== ===========
</TABLE>
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
EvStratInc FidVIPHI
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... $ 421,087 58,403 166,235 81,089
Mortality, expense and administration
charges (note 2) ............................ (81,408) (3,818) (31,839) (21,420)
------------ ------------ ------------ ------------
Net investment activity ..................... 339,679 54,585 134,396 59,669
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 1,064,321 27,364 637,651 135,073
Cost of mutual fund shares sold ............... (1,035,887) (26,954) (608,365) (123,630)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 28,434 410 29,286 11,443
Change in unrealized gain (loss) on investments (130,808) 9,641 (397,432) 169,861
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (102,374) 10,051 (368,146) 181,304
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- 3,203 105,628 10,022
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 237,305 67,839 (128,122) 250,995
------------ ------------ ------------ ------------
Equity transactions:
Purchase payments received from
contract owners ............................. 8,368,709 2,031,686 560,932 793,624
Transfers between funds ....................... 625,598 110,007 (309,711) (67,359)
Redemptions ................................... (250,007) (4,481) (93,106) (37,261)
Contingent deferred sales charges (note 2) .... (3,783) -- (1,478) (1,077)
Adjustments to maintain reserves .............. (75) (176) (365) (1,783)
------------ ------------ ------------ ------------
Net equity transactions ................... 8,740,442 2,137,036 156,272 686,144
------------ ------------ ------------ ------------
Net change in contract owners' equity ......... 8,977,747 2,204,875 28,150 937,139
Contract owners' equity beginning of period ... 2,204,875 -- 2,060,711 1,123,572
------------ ------------ ------------ ------------
Contract owners' equity end of period ......... 11,182,622 2,204,875 2,088,861 2,060,711
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidVIPOv FidVIPAM
----------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... 51,626 25,789 60,892 44,528
Mortality, expense and administration
charges (note 2) ............................ (40,291) (28,305) (28,570) (21,642)
------------ ------------ ------------ ------------
Net investment activity ..................... 11,335 (2,516) 32,322 22,886
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 298,379 134,986 180,711 183,404
Cost of mutual fund shares sold ............... (271,550) (125,100) (165,427) (168,748)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 26,829 9,886 15,284 14,656
Change in unrealized gain (loss) on investments 100,727 32,191 24,653 135,695
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 127,556 42,077 39,937 150,351
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 152,162 102,376 182,677 111,698
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 291,053 141,937 254,936 284,935
------------ ------------ ------------ ------------
Equity transactions:
Purchase payments received from
contract owners ............................. 146,809 1,095,522 157,578 457,162
Transfers between funds ....................... (96,968) 154,310 (49,668) (24,319)
Redemptions ................................... (88,116) (55,512) (91,144) (47,012)
Contingent deferred sales charges (note 2) .... (1,809) (1,667) (1,133) (1,956)
Adjustments to maintain reserves .............. (595) (2,173) (287) (1,822)
------------ ------------ ------------ ------------
Net equity transactions ................... (40,679) 1,190,480 15,346 382,053
------------ ------------ ------------ ------------
Net change in contract owners' equity ......... 250,374 1,332,417 270,282 666,988
Contract owners' equity beginning of period ... 2,661,194 1,328,777 1,886,838 1,219,850
------------ ------------ ------------ ------------
Contract owners' equity end of period ......... 2,911,568 2,661,194 2,157,120 1,886,838
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Fid VIPCon FidVIPGrOp
---------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... $ 9,259 -- 19,139 --
Mortality, expense and administration
charges (note 2) ............................ (23,433) (7,563) (33,857) (9,859)
----------- ----------- ----------- -----------
Net investment activity ..................... (14,174) (7,563) (14,718) (9,859)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 486,379 43,360 264,446 8,378
Cost of mutual fund shares sold ............... (386,936) (41,279) (195,987) (7,246)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 99,443 2,081 68,459 1,132
Change in unrealized gain (loss) on investments 269,080 106,841 433,931 200,704
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 368,523 108,922 502,390 201,836
----------- ----------- ----------- -----------
Reinvested capital gains ...................... 68,120 -- 66,530 --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 422,469 101,359 554,202 191,977
----------- ----------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ............................. 337,230 833,310 861,311 1,126,943
Transfers between funds ....................... 179,052 278,193 389,976 202,051
Redemptions ................................... (30,229) (19,227) (109,496) (10,326)
Contingent deferred sales charges (note 2) .... (490) -- (4,526) --
Adjustments to maintain reserves .............. (214) (611) (349) (815)
----------- ----------- ----------- -----------
Net equity transactions ................... 485,349 1,091,665 1,136,916 1,317,853
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 907,818 1,193,024 1,691,118 1,509,830
Contract owners' equity beginning of period ... 1,193,024 -- 1,509,830 --
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... $ 2,100,842 1,193,024 3,200,948 1,509,830
=========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
NSATGvtBd NSATMyMkt
---------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... 43,647 14,524 172,433 90,915
Mortality, expense and administration
charges (note 2) ............................ (10,720) (3,173) (47,634) (23,261)
----------- ----------- ----------- -----------
Net investment activity ..................... 32,927 11,351 124,799 67,654
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 315,041 167,781 5,558,629 3,396,796
Cost of mutual fund shares sold ............... (298,698) (162,759) (5,558,629) (3,396,796)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 16,343 5,022 -- --
Change in unrealized gain (loss) on investments 1,842 2,740 -- --
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 18,185 7,762 -- --
----------- ----------- ----------- -----------
Reinvested capital gains ...................... 6,570 -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 57,682 19,113 124,799 67,654
----------- ----------- ----------- -----------
Equity transactions:
Purchase payments received from
contract owners ............................. 67,906 151,591 4,701,737 3,392,547
Transfers between funds ....................... 995,059 (1,011) (446,943) (2,731,065)
Redemptions ................................... (37,892) (95,353) (738,553) (188,401)
Contingent deferred sales charges (note 2) .... (1,011) (176) (30,939) (2,702)
Adjustments to maintain reserves .............. (50) (264) 341 (1,571)
----------- ----------- ----------- -----------
Net equity transactions ................... 1,024,012 54,787 3,485,643 468,808
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 1,081,694 73,900 3,610,442 536,462
Contract owners' equity beginning of period ... 290,314 216,414 1,711,675 1,175,213
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... 1,372,008 290,314 5,322,117 1,711,675
=========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT-6
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide Variable Account-6 (the Account) was established pursuant to
a resolution of the Board of Directors of Nationwide Life Insurance
Company (the Company) on February 2, 1994. The Account has been
registered as a unit investment trust under the Investment Company Act
of 1940.
On February 28, 1996, the Company (Depositor) transferred to the
Account, 100,000 shares of the Evergreen - VA Foundation Fund, 100,000
shares of the Evergreen - VA Fund and 100,000 shares of the Evergreen -
VA Growth and Income Fund, for which the Account was credited with
100,000 units of each of the foregoing Evergreen Funds. These amounts
represent the initial funding of the Account. The value of the units
purchased by the Company on February 28, 1996 was $3,000,000.
On March 3, 1997, the Company (Depositor) transferred to the Account,
100,000 shares of the Evergreen - VA Aggressive Growth Fund, 100,000
shares of the Evergreen - VA Global Leaders Fund and 100,000 shares of
the Evergreen - VA Strategic Income Fund, for which the Account was
credited with 100,000 units of each of the foregoing Evergreen Funds.
The value of the units purchased by the Company on March 3, 1997 was
$3,000,000.
On May 1, 1998, the Company (Depositor) transferred to the Account,
100,000 shares of the Evergreen - VA Small Cap Equity Income Fund, for
which the Account was credited with 100,000 units of the foregoing
Evergreen Fund. The value of the units purchased by the Company on May
1, 1998 was $1,000,000.
On August 17, 1998, the Company (Depositor) transferred to the Account,
100,000 shares of the Evergreen - International Growth Fund, for which
the Account was credited with 100,000 units of the foregoing Evergreen
Fund. The value of the units purchased by the Company on August 17,
1998 was $1,000,000.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts through the Account. The primary
distribution for the contracts is through banks and other financial
institutions.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase.
See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in any of the following funds:
Funds of the Evergreen Variable Trust (Evergreen);
Evergreen - VA Aggressive Growth Fund (EvAggrGro)
Evergreen - VA Foundation Fund (EvFound)
Evergreen - VA Fund (EvFund)
Evergreen - VA Global Leaders Fund (EvGloLead)
Evergreen - VA Growth and Income Fund (EvGrInc)
Evergreen - VA International Growth Fund (EvIntGr)
Evergreen - VA Small Cap Equity Income Fund (EvSmCapEI)
Evergreen - VA Strategic Income Fund (EvStratInc)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
<PAGE> 10
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
At December 31, 1998, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1998. The cost of investments
sold is determined on the 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 Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge not to exceed 7% of the lesser of purchase payments or the amount
surrendered, such charge declining 1% per year, to 0%, after the purchase
payment has been held in the contract for 84 months. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The following contract charges are deducted by the Company: 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 0.15%, respectively. No charges are deducted from the initial
funding by the Depositor, or from earnings thereon.
<PAGE> 11
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 53
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars, except per share amounts)
December 31,
-----------------------
Assets 1998 1997
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $14,245.1 $13,204.1
Equity securities 127.2 80.4
Mortgage loans on real estate, net 5,328.4 5,181.6
Real estate, net 243.6 311.4
Policy loans 464.3 415.3
Other long-term investments 44.0 25.2
Short-term investments 289.1 358.4
--------- ---------
20,741.7 19,576.4
--------- ---------
Cash 3.4 175.6
Accrued investment income 218.7 210.5
Deferred policy acquisition costs 2,022.2 1,665.4
Other assets 420.3 438.4
Assets held in separate accounts 50,935.8 37,724.4
--------- ---------
$74,342.1 $59,790.7
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $19,767.1 $18,702.8
Other liabilities 866.1 885.6
Liabilities related to separate accounts 50,935.8 37,724.4
--------- ---------
71,569.0 57,312.8
--------- ---------
Commitments and contingencies (notes 7 and 12)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 914.7
Retained earnings 1,579.0 1,312.3
Accumulated other comprehensive income 275.6 247.1
--------- ---------
2,773.1 2,477.9
--------- ---------
$74,342.1 $59,790.7
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
Years ended December 31,
-----------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Policy charges $ 698.9 $ 545.2 $ 400.9
Life insurance premiums 200.0 205.4 198.6
Net investment income 1,481.6 1,409.2 1,357.8
Realized gains (losses) on investments 28.4 11.1 (0.3)
Other 66.8 46.5 35.9
-------- -------- --------
2,475.7 2,217.4 1,992.9
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Other benefits and claims 175.8 178.2 178.3
Policyholder dividends on participating policies 39.6 40.6 41.0
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Other operating expenses 419.7 384.9 342.4
-------- -------- --------
1,918.6 1,787.5 1,677.4
-------- -------- --------
Income from continuing operations before federal income tax expense 557.1 429.9 315.5
Federal income tax expense 190.4 150.2 110.9
-------- -------- --------
Income from continuing operations 366.7 279.7 204.6
Income from discontinued operations (less federal income tax expense
of $4.5 in 1996) -- -- 11.3
-------- -------- --------
Net income $ 366.7 $ 279.7 $ 215.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
(in millions of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 3.8 $ 657.2 $1,583.2 $ 384.3 $2,628.5
Comprehensive income:
Net income -- -- 215.9 -- 215.9
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (170.9) (170.9)
--------
Total comprehensive income 45.0
--------
Dividends to shareholder -- (129.3) (366.5) (39.8) (535.6)
------ ------- -------- ------- --------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ ------- -------- ------- --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ ------- -------- ------- --------
December 31, 1998 $ 3.8 $ 914.7 $1,579.0 $ 275.6 $2,773.1
====== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 366.7 $ 279.7 $ 215.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Capitalization of deferred policy acquisition costs (584.2) (487.9) (422.6)
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Amortization and depreciation (8.5) (2.0) 7.0
Realized gains on invested assets, net (28.4) (11.1) (0.3)
(Increase) decrease in accrued investment income (8.2) (0.3) 2.8
(Increase) decrease in other assets 16.4 (12.7) (38.9)
Decrease in policy liabilities (8.3) (23.1) (151.0)
(Decrease) increase in other liabilities (34.8) 230.6 191.4
Other, net (11.3) (10.9) (61.7)
--------- --------- ---------
Net cash provided by operating activities 982.9 1,146.1 858.3
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,557.0 993.4 1,162.8
Proceeds from sale of securities available-for-sale 610.5 574.5 299.6
Proceeds from repayments of mortgage loans on real estate 678.2 437.3 309.0
Proceeds from sale of real estate 103.8 34.8 18.5
Proceeds from repayments of policy loans and sale of other invested assets 23.6 22.7 22.8
Cost of securities available-for-sale acquired (3,182.8) (2,828.1) (1,573.6)
Cost of mortgage loans on real estate acquired (829.1) (752.2) (972.8)
Cost of real estate acquired (0.8) (24.9) (7.9)
Policy loans issued and other invested assets acquired (88.4) (62.5) (57.7)
Short-term investments, net 69.3 (354.8) 28.0
--------- --------- ---------
Net cash used in investing activities (1,058.7) (1,959.8) (771.3)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- 836.8 --
Cash dividends paid (100.0) -- (50.0)
Increase in investment product and universal life insurance
product account balances 2,682.1 2,488.5 1,781.8
Decrease in investment product and universal life insurance
product account balances (2,678.5) (2,379.8) (1,784.5)
--------- --------- ---------
Net cash (used in) provided by financing activities (96.4) 945.5 (52.7)
--------- --------- ---------
Net (decrease) increase in cash (172.2) 131.8 34.3
Cash, beginning of year 175.6 43.8 9.5
--------- --------- ---------
Cash, end of year $ 3.4 $ 175.6 $ 43.8
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Organization and Description of Business
----------------------------------------
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11,
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 10 and 14. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of 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 consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are 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.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated 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 consolidated 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) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Operations that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "Income from discontinued operations" in
the accompanying consolidated statements of income. All
significant intercompany balances and transactions have been
eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1998 or 1997.
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. Other long-term investments are carried on
the equity basis, adjusted for 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.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
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 whole life insurance,
limited-payment life insurance, term life insurance and 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.
(d) 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. For traditional life insurance
products, these deferred policy acquisition costs are
predominantly being amortized with interest over the premium
paying period of the related policies in proportion to the ratio
of actual annual premium revenue to the anticipated total premium
revenue. Such anticipated premium revenue was estimated using the
same assumptions as were used for computing liabilities for future
policy benefits. 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(b).
(e) Separate Accounts
-----------------
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $743.9 million of separate
account assets, 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 consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) 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 6.0%, 6.1% and 6.3% for the years ended
December 31, 1998, 1997 and 1996, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 40% in 1998 (50%
in 1997 and 52% in 1996) of the Company's life insurance in force,
74% in 1998 (77% in 1997 and 78% in 1996) of the number of life
insurance policies in force, and 14% in 1998 (27% in 1997 and 40%
in 1996) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
------------------
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement 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.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 10 and 14.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(j) Recently Issued Accounting Pronouncements
-----------------------------------------
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 13.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Statement does not change
the measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(k) Reclassification
----------------
Certain items in the 1997 and 1996 consolidated financial
statements have been reclassified to conform to the 1998
presentation.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated 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, 1998 and
1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
------------------------ ---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------ ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------ ---------
$13,831.7 $563.2 $(22.6) $14,372.3
========= ====== ====== =========
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ -- $ 313.7
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
--------- ------ ------ ---------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
--------- ------ ------ ---------
$12,800.7 $498.3 $(14.5) $13,284.5
========= ====== ====== =========
</TABLE>
As of December 31, 1998 the Company had entered into S&P 500 futures
contracts with a notional amount of $20.0 million to reduce the risk of
changes in the fair market value of certain investments classified as
equity securities. These contracts had an unrealized loss of $1.3
million as of December 31, 1998 which is included in the recorded
amount of the equity securities and in accumulated other comprehensive
income, net of tax, similar to other unrealized gains and losses on
securities available-for-sale.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 2,019.9 $ 2,048.0
Due after one year through five years 8,169.1 8,470.6
Due after five years through ten years 2,795.0 2,927.7
Due after ten years 737.3 798.8
--------- ---------
$13,721.3 $14,245.1
========= =========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 540.6 $ 483.8
Adjustment to deferred policy acquisition costs (116.6) (103.7)
Deferred federal income tax (148.4) (133.0)
------- -------
$ 275.6 $ 247.1
======= =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $52.6 $137.5 $(289.2)
Equity securities 4.2 (2.7) 8.9
----- ------ -------
$56.8 $134.8 $(280.3)
===== ====== =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $610.5 million, $574.5 million and $299.6 million,
respectively. During 1998, gross gains of $9.0 million ($9.9 million
and $6.6 million in 1997 and 1996, respectively) and gross losses of
$7.6 million ($18.0 million and $6.9 million in 1997 and 1996,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $3.7 million. No valuation
allowance has been recorded for these loans as of December 31, 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million which includes
$3.9 million of impaired mortgage loans on real estate for which the
related valuation allowance was $0.1 million and $16.0 million of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 1998, the average recorded investment in impaired
mortgage loans on real estate was approximately $9.1 million ($31.8
million in 1997) and interest income recognized on those loans was $0.3
million ($1.0 million in 1997), which is equal to interest income
recognized using a cash-basis method of income recognition.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $42.5 $51.0
Reductions credited to operations (0.1) (1.2)
Direct write-downs charged against the allowance -- (7.3)
----- -----
Allowance, end of year $42.4 $42.5
===== =====
</TABLE>
Real estate is presented at cost less accumulated depreciation of $21.5
million as of December 31, 1998 ($45.1 million as of December 31, 1997)
and valuation allowances of $5.4 million as of December 31, 1998 ($11.1
million as of December 31, 1997).
Investments that were non-income producing for the twelve month period
preceding December 31, 1998 amounted to $42.4 million ($19.4 million
for 1997) and consisted of $32.7 million ($3.0 million in 1997) in
securities available-for-sale and $9.7 million ($16.4 million in 1997)
in real estate.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 982.5 $ 911.6 $ 917.1
Equity securities 0.8 0.8 1.3
Mortgage loans on real estate 458.9 457.7 432.8
Real estate 40.4 42.9 44.3
Short-term investments 17.8 22.7 4.2
Other 30.7 21.0 4.0
-------- -------- --------
Total investment income 1,531.1 1,456.7 1,403.7
Less investment expenses 49.5 47.5 45.9
-------- -------- --------
Net investment income $1,481.6 $1,409.2 $1,357.8
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(0.7) $ 3.6 $(3.5)
Equity securities 2.1 2.7 3.2
Mortgage loans on real estate 3.9 1.6 (4.1)
Real estate and other 23.1 3.2 4.1
----- ----- -----
$28.4 $11.1 $(0.3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $6.5 million and
$6.2 million as of December 31, 1998 and 1997, respectively, were on
deposit with various regulatory agencies as required by law.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) Federal Income Tax
------------------
The Company's current federal income tax liability was $72.8 million
and $60.1 million as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $207.7 $200.1
Liabilities in Separate Accounts 319.9 242.0
Mortgage loans on real estate and real estate 17.5 19.0
Other assets and other liabilities 58.9 59.2
------ ------
Total gross deferred tax assets 604.0 520.3
Less valuation allowance (7.0) (7.0)
------ ------
Net deferred tax assets 597.0 513.3
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 568.7 480.5
Fixed maturity securities 212.2 193.3
Deferred tax on realized investment gains 34.8 40.1
Equity securities and other long-term investments 9.6 7.5
Other 21.6 22.2
------ ------
Total gross deferred tax liabilities 846.9 743.6
------ ------
Net deferred tax liability $249.9 $230.3
====== ======
</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. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1998, 1997 and 1996.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $186.1 $121.7 $116.5
Deferred tax expense (benefit) 4.3 28.5 (5.6)
------ ------ ------
$190.4 $150.2 $110.9
====== ====== ======
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(in millions of dollars) Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $195.0 35.0 $150.5 35.0 $110.4 35.0
Tax exempt interest and dividends
received deduction (4.9) (0.9) - 0.0 (0.2) (0.1)
Other, net 0.3 0.1 (0.3) (0.1) 0.7 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $190.4 34.2 $150.2 34.9 $110.9 35.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $173.4 million, $91.8 million and
$115.8 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
(5) Comprehensive Income
--------------------
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Gross $ 58.2 $141.1 $(272.4)
Adjustment to deferred policy acquisition costs (12.9) (21.8) 57.0
Related federal income tax (expense) benefit (15.9) (41.7) 44.0
------ ------ ------
Net 29.4 77.6 (171.4)
------ ------ ------
Reclassification adjustment for net (gains) losses
on securities available-for-sale realized
during the period:
Gross (1.4) (6.3) 0.7
Related federal income tax expense (benefit) 0.5 2.2 (0.2)
------ ------ -------
Net (0.9) (4.1) 0.5
------ ------ -------
Total Other Comprehensive Income $ 28.5 $ 73.5 $(170.9)
====== ====== =======
</TABLE>
(6) Fair Value of Financial Instruments
-----------------------------------
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for
equity securities exclude the fair value of futures contracts
designated as hedges of equity securities.
Mortgage loans on real estate, net: 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 mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated 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.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which 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 7.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $14,245.1 $14,245.1 $13,204.1 $13,204.1
Equity securities 128.5 128.5 80.4 80.4
Mortgage loans on real estate, net 5,328.4 5,527.6 5,181.6 5,509.7
Policy loans 464.3 464.3 415.3 415.3
Short-term investments 289.1 289.1 358.4 358.4
Cash 3.4 3.4 175.6 175.6
Assets held in separate accounts 50,935.8 50,935.8 37,724.4 37,724.4
Liabilities:
Investment contracts 15,468.7 15,158.6 14,708.2 14,322.1
Policy reserves on life insurance contracts 3,914.0 3,768.9 3,345.4 3,182.4
Liabilities related to separate accounts 50,935.8 49,926.5 37,724.4 36,747.0
Futures contracts 1.3 1.3 -- --
</TABLE>
(7) Risk Disclosures
----------------
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and 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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $156.0 million
extending into 1999 were outstanding as of December 31, 1998. The
Company also had $40.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1998.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (20% in 1997) in any geographic area and no more than 2% (2%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998, 42% (46% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $187.9 million and $220.2 million as of December 31,
1998 and 1997, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(8) Pension Plan and Postretirement Benefits Other Than Pensions
------------------------------------------------------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $2.0 million, $7.5 million
and $7.4 million, respectively. The Company has recorded a prepaid
pension asset of $5.0 million as of December 31, 1998 and no prepaid or
accrued pension asset or expense as of December 31, 1997.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1998 and 1997 was $40.1 million and $36.5 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1998, 1997 and
1996 was $4.1 million, $3.0 million and $3.3 million, respectively.
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------- -----------------------
(in millions of dollars) 1998 1997 1998 1997
--------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,033.8 $1,847.8 $237.9 $ 200.7
Service cost 87.6 77.3 9.8 7.0
Interest cost 123.4 118.6 15.4 14.0
Actuarial loss 123.2 60.0 15.6 24.4
Plan curtailment in 1998/merger in 1997 (107.2) 1.5 - -
Benefits paid (75.8) (71.4) (8.6) (8.2)
-------- -------- ------- -------
Benefit obligation at end of year 2,185.0 2,033.8 270.1 237.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212.9 1,947.9 69.2 63.0
Actual return on plan assets 300.7 328.1 5.0 3.6
Employer contribution 104.1 7.2 12.1 10.6
Plan merger - 1.1 - -
Benefits paid (75.8) (71.4) (8.4) (8.0)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,541.9 2,212.9 77.9 69.2
-------- -------- ------- -------
Funded status 356.9 179.1 (192.2) (168.7)
Unrecognized prior service cost 31.5 34.7 - -
Unrecognized net (gains) losses (345.7) (330.7) 16.0 1.6
Unrecognized net (asset) obligation at transition (11.0) 33.3 1.3 1.5
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 31.7 $ (83.6) $(174.9) $(165.6)
======== ======== ======= =======
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
-------------------- -----------------------
1998 1997 1998 1997
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
-------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
Service cost (benefits earned during the period) $ 87.6 $ 77.3 $ 75.5
Interest cost on projected benefit obligation 123.4 118.6 105.5
Expected return on plan assets (159.0) (139.0) (116.1)
Recognized gains (3.8) - -
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation 4.2 4.2 4.1
------- ------- -------
$ 55.6 $ 64.3 $ 72.2
======= ======= =======
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67.1
million resulted (consisting of a $107.2 million reduction in the
projected benefit obligation, net of the write-off of the $40.1 million
remaining unamortized transition obligation related to WSC). The
Company anticipates that the plan will settle the obligation related to
WSC employees with a transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 9.8 $ 7.0 $ 6.5
Interest cost on accumulated postretirement benefit obligation 15.4 14.0 13.7
Actual return on plan assets (5.0) (3.6) (4.3)
Amortization of unrecognized transition obligation of affiliates 0.2 0.2 0.2
Net amortization and deferral 1.2 (0.5) 1.8
----- ----- -----
$21.6 $17.1 $17.9
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
----------------------------------------------------------------------
and Dividend Restrictions
-------------------------
Ohio, NLIC's and NLAIC'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. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1998, 1997
and 1996 was $1.32 billion, $1.13 billion and $1.00 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1998, 1997 and 1996 was $171.0 million, $111.7 million and
$73.2 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $71.0
million.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(10) Transactions With Affiliates
----------------------------
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $8.0
million, $8.4 million and $9.1 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $95.0 million, $85.8 million and $101.6
million in 1998, 1997 and 1996, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $31.9 million and $20.5 million as of
December 31, 1998 and 1997, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1998 and
1997 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW NMIC ELICW
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums $90.1 $106.3 $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other
revenue $11.1 $ 9.4 $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and expenses $98.8 $160.5 $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a 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 $248.4 million and $211.0 million as
of December 31, 1998 and 1997, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1998 were $60.0
million, $66.1 million and $76.9 million, respectively.
(11) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement. As of December 31, 1998 the Company had
no amounts outstanding under the agreement.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(12) Contingencies
-------------
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(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 the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for a
prescribed period, with returns accumulating on a tax-deferred basis.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary (other than
the portion allocated to the Variable Annuities and Life Insurance
segments), revenues and expenses related to group annuity contracts
sold to Nationwide Insurance Enterprise employee and agent benefit
plans and all realized gains and losses on investments in a Corporate
and Other segment.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's business
segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
- ------------------------------------ --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 231.6 $ 164.7 $ 1,481.6
Other operating revenue 560.8 35.7 319.6 49.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 529.5 1,152.3 551.2 214.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 187.2 104.2 294.6 49.1 635.1
--------- --------- -------- -------- ---------
Total expenses 311.1 977.0 456.4 174.1 1,918.6
--------- --------- -------- -------- ---------
Operating income (loss) before
federal income tax 218.4 175.3 94.8 40.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 94.8 $ 68.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.9) $ 1,098.2 $ 189.1 $ 148.8 $ 1,409.2
Other operating revenue 430.9 43.2 284.0 39.0 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 404.0 1,141.4 473.1 187.8 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Other benefits and expenses 165.3 108.7 284.1 45.6 603.7
--------- --------- -------- -------- ---------
Total expenses 253.1 971.9 402.2 160.3 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 70.9 27.5 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 70.9 $ 38.6 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
------------------------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (21.5) $ 1,050.6 $ 174.0 $ 154.7 $ 1,357.8
Other operating revenue 306.1 42.0 261.6 25.7 635.4
---------- ---------- --------- --------- ---------
Total operating revenue (2) 284.6 1,092.6 435.6 180.4 1,993.2
---------- ---------- --------- --------- ---------
Interest credited to policyholder
account balances -- 805.0 70.2 107.1 982.3
Amortization of deferred policy
acquisition costs 57.4 38.6 37.4 -- 133.4
Benefits and expenses 136.9 113.6 260.8 50.4 561.7
---------- ---------- --------- --------- ---------
Total expenses 194.3 957.2 368.4 157.5 1,677.4
---------- ---------- --------- --------- ---------
Operating income before federal
income tax 90.3 135.4 67.2 22.9 315.8
Realized losses on investments -- -- -- (0.3) (0.3)
---------- ---------- --------- --------- ---------
Consolidated income from
continuing operations before
federal tax expense $ 90.3 $ 135.4 $ 67.2 $ 22.6 $ 315.5
========== ========== ======== ======== =========
Assets as of year end $ 25,069.7 $ 13,994.7 $3,353.3 $5,348.5 $47,766.2
========== ========== ======== ======== =========
</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.
(14) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 10 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C>
Revenues $ -- $ -- $ 668.9
Net income $ -- $ -- $ 11.3
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets, consisting primarily of investments $221.5 $247.3 $3,288.5
Liabilities, consisting primarily of policy benefits and claims $221.5 $247.3 $2,802.8
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE
<S> <C>
(a) To be filed by Financial Statements:
(1) Financial statements included in Prospectus
(Part A):
Condensed Financial Information. 12
(2) Financial statements included
in Part B:
Those financial statements required by 52
Item 23 to be included in Part B have been
incorporated therein by reference to the
Statement of Additional Information
(Part A).
Nationwide Variable Account-6
Independent Auditors' Report. 52
Statements of Assets, Liabilities
and Contract Owners' Equity as of
December 31, 1998. 53
Statements of Operations and Changes
In Contract Owners' Equity for the year ended
December 31, 1998. 56
Notes to Financial Statements. 60
Nationwide Life Insurance Company:
Independent Auditors' Report. 63
Consolidated Balance Sheets as of December 31, 1998
and 1997. 64
Consolidated Statements of Income for the years
ended December 31, 1998, 1997 and 1996. 65
Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1998, 1997 and
1996. 66
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997and 1996. 67
Notes to Consolidated Financial Statements. 68
</TABLE>
90 of 109
<PAGE> 55
<TABLE>
<S> <C>
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with
this Registration Statement and hereby
incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution contracts
between the Registrant and Principal
Underwriter - Filed previously with this
Registration Statement and hereby
incorporated by reference.
(4) The form of the variable annuity contract - Attached hereto.
(5) Variable Annuity Application - Attached hereto.
(6) Articles of Incorporation of Depositor
Filed previously with this Registration
Statement and hereby incorporated herein
by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
this Registration Statement and hereby
incorporated herein by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Filed previously with this
Registration Statement and hereby
incorporated herein by reference.
</TABLE>
91 of 109
<PAGE> 56
<TABLE>
<CAPTION>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<S> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
Ralph M. Paige, Executive Director Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
</TABLE>
92 of 109
<PAGE> 57
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1733A Westwood Avenue
Alliance, OH 44601
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Phillip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary
Columbus, OH 43215
Richard D. Headley Senior Vice President - Chief
One Nationwide Plaza Information Technology
Columbus, OH 43215
Donna A. James Senior Vice President -
One Nationwide Plaza Human Resources
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Douglas C. Robinette Senior Vice President-
One Nationwide Plaza Marketing and Product
Columbus, OH 43215 Management
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Bruce C. Barnes Vice President - Technology
One Nationwide Plaza Strategy and Planning
Columbus, OH 43215
</TABLE>
93 of 109
<PAGE> 58
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Vice President - Enterprise
One Nationwide Plaza Controller of Nationwide
Columbus, OH 43215 Financial Services
Matthew S. Easley Vice President -
One Nationwide Plaza Investment Life Actuarial
Columbus, OH 43215
R. Dennis Noice Vice President - Systems
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President - Office of Product
Columbus, OH 43215 and Market Compliance
Mark R. Thresher Vice President - Finance and Treasurer
One Nationwide Plaza
Columbus, OH 43215
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
</TABLE>
94 of 109
<PAGE> 59
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE/COUNTRY (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
95 of 109
<PAGE> 60
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE/COUNTRY (SEE ATTACHED
CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
</TABLE>
96 of 109
<PAGE> 61
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE/COUNTRY (SEE ATTACHED
CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds,
and other evidences of indebtedness,
securities, and contracts of other
persons, associations, corporations,
domestic or foreign and to form or
acquire the control of other
corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds,
and other evidences of indebtedness,
securities, and contracts of other
persons, associations, corporations,
domestic or foreign and to form or
acquire the control of other
corporations
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Mutual Funds Ohio Investment Company
</TABLE>
97 of 109
<PAGE> 62
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE/COUNTRY (SEE ATTACHED
CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
Nationwide Trust Company, FSB United States Federal Savings Bank
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
98 of 109
<PAGE> 63
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE/COUNTRY (SEE ATTACHED
CHART) UNLESS
COMPANY OF ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
Public Employees Benefit Services Delaware Markets and Administers Deferred Compensation
Corporation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) Great Britain Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE/COUNTRY (SEE ATTACHED CHART) UNLESS
OTHERWISE INDICATED
COMPANY OF ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Policies
Account-C Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account - D Separate Account
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE/COUNTRY (SEE ATTACHED CHART) UNLESS
OTHERWISE INDICATED
COMPANY OF ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C>
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
99 of 109
<PAGE> 66
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ----------------------------
| ALLIED LIFE | | ALLIED | | AID FINANCE |
| FINANCIAL | | GROUP, INC. | | SERVICES, INC. |
| CORPORATION | | (AGI) | | (AID FINANCE) |
| (ALFC) | | | | |
|Common Stock: 850 | |Common Stock: 850 Shares | |Common Stock: 10,000 |
|------------ Shares | |------------ | |------------ Shares |
| |---| | |---| | |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
|Casualty- | | |Casualty- | | |Casualty- |
|100% $47,286,429 | | |100% $1,049,237,226| | |100% $19,545,634 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| ALLIED GROUP | | | AMCO | | | ALLIED |
| MERCHANT BANKING | | | INSURANCE COMPANY | | | GROUP INSURANCE |
| CORPORATION | | | (AMCO) | | | MARKETING COMPANY |
|Common Stock: 10,000 | | |Common Stock: 155,991 | | |Common Stock: 20,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| |----| |---| | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
| | | | | | | |Aid Finance- |
|AFLC-100% $100,000 | | | |AGI-100% $95,925,450| | |100% $16,059,469 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | WESTERN | | | DEPOSITORS |
| BROKERAGE | | | | HERITAGE INSURANCE | | | INSURANCE COMPANY |
| AGENCY, INC. | | | | COMPANY | | | (DEPOSITORS) |
|Common Stock: 500,000 | | | |Common Stock: 4,776,076 | | |Common Stock: 199,991 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|AFLC-100% $442,695 | | | |AMCO-100% $11,686,037| | |AGI-100% $15,251,842 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | ALLIED | | | ALLIED PROPERTY |
| INSURANCE | | | | GENERAL AGENCY | | | AND CASUALTY |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 250,000 | | | |Common Stock: 5,000 | | |Common Stock: 156,822 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AFLC-100% $41,732,343| |AMCO-100% $135,342 | | |AGI-100% $33,018,634 |
- --------------------------- --------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| PREMIER | | | ALLIED |
| AGENCY, | | | GROUP MORTGAGE |
| INC. | | | COMPANY |
|Common Stock: 100,000 | | |Common Stock: 9,500 |
|------------ Shares | | |------------ Shares |
| |---|---| |
| Cost | | | Cost |
| ---- | | | ---- |
|AGI-100% $100,000 | | |AGI-100% $213,976 |
--------------------------- | ----------------------------
|
| ----------------------------
| | MIDWEST |
| | PRINTING SERVICES |
| | LTD. |
| |Common Stock: 10,000 |
| |------------ Shares |
|---| |
| Cost |
| ---- |
|AFLC-100% $610,000 |
----------------------------
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |============================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
| || |--------------------------------------------------------------------| |--------------------------
- --| || |
|| |--------------------------------------------------------------|----------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| | NATIONWIDE LLOYDS | | | | | |
|| | | | |Common Stock: 20,000 | |Common Stock: 10,000 |
||==| | |---|------------ Shares | |--|------------ Shares |
|| | A TEXAS LLOYDS | | | | | | |
|| | | | | Cost | | | Cost |
|| | | | | ---- | | | ---- |
|| | | | |Casualty-100% $5,944,422 | | |Casualty-100% $87,943,140 |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE PROPERTY | | | NECKURA |
|| | INSURANCE COMPANY | | | AND CASUALTY | | | INSURANCE COMPANY |
|| |Guaranty Fund | | | INSURANCE COMPANY | | | |
|| |------------ | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
||==|Certificate |---| |---|------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WISCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |---- |---|------------ Shares | ---- |--|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares | | | Common Stock: 10,000 | | | |Common Stock: 1 Share |
| |--------| | ------------ Shares | ---| |--|------------ |
| Cost | | | | | | | |
|Casualty-99.9% ---- | | | Cost | | | | Cost |
|Other Capital: $26,714,335 | | | ---- | | | | ---- |
|------------- | | | SIC-100% $6,000,000 | | | |Neckura-100% DM 51,639 |
|Casualty-Ptd. $ 713,576 | | | | | | | |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |--------| |------------ Shares |----| |--|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
-------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1500 Shares |
| | |------------ |------------|------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- -----------------------------------------------------------------------|
|
- --------------- --------------------------------------------------
| |
- -----------------------------------------------------------------------------------------|----------------------- |
| | | | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | | CORPORATION |
| | | | | REDEVELOPMENT | | | |
| | | | | CORPORATION | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | Cost | | | Cost | | | Shares Cost |
| | ---- | | | ---- | | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $751,352,485|
| | | | | | | |Fire 649,510 24,007,936|
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | NATIONWIDE | | | INSURANCE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. | | |Common Stock: 10,330 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 | |--------| ---- |
| |------------ Shares | | |------------ Shares | | |Casualty-18.6% $88,320 |
| | Cost | | | Cost | | |Fire-18.6% $88,463 |
| | ---- | | | ---- | | |Preferred Stock 1466 Shares |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 | | |--------------- Cost |
| | | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | LONE STAR | | | NATIONWIDE CASH | | | PENSION ASSOCIATES |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY | | | OF WAUSAU, INC. |
| | | | |Common Stock: 100 Shares | | |Common Stock: 1,000 Shares |
------|Common Stock: 1,000 | |----|------------ | |--------|------------- |
| |------------ Shares | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-90% $9,000 | | | |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 | | |Casualty-100% $2,839,392 |
| -------------------------------- | -------------------------------- | ----------------------------------
| || | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | COLONIAL COUNTY MUTUAL | | | NATIONWIDE INSURANCE | | | AMERCIAN MARINE |
| | INSURANCE COMPANY | | | COMPANY OF FLORIDA | | | UNDERWRITERS, INC. |
| | | | |Common Stock: 10,000 | | |Common Stock: 20 Shares |
| |Surplus Debentures | | |------------- Shares | | |------------- |
| |------------------ | |----| | |--------| Cost |
| | Cost | | | Cost | | ---- |
| | ---- | | | ---- | | |
| |Colonial $500,000 | | |Casualty-100% $300,000,000 | |Casualty-100% $5,020 |
| |Lone Star 150,000 | | | | | |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | WAUSAU INTERNATIONAL |
| | INSURANCE COMPANY | | | UNDERWRITERS |
| |Common Stock 12,000 | | | |
| |------------ Shares | | |Common Stock: 1,000 Shares |
|-----| | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $10,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE |
| | ENTERPRISE SERVICES, LTD. | | | ARENA LLC |
| | | | | |
| |Single Member Limited | | | |
|.....|Liability Company | |....| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
</TABLE>
Page 1
<PAGE> 69
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-------------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
----------------|------------ ----------------------------- ---------------||------------
| ||
- ----------------------------- | ----------------------------- ----------------------------- || ----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |--|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| INVESTORS, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ |..| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
- ----------------------------- | ----------------------------- || ----------------------------- ----------------------------
| ||
- ----------------------------- | ----------------------------- || -----------------------------
| NATIONWIDE | | | NATIONWIDE | || | NATIONWIDE |
| PROPERTIES, LTD. | | | INVESTING | || | INVESTING |
| | | | FOUNDATION II | || | FOUNDATION III |
| Units: |..| | | || | |
| ------ | | |==||==| |
| | | | || | |
| | | | || | | ----------------------
| NW Life -97.6% | | | || | | | MORLEY RESEARCH |
| NW Mutual -2.4% | | COMMON LAW TRUST | || | OHIO BUSINESS TRUST | | ASSOCIATES, LTD. |
- ----------------------------- ----------------------------- || ----------------------------- | |
|| |Common Stock: 1,000 |
----------------------------- || ----------------------------- |------------- Shares|------
| NATIONWIDE | || | NATIONWIDE | | Cost |
| SEPARATE ACCOUNT | || | ASSET ALLOCATION TRUST | | ---- |
| TRUST | || | | |Morley-100% $1,000|
| | || | | ----------------------
| |==||==| |
| | | |
| | | |
| | | MASSACHUSETTS |
| COMMON LAW TRUST | | BUSINESS TRUST |
----------------------------- -----------------------------
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $751,352,485 |
|Fire 649,510 24,007,936 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------------|-------------------------------|-------------------|--------------------------------|-----------------------------
| | | |
-------------|--------------- --------------|-------------- | ---------------|-------------
| MORLEY FINANCIAL | | THE 401(k) COMPANIES, INC.| | | NATIONWIDE RETIREMENT |
| SERVICES, INC. (MORLEY) | | (401(k)) | | | SOLUTIONS, INC. |
|Common Stock: 82,343 | |Common Stock: Control: | | |Common Stock: 236,494 |
|---|------------- Shares | |------------- ------- |--| | |------------- Shares |
| | | |Class A Other-100% | | | | |
| |NFS-100% | |Class B NFS -100% | | | |NRS-100% |
| ----------------------------- ----------------------------- | | ---------------|-------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY & | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | ASSOCIATES, INC. | | SERVICES, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF NEW |
| | | | | | | | ALABAMA | | | MEXICO |
| |Common Stock: 3,500 | | Common Stock: 1,000,000 | | | | Common Stock: 10,000 | | | Common Stock: 1,000 |
|---|------------- Shares | | ------------- Shares |--| | | ------------- Shares |--|--| ------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $1,000 | |401(k)-100% $7,800 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY CAPITAL | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | MANAGEMENT | | ADVISORS, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARIZONA | | | SO. DAKOTA |
| |Common Stock: 500 | |Common Stock: 1,000 | | | |Common Stock: 1,000 | | |Common Stock: 1,000 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $5,000 | |401(k)-100% $1,000 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | UNION BOND | | 401(k) ICOMPANY | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | & TRUST COMPANY | | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARKANSAS | | | WYOMING |
| |Common Stock: 2,000 | |Common Stock: 855,000 | | | |Common Stock: 50,000 | | |Common Stock: 500 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | Cost | | | Cost |
| | ---- | | ---- | | | ---- | | | ---- |
| |Morley-100% $50,000 | |401(k)-100% $1,000 | | |NRS-100% $500 | | |NRS-100% $500 |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | PORTLAND INVESTMENT | | NATIONWIDE TRUST | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | SERVICES, INC. | | COMPANY, FSB | | | SOLUTIONS, INS. AGENCY, | | | SOLUTIONS, INC. OF |
| | | | | | | INC. | | | OHIO |
| |Common Stock: 1,000 | |Common Stock: 2,800,000 | | |Common Stock: 1,000 | | | |
|---|------------- Shares | |------------- Shares |-----| |------------- Shares |--|==| |
| | Cost | | Cost | | | Cost | | | |
| | ---- | | ---- | | | ---- | | | |
| |Morley-100% $25,000 | |NFS-100% $3,500,000 | | |NRS -100% $1,000 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ---------------------------- | ---------------------------
| | EXCALIBER FUNDING | | NATIONWIDE FINANCIAL | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | SERVICES CAPITAL TRUST II | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | MONTANA | | | OKLAHOMA |
| |Common Stock: 1,000 | | | | |Common Stock: 500 | | | |
|---|------------- Shares | | |-----| |------------- Shares |--|==| |
| | Cost | | | | | Cost | | | |
| | ---- | | | | | ---- | | | |
| |Morley-100% $1,000 | |NFS-100% | | |NRS-100% $500 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | CALIBER FUNDING | | NFS DISTRIBUTORS INC. | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | NEVADA | | | TEXAS |
| | | | | | | Common Stock: 1,000 | | | |
|---| | | |-----| | ------------- Shares |--|==| |
| | | | | Cost | | |
| | | | | ---- | | |
|Morley-100% | |NFS-100% | | NRS-100% $1,000 | | |
----------------------------- ----------------------------- ----------------------------- ---------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------|--------------------|---------------------------------------|
| | |
| ---------------|---------------- --------------|----------------
| | EMPLOYERS LIFE INSURANCE CO. | | GATES MCDONALD |
| | OF WAUSAU (ELIOW) | | & COMPANY (GATES) |
| | | | |
| |Common Stock: 250,000 | |Common Stock: 254 |
| |--|------------- Shares | |--|------------- Shares |
| | | | | | |
| | | Cost | | | Cost |
| | | ---- | | | ---- |
| | |NW CORP. -100% $126,509,480 | | |NW CORP. -100% $25,683,532 |
| | -------------------------------- | -------------------------------
- ------------ | | |
| -------------------------------- | | -------------------------------- | --------------------------------
| | NATIONWIDE TRUST | | | | WAUSAU PREFERRED | | | HEALTHCARE |
| | COMPANY | | | | HEALTH INSURANCE CO. | | | FIRST, INC. |
| | | | | | | | | |
| |Common Stock: 2,800,000 | | | |Common Stock: 200 | | | |
|--|------------- Shares | | |--|------------- Shares | |--| |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |ELIOW -100% $57,413,193 | | |Gates-100% $6,700,000 |
| -------------------------------- | -------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE FINANCIAL | | | NATIONWIDE GLOBAL | | | GATES MCDONALD & COMPANY |
| | SERVICES (BERMUDA) INC. | | | HOLDINGS, INC. (NGH) | | | OF NEW YORK, INC. |
| | | | | | | | |
| |Common Stock: 250,000 | | |Common Stock: 1 | | |Common Stock: 3 |
|--|------------- Shares | |-----|------------- Share | |--|------------- Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |NW CORP.-100% $7,000,000 | | |Gates-100% $106,947 |
| -------------------------------- | -------------------------------- | -------------------------------
| | | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE DEFERRED | | | NATIONWIDE GLOBAL HOLDINGS | | | GATES MCDONALD & COMPANY |
| | COMPENSATION, INC. | | | -HONG KONG, LIMITED | | | OF NEVADA |
| | | | | | | | |
| | | | |Common Stock: 2 | | |Common Stock: 40 |
|--| | | |------------- Shares | |--|------------- Shares |
| | | | | | | | |
| | | | | | | | Cost |
| | | | | | | | ---- |
| |NFS-100% | | |NGH-100% | | |Gates-100% $93,750 |
| -------------------------------- | -------------------------------- | -------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | IRVIN L. SCHWARTZ | | | NATIONWIDE | | | GATES McDONALD |
| | AND ASSOCIATES, INC. | | | HEALTH PLANS, INC. (NHP) | | | HEALTH PLUS, INC. |
| | | | | | | | |
| |Common Stock: Control | | |Common Stock: 100 | | |Common Stock: 200 |
|--|------------- ------- | |-----|------------- Shares |--| |--|------------- Shares |
| | | | | | | |
| | | | Cost | | | Cost |
|Class A Other-100% | | | ---- | | | ---- |
|Class B NFS -100% | | |NW CORP.-100% $14,603,732 | | |Gates-100% $2,000,000 |
-------------------------------- | -------------------------------- | -------------------------------
| |
-------------------------------- | -------------------------------- |
| MRM INVESTMENTS, INC. | | | NATIONWIDE MANAGEMENT | |
| | | | SYSTEMS, INC. | |
| | | | | |
|Common Stock: 1 | | |Common Stock: 100 | |
|------------- Share |--| |------------- Shares |--|
| | | | |
| Cost | | Cost | |
| ---- | | ---- | |
|NW CORP.-100% $7,000,000 | |NHP Inc.-100% $25,149 | |
-------------------------------- -------------------------------- |
|
-------------------------------- |
| NATIONWIDE | |
| AGENCY, INC. | |
| | |
|Common Stock: 100 | |
|------------ Shares |--|
| |
| Cost |
| ---- |
|NHP Inc.-99% $116,077 |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
Page 2
</TABLE>
<PAGE> 72
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of January 31,1999 was 230 and 667, 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 Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide 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 and
Nationwide Variable Account, all of which are separate
investment accounts of Nationwide or its affiliates.
NAS also acts as principal underwriter for Nationwide Mutual
Funds, Nationwide Separate Account Trust, and Nationwide
Asset Allocation Trust which are open-end management
investment companies.
104 of 109
<PAGE> 73
<TABLE>
<CAPTION>
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
NAME AND POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman and
One Nationwide Plaza Chief Executive Officer and Director
Columbus, OH 43215
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Paul J. Hondros Director
One Nationwide Plaza
Columbus, OH 43215
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Edwin P. Mc Causland, Jr. Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
Charles S. Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Joseph P. Rath Vice President - Office of Product and
One Nationwide Plaza Market Compliance
Columbus, OH 43215
Vice President - Taxation
Alan A. Todryk
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide
Advisory N/A N/A N/A N/A
Services,
Inc.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza
Columbus, OH 43218-2008
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
Securities and Exchange Commission to the American Council of Life
Insurance (publicly available November 28, 1988) permitting
withdrawal restrictions to the extent necessary to comply with
Section 403(b)(11) of the 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.
106 of 109
<PAGE> 75
Offered by
NATIONWIDE
LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE
VARIABLE ACCOUNT 6
MODIFIED SINGLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
PROSPECTUS
MAY 1, 1999
107 of 109
<PAGE> 76
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of the Nationwide Variable Account-6:
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 29, 1999
108 of 109
<PAGE> 77
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT-6, certifies that it meets
the requirements of Securities Act Rule 485 for effectiveness of this
Post-Effective Amendment and has caused this Post-Effective Amendment to be
signed on its behalf in the City of Columbus, and State of Ohio, on this 29th of
April, 1999.
<TABLE>
<S> <C>
NATIONWIDE VARIABLE ACCOUNT-6
---------------------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
---------------------------------------------------------------
Joseph P. Rath
Vice President -Product and Market Compliance
As required by the Securities Act of 1933, this Post-effective Amendment has been signed by the following persons in
the capacities indicated on the 29th of April, 1999.
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
- -------------------------------------------------
Joseph J. Gasper Operating Office and Director
DIMON R. McFERSON Chairman and Chief Executive Officer
- -------------------------------------------------
Dimon R. McFerson and Director
DAVID O. MILLER Chairman of the Board and Director
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President-
- -------------------------------------------------
Robert A. Oakley Chief Financial Officer
RALPH M. PAIGE Director
- -------------------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director Attorney-in-Fact
- -------------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------------------------
Nancy C. Thomas
</TABLE>
109 of 109
