<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-82370
'40 Act File No. 811-8684
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 9 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9 [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.
It is proposed that this filing will become effective (Check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on May 1, 2000 pursuant to paragraph 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.
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-6
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM CAPTION
<S> <C>
PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page........................................................... Cover Page
Item 2. Definitions.......................................................... Glossary of Special Terms
Item 3. Synopsis or Highlights............................................... Synopsis of the Contracts
Item 4. Condensed Financial Information...................................... Condensed Financial Information
Item 5. General Description of Registrant, Depositor, and Portfolio
Companies ...................................................... Nationwide Life Insurance Company;
Investing in the Contract
Item 6. Deductions and Expenses.............................................. Standard Charges and Deductions
Item 7. General Description of Variable
Annuity Contracts.................................................... Contract Ownership; Operation of the Contract
Item 8. Annuity Period....................................................... Annuitizing the Contract
Item 9. Death Benefit........................................................ Death Benefits
Item 10. Purchases and Contract Value......................................... Operation of the Contract
Item 11. Redemptions.......................................................... Surrender (Redemption)
Item 12. Taxes .............................................................. Federal Tax Considerations
Item 13. Legal Proceedings.................................................... Legal Proceedings
Item 14. Table of Contents of the Statement of Additional
Information......................... ........................... Table of Contents of the Statement of
Additional Information
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page........................................................... Cover Page
Item 16. Table of Contents.................................................... Table of Contents
Item 17. General Information and History...................................... General Information and History
Item 18. Services............................................................. Services
Item 19. Purchase of Securities Being Offered................................. Purchase of Securities Being Offered
Item 20. Underwriters......................................................... Underwriters
Item 21. Calculation of Performance.......................................... Calculation of Performance
Item 22. Annuity Payments..................................................... Annuity Payments
Item 23. Financial Statements................................................. Financial Statements
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits................................... Item 24
Item 25. Directors and Officers of the Depositor.............................. Item 25
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant..................................... Item 26
Item 27. Number of Contract Owners............................................ Item 27
Item 28. Indemnification...................................................... Item 28
Item 29. Principal Underwriter................................................ Item 29
Item 30. Location of Accounts and Records..................................... Item 30
Item 31. Management Services.................................................. Item 31
Item 32. Undertakings......................................................... Item 32
</TABLE>
<PAGE> 3
NATIONWIDE LIFE 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, 2000.
Variable annuities are complex investment products with unique benefits and
advantages that may be particularly useful to many investors in meeting
long-term savings and retirement needs. There are, however, costs and charges
associated with some of these unique benefits - costs and charges that do not
exist or are not present with other investment products. With help from
financial consultants or advisers, investors are encouraged to compare and
contrast the costs and benefits of the variable annuity described in this
prospectus with those of other investment products, including other variable
annuity or variable life insurance products offered by Nationwide Life Insurance
Company and its affiliates. This process will aid in determining whether the
purchase of the contract described in this prospectus is consistent with an
individual's goals, risk tolerance, time horizon, marital status, tax situation,
and other personal characteristics and needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THE CONTRACTS
BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE AVAILABLE UNDER THE CONTRACTS:
EVERGREEN VARIABLE TRUST
- - Evergreen VA Foundation Fund
- - Evergreen VA Fund
- - Evergreen VA Global Leaders Fund
- - Evergreen VA Growth and Income Fund*
- - Evergreen VA Omega Fund (formerly, Evergreen VA Aggressive Growth Fund)
- - Evergreen VA Small Cap Value Fund (formerly, 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(R) 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, 2000) which contains
additional information about the contracts and the variable account, has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The table of contents for the Statement of Additional
Information is on page 41.
For general information or to obtain FREE copies of the:
- - Statement of Additional Information;
- - prospectus, annual report or semi-annual report for any underlying mutual
fund; or
- - 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
1
<PAGE> 4
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
WWW.SEC.GOV
THIS ANNUITY IS NOT:
- - A BANK DEPOSIT - FEDERALLY INSURED
- - ENDORSED BY A BANK - AVAILABLE IN EVERY STATE
OR GOVERNMENT AGENCY
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit of measure used to calculate the variable
payment annuity payments.
CONTRACT VALUE- The total value of all accumulation units in a contract plus any
amount held in the fixed account.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income 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 for which accumulation units and
annuity units are separately maintained - each sub-account corresponds to a
single underlying mutual fund.
TAX SHELTERED ANNUITY- An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide 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.
3
<PAGE> 6
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS..........................3
SUMMARY OF CONTRACT EXPENSES.......................6
UNDERLYING MUTUAL FUND ANNUAL
EXPENSES......................................7
EXAMPLE............................................9
SYNOPSIS OF THE CONTRACTS..........................10
FINANCIAL STATEMENTS...............................10
CONDENSED FINANCIAL INFORMATION....................10
NATIONWIDE LIFE INSURANCE COMPANY..................11
NATIONWIDE INVESTMENT SERVICES
CORPORATION...................................11
TYPES OF CONTRACTS.................................11
Non-Qualified Contracts
Individual Retirement Annuities (IRAs)
Simplified Employee Pension IRAs (SEP IRAs)
Roth IRAs
Tax Sheltered Annuities
Qualified Plans
INVESTING IN THE CONTRACT..........................13
The Variable Account and Underlying Mutual Funds
The Fixed Account
CHARGES AND DEDUCTIONS.............................15
Mortality and Expense Risk Charges
Administration Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP.................................16
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 Prior to Annuitization
Transfers After Annuitization
Transfers Requests
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
4
<PAGE> 7
FEDERAL TAX CONSIDERATIONS.........................31
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation
Skipping Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS.............................36
LEGAL PROCEEDINGS..................................36
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY....37
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION..........................41
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS...........................................42
APPENDIX B: CONDENSED FINANCIAL INFORMATION........45
5
<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contract owners unless the contract
owner meets an available exception under the contract.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge ("CDSC") (as a percentage of purchase
payments surrendered)....................7%(1)
Range of CDSC over time:
NUMBER OF COMPLETED CDSC
YEARS FROM DATE OF PERCENTAGE
PURCHASE PAYMENT
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
(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 as Tax Sheltered Annuities
due to Internal Revenue Code restrictions.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of daily net assets of the variable account)
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.
LOAN PROCESSING FEE
Nationwide may charge a Loan Processing Fee at the time each new loan is
processed. If assessed, it compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not permit Nationwide to assess a Loan Processing Fee.
6
<PAGE> 9
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 Foundation Fund 0.84% 0.11% 0.00% 0.95%
----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Fund 0.89% 0.13% 0.00% 1.02%
----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Global Leaders 0.77% 0.24% 0.00% 1.01%
Fund(1) ----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Growth and 0.89% 0.12% 0.00% 1.01%
Income Fund(1) ----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Omega Fund 0.60% 0.36% 0.00% 0.96%
(formerly, Evergreen VA Aggressive Growth Fund(1)) ----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Small Cap Value 0.59% 0.42% 0.00% 1.01%
Fund (formerly, Evergreen VA Small Cap Equity Income ----- ----- ----- -----
Fund)
Evergreen Variable Trust - Evergreen VA Strategic Income 0.61% 0.23% 0.00% 0.84%
Fund(1) ----- ----- ----- -----
Fidelity VIP High Income Portfolio 0.58% 0.11% 0.00% 0.69%
----- ----- ----- -----
Fidelity VIP Overseas Portfolio 0.73% 0.14% 0.00% 0.87%
----- ----- ----- -----
Fidelity VIP II Asset Manager Portfolio 0.53% 0.09% 0.00% 0.62%
----- ----- ----- -----
Fidelity VIP II Contrafund(R) Portfolio 0.58% 0.07% 0.00% 0.65%
----- ----- ----- -----
Fidelity VIP III Growth Opportunities Portfolio 0.58% 0.10% 0.00% 0.68%
----- ----- ----- -----
NSAT - Government Bond Fund 0.50% 0.15% 0.00% 0.65%
----- ----- ----- -----
NSAT - Money Market Fund 0.39% 0.15% 0.00% 0.54%
----- ----- ----- -----
</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, 1999
to December 31, 1999 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 in calculating the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
7
<PAGE> 10
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 Fund 0.95% 0.13% 0.00% 1.08%
----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Global Leaders 0.95% 0.24% 0.00% 1.19%
Fund ----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Growth and 0.95% 0.12% 0.00% 1.07%
Income Fund ----- ----- ----- -----
Evergreen Variable Trust - Evergreen VA Small Cap 0.95% 0.42% 0.00% 1.37%
Value Fund (formerly, Evergreen VA Small Cap Equity ----- ----- ----- -----
Income Fund)
Fidelity VIP Overseas Portfolio 0.73% 0.18% 0.00% 0.91%
----- ----- ----- -----
Fidelity VIP II Asset Manager Portfolio 0.53% 0.10% 0.00% 0.63%
----- ----- ----- -----
Fidelity VIP II Contrafund(R) Portfolio 0.58% 0.09% 0.00% 0.67%
----- ----- ----- -----
Fidelity VIP III Growth Opportunities Portfolio 0.58% 0.11% 0.00% 0.69%
----- ----- ----- -----
</TABLE>
8
<PAGE> 11
EXAMPLE
The following chart shows the expenses (in dollars) that would be incurred under
this contract assuming a $1,000 investment, 5% annual return, and no change in
expenses. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown below. The 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.
<TABLE>
<CAPTION>
If you surrender your If you do not surrender If you annuitize your contract
contract at the end of the your contract at the end at the end of the applicable
applicable time period of the 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 88 121 157 277 25 76 130 277 * 76 130 277
Trust-Evergreen VA Foundation -- --- --- --- -- -- --- --- -- --- ---
Fund
Evergreen Variable 88 123 160 284 25 78 133 284 * 78 133 284
Trust-Evergreen VA Fund -- --- --- --- -- -- --- --- -- --- ---
Evergreen Variable Trust- 88 123 160 283 25 78 133 283 * 78 133 283
Evergreen VA Global Leaders Fund -- --- --- --- -- -- --- --- -- --- ---
Evergreen Variable 88 123 160 283 25 78 133 283 * 78 133 283
Trust-Evergreen VA Growth and -- --- --- --- -- -- --- --- -- --- ---
Income Fund
Evergreen Variable 88 121 157 278 25 76 130 278 * 76 130 278
Trust-Evergreen VA Omega Fund -- --- --- --- -- -- --- --- -- --- ---
(formerly, Evergreen VA
Aggressive Growth Fund)
Evergreen Variable Trust - 88 123 160 283 25 78 133 283 * 78 133 283
Evergreen VA Small Cap Value -- --- --- --- -- -- --- --- -- --- ---
Fund (formerly, Evergreen VA
Small Cap Equity Income Fund)
Evergreen Variable Trust- 87 117 151 265 24 72 124 265 * 72 124 265
Evergreen VA Strategic Income -- --- --- --- -- -- --- --- -- --- ---
Fund
Fidelity Variable Insurance 85 113 143 249 22 68 116 249 * 68 116 249
Products Fund- High -- --- --- --- -- -- --- --- -- --- ---
Income Portfolio
Fidelity Variable Insurance 87 118 153 268 24 73 126 268 * 73 126 268
Products Fund- Overseas -- --- --- --- -- -- --- --- -- --- ---
Portfolio
Fidelity Variable Insurance 84 110 139 242 21 65 112 242 * 65 112 242
Products Fund II- Asset -- --- --- --- -- -- --- --- -- --- ---
Manager Portfolio
Fidelity Variable Insurance 85 111 141 245 22 66 114 245 * 66 114 245
Products Fund II- Contrafund(R) -- --- --- --- -- -- --- --- -- --- ---
Portfolio
Fidelity Variable Insurance 85 112 143 248 22 67 116 248 * 67 116 248
Products Fund III- -- --- --- --- -- -- --- --- -- --- ---
Growth Opportunities Portfolio
NSAT- Government Bond Fund 85 111 141 245 22 66 114 245 * 66 114 245
-- --- --- --- -- -- --- --- -- --- ---
NSAT- Money Market Fund 83 108 135 233 20 63 108 233 * 63 108 233
-- --- --- --- -- -- --- --- -- --- ---
</TABLE>
* The contracts sold under this prospectus do not permit annuitizations during
the first two contract years.
9
<PAGE> 12
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" will also mean "certificate."
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;
- - SEP IRAs;
- - Roth IRAs; and
- - Tax Sheltered Annuities with contributions rolled over or transferred from
another Tax Sheltered Annuity or Custodial Account.
For more detailed information with regard to the differences in contract types,
please see, "Types of Contracts" later in this prospectus.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE SUBSEQUENT
TYPE PAYMENT PAYMENTS
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
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% of the daily net assets of the variable account. Nationwide assesses
these charges in return for bearing certain mortality and administrative risks.
Nationwide deducts an Administration Charge equal to an annual rate of 0.15% of
the daily net assets of the variable account. Nationwide assesses this charge
for reimbursement of administrative expenses relating to contract issuance and
maintenance.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued and the
purpose for which the contract is purchased. Nationwide will charge against the
contract any premium taxes levied by any governmental authority (see "Federal
Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or other amounts required
by law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained without charge by contacting Nationwide's home
office at the telephone number listed on page 1 of this prospectus.
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of
10
<PAGE> 13
the underlying mutual funds and the assessment of variable account charges,
which may vary from contract to contract (for more information on the
calculation of accumulation unit values, see "Variable Payment Annuity"). Please
refer to Appendix B for information regarding each class of accumulation units.
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 INVESTMENT SERVICES CORPORATION
The contracts are distributed by the general distributor, Nationwide Investment
Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. (For
contracts issued in the State of Michigan, all references to NISC shall mean
Nationwide Investment Svcs. Corporation.) NISC is a wholly owned subsidiary of
Nationwide Life Insurance Company.
TYPES OF CONTRACTS
The contracts described in this prospectus are classified according to the tax
treatment they are subject to under the Internal Revenue Code. The following is
a general description of the various types of contracts. Eligibility
requirements, tax benefits (if any), limitations, and other features of the
contracts will differ depending on the type of contract.
NON-QUALIFIED CONTRACTS
A Non-Qualified Contract is a contract that does not qualify for certain tax
benefits under the Internal Revenue Code, and which is not an IRA, a Roth IRA, a
SEP IRA, or a Tax Sheltered Annuity.
Upon the death of the owner of a Non-Qualified Contract, mandatory distribution
requirements are imposed to ensure distribution of the entire balance in the
contract a required period.
Non-Qualified Contracts that are owned by natural persons allow for the deferral
of taxation on the income earned in the contract until it is distributed or
deemed to be distributed.
INDIVIDUAL RETIREMENT ANNUITIES (IRAS)
Individual Retirement Annuities are contracts that are issued by insurance
companies and satisfy the following requirements:
- - the contract is not transferable by the owner; o the premiums are not
fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from qualified plans, tax-sheltered annuities and other IRAs can be
received);
- - certain minimum distribution requirements must be satisfied after the owner
attains the age of 70-1/2;
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
Depending on the circumstance of the owner, all or a portion of the
contributions made to the account may be deducted for federal income tax
purposes.
Failure to make the mandatory distributions can result in an additional penalty
tax of 50% of the excess of the amount required to be distributed over the
amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement
Accounts and Individual Retirement Annuities, from Tax Sheltered Annuities, and
from qualified retirement plans, including 401(k) plans.
11
<PAGE> 14
For further details regarding IRAs, please refer to the disclosure statement
provided when the IRA was established.
SIMPLIFIED EMPLOYEE PENSION IRAS (SEP IRAS)
A SEP IRA is a written plan established by an employer for the benefit of
employees which permits the employer to make contributions to an IRA established
for the benefit of each employee.
An employee may make deductible contributions to a SEP IRA in the same way, and
with the same restrictions and limitations, as for an IRA. In addition, the
employer may make contributions to the SEP IRA, subject to dollar and percentage
limitations imposed by both the Internal Revenue Code and the written plan.
A SEP IRA plan established by an employer must satisfy certain requirements:
- - minimum participation rules;
- - top-heavy contribution rules;
- - nondiscriminatory allocation rules; and
- - requirements regarding a written allocation formula.
In addition, the plan cannot restrict withdrawals of non-elective contributions,
and must restrict withdrawals of elective contributions before March 15th of the
following year.
ROTH IRAS
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
- - the contract is not transferable by the owner;
- - the premiums are not fixed;
- - the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from other Roth IRAs and IRAs can be received);
- - the entire interest of the owner in the contract is nonforfeitable; and
- - after the death of the owner, certain distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within
the statutory period of time.
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over
from the IRA to the Roth IRA is required to be included in the owner's federal
gross income at the time of the rollover, and will be subject to federal income
tax.
There are income limitations on eligibility to participate in a Roth IRA and
additional income limitations for eligibility to roll over amounts from an IRA
to a Roth IRA. For further details regarding Roth IRAs, please refer to the
disclosure statement that should have been received when the Roth IRA was
established.
TAX SHELTERED ANNUITIES
Certain tax-exempt organizations (described in section 501(c)(3) of the Internal
Revenue Code) and public school systems may establish a plan under which annuity
contracts can be purchased for their employees. These annuity contracts are
often referred to as Tax Sheltered Annuities.
Purchase payments made to Tax Sheltered Annuities are excludible from the income
of the employee, up to statutory maximum amounts. These amounts should be set
forth in the plan adopted by the employer.
The owner's interest in the contract is nonforfeitable (except for failure to
pay premiums) and cannot be transferred. Certain minimum distribution
requirements must be satisfied after the owner attains the age of 70-1/2, and
after the death of the owner, additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within the
required period of time.
QUALIFIED PLANS
Contracts that are owned by Qualified Plans are not intended to confer tax
benefits on the beneficiaries of the plan; they are used as investment vehicles
for the plan. The income tax consequences to the beneficiary of a Qualified Plan
are controlled by the operation of the plan, not by operation of the assets in
which the plan invests.
12
<PAGE> 15
Beneficiaries of Qualified Plans should contact their employer and/or trustee of
the plan to obtain and review the plan, trust, summary plan description and
other documents for the tax and other consequences of being a participant in a
qualified plan.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-6 is a variable account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
variable account on February 2, 1994, pursuant to Ohio law. Although the
variable account is registered with the SEC as a unit investment trust pursuant
to the Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise
the management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts, each corresponding to a
single underlying mutual fund. Nationwide uses the assets of each sub-account to
buy shares of the underlying mutual funds based on contract owner instructions.
There are two sub-accounts for each underlying mutual fund. One sub-account
contains shares attributable to accumulation units under Non-Qualified
Contracts. The other contains shares attributable to accumulation units under
Individual Retirement 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.
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
13
<PAGE> 16
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.
- - 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 which the 12 month anniversary of the fixed account
allocation occurs.
14
<PAGE> 17
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3% per
year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less surrenders and any applicable charges
including CDSC.
CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK 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 Charge compensates Nationwide for guaranteeing the annuity
purchase rates of the contracts. This guarantee ensures that the annuity
purchase rates will not change regardless of the death rates of annuity payees
or the general population.
The Expense Risk Charge compensates Nationwide for guaranteeing that
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. Earnings are not subject to the CDSC, but may not be distributed
prior to the distribution of all purchase payments. (For tax purposes, a
surrender is usually treated as a withdrawal of earnings first).
The CDSC applies as follows:
NUMBER OF YEARS FROM DATE CDSC
OF PURCHASE PAYMENT PERCENTAGE
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
The CDSC is used to cover sales expenses, including commissions, 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
15
<PAGE> 18
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.
All or a portion of any withdrawal may be subject to federal income taxes.
Contract owners taking withdrawals before age 59-1/2 may be subject to a 10% tax
penalty.
Waiver of Contingent Deferred Sales Charge
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
5.0%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such other date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract, including the right to
designate and change any designations of the contract owner,
16
<PAGE> 19
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 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 changed prior to the
annuitization date with the consent of Nationwide.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. Multiple beneficiaries will
share
17
<PAGE> 20
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
CONTRACT MINIMUM INITIAL MINIMUM
TYPE PURCHASE PAYMENT SUBSEQUENT
PAYMENTS
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
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.
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 will 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 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.
18
<PAGE> 21
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 PRIOR TO ANNUITIZATION
Transfers from the Fixed Account to the Variable Account
Fixed account allocations may be transferred to the variable account only upon
reaching the end of an Interest Rate Guarantee Period. Normally, Nationwide will
permit 100% of such fixed account allocations to be transferred to the variable
account; however Nationwide may, under certain economic conditions and at its
discretion, limit the maximum transferable amount. 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.
19
<PAGE> 22
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.
Transfers Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation date.
TRANSFERS AFTER ANNUITIZATION
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
TRANSFER REQUESTS
Nationwide will accept transfer requests in writing or over the telephone.
Nationwide will use reasonable procedures to confirm that telephone instructions
are genuine and will not be liable for following telephone instructions that it
reasonably determined to be genuine. Nationwide may withdraw the telephone
exchange privilege upon 30 days written notice to contract owners.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the
transfer request is received.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same.
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:
- - submitted by any agent acting under a power of attorney on behalf of more
than one contract owner; or
20
<PAGE> 23
- - 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 of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code
21
<PAGE> 24
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 Tax Sheltered Annuities. These
contract owners can take loans from the contract value beginning 30 days after
the contract is issued up to the annuitization date. Loans are subject to the
terms of the contract, the plan, and the Internal Revenue Code. Nationwide may
modify the terms of a loan to comply with changes in applicable law.
MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1,000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
NON-ERISA PLANS up to up to 80% of contract
$20,000 value (not more than
$10,000)
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
* The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
Salary reduction Tax Sheltered Annuity loans may be secured only by the contract
value.
LOAN PROCESSING FEE
Nationwide may charge a Loan Processing Fee at the time each new loan is
processed. If assessed it compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not permit Nationwide to assess a Loan Processing Fee.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount, Nationwide next transfers contract value from the fixed account. No CDSC
will be deducted on transfers related to loan processing.
22
<PAGE> 25
INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The credited interest rate will be
2.25% less than the loan interest rate fixed by Nationwide. The credited
interest rate is guaranteed never to fall below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
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
<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, the Fidelity VIP High Income Portfolio, the
NSAT-Government Bond Fund, and the NSAT-Money Market Fund to any other
underlying mutual fund.
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
<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.
A CDSC may apply to amounts taken through systematic withdrawals.
If a CDSC applies, the maximum amount that can be withdrawn annually without a
CDSC is the greatest of:
1) 10% of all purchase payments made to the contract as of the withdrawal
date; or
2) an amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
3) a percentage of the contract value based on the contract owner's age,
as shown in the table below:
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
Under age 59-1/2 5%
Age 59-1/2 through age 61 7%
Age 62 through age 64 8%
Age 65 through age 74 10%
Age 75 and over 13%
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
25
<PAGE> 28
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payment
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday basis" by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday basis" by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent 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 may only be made on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
26
<PAGE> 29
- the amount to be distributed is less than $5,000, in which case
Nationwide may make 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 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
27
<PAGE> 30
last surviving contract owner's estate will receive the death benefit.
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.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
If the annuitant dies on or after his or her 86th birthday and prior to
annuitization, the death benefit will equal the contract value.
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;
28
<PAGE> 31
2) If any contract owner dies before the annuitization date, then the
entire interest in the contract (consisting of either the death
benefit or the contract value reduced by charges set forth elsewhere
in the contract) will be distributed within 5 years of the contract
owner's death, provided however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over a
period not longer than the life expectancy of the designated
beneficiary. Payments must begin within one year of the contract
owner's death unless otherwise permitted by federal income tax
regulations;
b) if the designated beneficiary is the surviving spouse of the
deceased contract owner, the spouse can choose to become the
contract owner instead of receiving a death benefit. Any
distributions required under these distribution rules will be
made upon that spouse's death.
In the event that the contract owner is not a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a
contract owner;
b) any change of annuitant will be treated as the death of a
contract owner; and
c) in either case, the appropriate distribution will be made upon
the death or change, as the case may be.
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;
29
<PAGE> 32
b) the joint and survivor life expectancy of the annuitant and the
annuitant's beneficiary.
The life expectancies and joint life expectancies are determined by reference to
Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the Qualified
Contract or Tax Sheltered Annuity must be distributed by December 31 of the
calendar year in which the fifth anniversary of the annuitant's death occurs
unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no later than
December 31 of the year in which the annuitant would have attained age
70-1/2; or
b) the annuitant names a beneficiary other than his or her surviving
spouse and the beneficiary elects to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the annuitant
dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as 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
30
<PAGE> 33
contract as his or her own, in the same manner as is described in section (a)(1)
of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The owner of an 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 "non-qualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- - the type of contract purchased;
- - the purposes for which the contract is purchased; and
- - the personal circumstances of individual investors having interests in the
contracts.
See "Synopsis of the Contracts" for a brief description of the various types of
contracts and the different purposes for which the contracts may be purchased.
Existing tax rules are subject to change, and may affect individuals differently
depending on their situation. Nationwide does not guarantee the tax status of
any contracts or any transactions involving the contracts.
If the contract is purchased as an investment of certain retirement plans (such
as qualified retirement plans, Individual Retirement Accounts, and custodial
accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal
Revenue Code), tax advantages enjoyed by the contract owner and/or annuitant may
relate to participation in the plan rather than ownership of the annuity
contract. Such plans
31
<PAGE> 34
are permitted to purchase investments other than annuities and retain
tax-deferred status.
The following is a brief summary of some of the federal income tax
considerations related to the contracts. In addition to the federal income tax,
distributions from annuity contracts may be subject to state and local income
taxes. The tax rules across all states and localities are not uniform and
therefore will not be discussed in this prospectus. Tax rules that may apply to
contracts issued in U.S. territories such as Puerto Rico and Guam are also not
discussed. Nothing in this prospectus should be considered to be tax advice.
Contract owners and prospective contract owners are encouraged to consult a
financial consultant, tax advisor or legal counsel to discuss the taxation and
use of the contracts.
The Internal Revenue Code sets forth different income tax rules for the
following types of annuity contracts:
- - IRAs;
- - SEP IRAs;
- - Roth IRAs;
- - Tax Sheltered Annuities; and
- - "Non-Qualified Annuities."
IRAs and SEP IRAs
Distributions from IRAs and SEP IRAs are generally taxed when received. If any
of the amount contributed to the IRA was nondeductible for federal income tax
purposes, then a portion of each distribution is excludable from income.
If distributions of income from an IRA are made prior to the date that the owner
attains the age of 59-1/2 years, the income is subject to both the regular
income tax and an additional penalty tax of 10%. The penalty tax can be avoided
if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled (as defined in the Internal
Revenue Code;
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - used for qualified higher education expenses; or
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or non-taxable depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
- - it is made on or after the date on which the contract owner attains age
59-1/2;
- - it is made to a beneficiary (or the contract owner's estate) on or after
the death of the contract owner;
- - it is attributable to the contract owner's disability; or
- - it is used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
The five year rule generally is satisfied if the distribution is not made within
the five taxable year period beginning with the first taxable year in which a
contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax
purposes.
A non-qualified distribution is not includible in gross income to the extent
that the distribution, when added to all previous distributions, does not exceed
that total amount of contributions made to the Roth IRA. Any non-qualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior
to January
32
<PAGE> 35
1, 1999 if the owner elected the special 4-year income averaging provisions that
were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the
date that the owner attains the age of 59-1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled (as defined in the Internal
Revenue Code);
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - for qualified higher education expenses; or
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer.
If the contract owner dies before the contract is completely distributed, the
balance may be included in the contract owner's gross estate for tax purposes.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
established pursuant to the Internal Revenue Code. The formula excludes from
income the amount invested in the contract divided by the number of anticipated
payments until the full investment in the contract is recovered. Thereafter all
distributions are fully taxable.
If a distribution of income is made from a Tax Sheltered Annuity prior to the
date that the owner attains the age of 59-1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- - made to a beneficiary on or after the death of the owner;
- - attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- - part of a series of substantially equal periodic payments made not less
frequently than annually made for the life (or life expectancy) of the
owner, or the joint lives (or joint life expectancies) of the owner and his
or her designated beneficiary;
- - for qualified higher education expenses;
- - used for expenses attributable to the purchase of a home for a qualified
first-time buyer; or
- - made to the owner after separation from service with his or her employer
after age 55.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is
owned by a natural person is not taxable until it is distributed from the
contract.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, any portion of the contract that is assigned or
pledged; or any portion of the contract that is transferred by gift. For these
purposes, a transfer by gift may occur upon annuitization if the contract owner
and the annuitant are not the same individual.
With respect to annuity distributions on or after the annuitization date, a
portion of each annuity payment is excludable from taxable income. The amount
excludable is based on the ratio between the contract owner's investment in the
contract and the expected return on the contract. Once the entire investment in
the contract is recovered, all distributions are fully includable in income. The
maximum amount excludable from income is the investment in the contract. If the
annuitant dies before the entire investment in the contract has been excluded
from income, and
33
<PAGE> 36
as a result of the annuitant's death no more payments are due under the
contract, then the unrecovered investment in the contract may be deducted on his
or her final tax return.
In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments
that were made prior to August 14, 1982. For those contracts, distributions that
are made prior to the annuitization date are treated first as a recovery of the
investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Internal Revenue Code imposes a penalty tax if a distribution is made before
the contract owner reaches age 59-1/2. The amount of the penalty is 10% of the
portion of any distribution that is includible in gross income. The penalty tax
does not apply if the distribution is:
- - the result of a contract owner's death;
- - the result of a contract owner's disability, as defined in the Internal
Revenue Code;
- - one of a series of substantially equal periodic payments made over the life
(or life expectancy) of the contract owner or the joint lives (or joint
life expectancies) of the contract owner and the beneficiary selected by
the contract owner to receive payment under the annuity payment option
selected by the contract owner; or
- - is allocable to an investment in the contract before August 14, 1982.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
by individuals. Different rules (the so-called "non-natural persons" rules)
apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities are not treated as annuity contracts under the Internal Revenue Code.
Therefore, income earned under a Non-Qualified Contract that is owned by a
non-natural person is taxed as ordinary income during the taxable year that it
is earned. Taxation is not deferred, even if the income is not distributed out
of the contract. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent of an individual is
treated as owned by the individual. This would cause the contract to be treated
as an annuity under the Internal Revenue Code, allowing tax deferral. However,
this exception does not apply when the non-natural person is an employer that
holds the contract under a non-qualified deferred compensation arrangement for
one or more employees.
The non-natural persons rules also do not apply to contracts that are:
- - acquired by the estate of a decedent by reason of the death of the
decedent;
- - issued in connection with certain qualified retirement plans and individual
retirement plans; or
- - purchased by an employer upon the termination of certain qualified
retirement plans.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. If the distribution is from a Tax Sheltered Annuity,
it will be subject to mandatory 20% withholding that cannot be waived, unless:
- - the distribution is made directly to another Tax Sheltered Annuity or IRA;
or
- - the distribution satisfies the minimum distribution requirements imposed by
the Internal Revenue Code.
In addition, contract owners may not waive withholding if the distribution is
subject to mandatory back-up withholding (if no taxpayer identification number
is given or if the Internal
34
<PAGE> 37
Revenue Service notifies Nationwide that mandatory back-up withholding is
required). Mandatory back-up withholding rates are 31% of income that is
distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- - who would be required to include the contract, death benefit, distribution,
or other payment in his or her federal gross estate at his or her death; or
- - who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification
35
<PAGE> 38
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 believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., Dollar Cost Averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
- semi-annual reports as of June 30 containing financial statements for
the variable account; and
- annual reports as of December 31 containing financial statements for
the variable account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits relating to life insurance and annuity
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract 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 sought to
represent a class of variable life insurance contract 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 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, motions to
dismiss the complaint filed by Nationwide and American Century. The remaining
claims against Nationwide allege securities fraud, common law
36
<PAGE> 39
fraud, civil conspiracy, and breach of contract. The District Court, on December
2, 1998, issued an order denying plaintiffs' motion for class certification and
the appeals court declined to review the order denying class certification upon
interlocutory appeal. On June 11, 1999, the District Court denied the
plaintiffs' motion to amend their complaint and reconsider class certification.
In January 2000 Nationwide and American Century settled this lawsuit now limited
to the claims of the two named plaintiffs. On February 9, 2000 the court
dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended complaint seeks
unspecified compensatory and punitive damages. No class has been certified. On
June 11, 1999, Nationwide and the other named defendants filed a motion to
dismiss the amended complaint. On March 8, 2000, the Court denied the motion to
dismiss the amended complaint filed by Nationwide and the other named
defendants. Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, NISC, is not engaged in any litigation of any material
nature.
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
37
<PAGE> 40
- Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- Lipper Analytical Services, Inc.,
- CDA/Wiesenberger;
- Morningstar;
- Donoghue's;
- magazines such as:
Money;
Forbes;
Kiplinger's Personal Finance Magazine;
Financial World;
Consumer Reports;
Business Week;
Time;
Newsweek;
National Underwriter; and
News and World Report;
- LIMRA;
- Value;
- Best's Agent Guide;
- Western Annuity Guide;
- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
- Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized average annual total return,
calculated in a manner prescribed by the SEC, and nonstandardized total return.
Average annual total return shows the percentage rate of return of a
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.
38
<PAGE> 41
If the underlying mutual fund has been available in the variable account for
less than one year (or if the underlying mutual fund has been effective for less
than one year), standardized and non-standardized performance is annualized.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1999.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
39
<PAGE> 42
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 YEARS OR DATE DATE FUND
FUND AVAILABLE ADDED TO
5 YEARS TO IN VARIABLE VARIABLE
SUB-ACCOUNT OPTION 1 YEAR TO 12/31/99 12/31/99 ACCOUNT TO ACCOUNT
12/31/99
<S> <C> <C> <C> <C>
Evergreen Variable Trust - Evergreen VA 38.88% N/A 24.89% 03-03-97
Omega Fund (formerly, Evergreen VA
Aggressive Growth Fund)
Evergreen Variable Trust- Evergreen VA 15.01% N/A 18.53% 03-01-96
Fund
Evergreen Variable Trust- Evergreen VA 2.75% N/A 14.36% 03-01-96
Foundation Fund
Evergreen Variable Trust- Evergreen VA 10.61% N/A 17.41% 03-01-96
Growth and Income Fund
Evergreen Variable Trust - Evergreen VA 16.67% N/A 15.57% 03-03-97
Global Leaders Fund
Evergreen Variable Trust - Evergreen VA 4.20% N/A 0.56% 05/01/98
Small Cap Value Fund (formerly,
Evergreen VA Small Cap Equity Income
Fund)
Evergreen Variable Trust- Evergreen VA -6.09% N/A 1.53% 03-03-97
Strategic Income Fund
Fidelity VIP High Income Portfolio 0.34% N/A 5.47% 03-01-96
Fidelity VIP Overseas Portfolio 34.33% N/A 17.20% 03-01-96
Fidelity VIP II Asset Manager Portfolio 3.24% N/A 13.14% 03-01-96
Fidelity VIP II Contrafund(R) Portfolio 16.22% N/A 22.76% 02-03-97
Fidelity VIP III Growth Opportunities -3.49% N/A 14.87% 02-03-97
Portfolio
NSAT- Government Bond Fund -9.75% N/A 2.94% 03-01-96
NSAT- Money Market Fund -2.92% N/A 2.79% 02-29-96
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 YEARS TO
5 YEARS TO 12/31/99 OR LIFE DATE FUND
SUB-ACCOUNT OPTION 1 YEAR TO 12/31/99 12/31/99 OF FUND EFFECTIVE
<S> <C> <C> <C> <C>
Evergreen Variable Trust - Evergreen VA 45.18% N/A 25.86% 02-28-97
Omega Fund (formerly, Evergreen VA
Aggressive Growth Fund)
Evergreen Variable Trust- Evergreen VA 21.31% N/A 19.11% 03-01-96
Fund
Evergreen Variable Trust- Evergreen VA 9.09% N/A 15.00% 03-01-96
Foundation Fund
Evergreen Variable Trust- Evergreen VA 16.91% N/A 18.00% 03-01-96
Growth and Income Fund
Evergreen Variable Trust- Evergreen VA 22.97% N/A 16.72% 02-28-97
Global Leaders Fund
Evergreen Variable Trust - Evergreen VA 10.50% N/A 3.75% 05-01-98
Small Cap Value Fund (formerly,
Evergreen VA Small Cap Equity Income
Fund)
Evergreen Variable Trust- Evergreen VA 0.21% N/A 3.05% 02-28-97
Strategic Income Fund
Fidelity VIP High Income Portfolio 6.64% 9.31% 10.87% 09-19-85
Fidelity VIP Overseas Portfolio 40.63% 15.73% 9.87% 01-28-87
Fidelity VIP II Asset Manager Portfolio 9.54% 14.01% 11.58% 02-28-97
Fidelity VIP II Contrafund(R) Portfolio 22.52% N/A 25.98% 01-03-95
Fidelity VIP III Growth Opportunities 2.81% N/A 19.84% 01-03-95
Portfolio
NSAT- Government Bond Fund -3.71% 5.96% 6.17% 11-08-82
NSAT- Money Market Fund 3.38% 3.76% 3.53% 11-10-81
</TABLE>
40
<PAGE> 43
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>
41
<PAGE> 44
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
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 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
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
42
<PAGE> 45
be no assurance that the Fund's investment objective will be achieved.
- EVERGREEN VA OMEGA FUND (FORMERLY, 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 SMALL CAP VALUE FUND (FORMERLY, 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,
43
<PAGE> 46
bonds and short-term fixed income instruments.
- VIP II CONTRAFUND(R) 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 mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Villanova Mutual
Fund Capital Trust ("VMF"), an indirect subsidiary of Nationwide Financial
Services, Inc.
- NSAT-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.
44
<PAGE> 47
APPENDIX B : CONDENSED FINANCIAL INFORMATION
Accumulation unit values for an accumulation unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
Evergreen Variable Trust- 15.661734 17.085223 9.09% 2,178,349 1999
Evergreen VA Foundation Fund - Q 14.357474 15.661734 9.08% 1,231,590 1998
11.393285 14.357474 26.02% 513,556 1997
10.000000 11.393285 13.93% 291,176 1996(1)
Evergreen Variable Trust- 15.661734 17.085223 9.09% 4,480,908 1999
Evergreen VA Foundation Fund - NQ 14.357474 15.661734 9.08% 3,082,969 1998
11.393285 14.357474 26.02% 1,362,798 1997
10.000000 11.393285 13.93% 835,841 1996(1)
Evergreen Variable Trust - 16.112386 19.546002 21.31% 840,158 1999
Evergreen VA Fund - Q 15.352653 16.112386 4.95% 611,181 1998
11.351897 15.352653 35.24% 253,280 1997
10.000000 11.351897 13.52% 121,148 1996(1)
Evergreen Variable Trust - 16.1123869 19.546002 21.31% 1,858,918 1999
Evergreen VA Fund - NQ 15.352653 16.112386 4.95% 1,639,136 1998
11.351897 15.352653 35.24% 772,073 1997
10.000000 11.351897 13.52% 419,319 1996(1)
Evergreen Variable Trust - Evergreen VA 12.608870 15.505471 22.97% 409,028 1999
Global Leaders Fund-Q 10.753040 12.608870 17.26% 187,738 1998
10.000000 10.753040 7.53% 61,612 1997(3)
Evergreen Variable Trust - Evergreen VA 12.608870 15.505471 22.97% 886,768 1999
Global Leaders Fund-NQ 10.753040 12.608870 17.26% 469,605 1998
10.000000 10.753040 7.53% 106,774 1997(3)
Evergreen Variable Trust - 16.130864 18.858129 16.91% 1,173,630 1999
Evergreen VA Growth and Income Fund - Q 15.614450 16.130864 3.31% 893,262 1998
11.759862 15.614450 32.78% 406,022 1997
10.000000 11.759862 17.60% 200,982 1996(1)
Evergreen Variable Trust - 16.130864 18.858129 16.91% 2,738,415 1999
Evergreen VA Growth and Income 15.614450 16.130864 3.31% 2,453,682 1998
Fund - NQ 11.759862 15.614450 32.78% 1,206,385 1997
10.000000 11.759862 17.60% 621,484 1996(1)
Evergreen Variable Trust - Evergreen VA 13.224364 19.198916 45.18% 379,798 1999
Omega Fund (formerly, 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 13.224364 19.198916 45.18% 789,802 1999
Omega Fund (formerly, 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 13.570000 19.980000 47.24% 100,000 1999
Omega Fund (formerly, 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
</TABLE>
45
<PAGE> 48
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
UNDERLYING AT BEGINNING AT END ACCUMULATION UNITS AT END
MUTUAL FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
Evergreen Variable Trust - Evergreen VA 9.623143 10.633805 10.50% 114,972 1999
Small Cap Value Fund (formerly, Evergreen
VA Small Cap Equity Income Fund ) - Q 10.000000 9.623143 -3.77% 30,706 1998(4)
Evergreen Variable Trust - Evergreen VA 9.623143 10.633805 10.50% 248,252 1999
Small Cap Value Fund (formerly, Evergreen
VA Small Cap Equity Income Fund) - NQ 10.000000 9.623143 -3.77% 105,451 1998(4)
Evergreen Variable Trust - Evergreen VA 9.714315 10.886886 12.07% 100,000 1999
Small Cap Value Fund (formerly, 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 10.866478 10.889649 0.21% 592,386 1999
Strategic Income Fund-Q 10.405791 10.866478 4.43% 294,309 1998
10.000000 10.405791 4.06% 30,744 1997(3)
Evergreen Variable Trust - Evergreen VA 10.866478 10.889649 0.21% 1,062,973 1999
Strategic Income Fund-NQ 10.405791 10.866478 4.43% 632,171 1998
10.000000 10.405791 4.06% 79,968 1997(3)
Fidelity Variable Insurance Products Fund - 11.837723 12.623913 6.64% 36,478 1999
VIP High Income Portfolio - Q
12.549013 11.837723 -5.67% 36,899 1998
10.816268 12.549013 16.02% 31,204 1997
10.000000 10.816268 8.16% 26,822 1996(1)
Fidelity Variable Insurance Products Fund - 11.837723 12.623913 6.64% 123,333 1999
VIP High Income Portfolio - NQ
12.549013 11.837723 -5.67% 139,559 1998
10.816268 12.549013 16.02% 133,009 1997
10.000000 10.816268 8.16% 77,056 1996(1)
Fidelity Variable Insurance Products Fund - 13.23057 18.736556 40.63% 32,318 1999
VIP Overseas Portfolio - Q
11.984120 13.323057 11.17% 34,092 1998
10.895270 11.984120 9.99% 32,632 1997
10.000000 10.895270 8.95% 22,959 1996(1)
Fidelity Variable Insurance 13.32057 18.736556 40.63% 164,086 1999
Products Fund - VIP Overseas Portfolio - NQ
11.984120 13.323057 11.17% 184,444 1998
10.895270 11.984120 9.99% 189,428 1997
10.000000 10.895270 8.95% 99,000 1996(1)
Fidelity Variable Insurance 14.983855 16.412859 9.54% 32,327 1999
Products Fund II - VIP II Asset Manager 13.208527 14.983855 13.44% 35,587 1998
Portfolio - Q 11.103069 13.208527 18.96% 35,177 1997
10.000000 11.103069 11.03% 32,538 1996(1)
Fidelity Variable Insurance 14.983855 16.412859 9.54% 108,297 1999
Products Fund II - VIP II Asset Manager 13.208527 14.983855 13.44% 108,376 1998
Portfolio - NQ 11.103069 13.208527 18.96% 1,422,202 1997
10.000000 11.103069 11.03% 77,328 1996(1)
</TABLE>
46
<PAGE> 49
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 15.176535 18.593650 22.52% 23,459 1999
Products Fund II - VIP II Contrafund(R) 11.841787 15.176535 28.16% 17,867 1998
Portfolio-Q 10.000000 11.841787 18.42% 10,250 1997(2)
Fidelity Variable Insurance 15.176535 18.593650 22.52% 169,889 1999
Products Fund II - VIP II Contrafund(R) 11.841787 15.176535 28.16% 120,560 1998
Portfolio-NQ 10.000000 11.841787 18.42% 90,497 1997(2)
Fidelity Variable Insurance 14.985858 15.407270 2.81% 43,970 1999
Products Fund III - VIP III Growth 12.196412 14.985852 22.87% 38,197 1998
Opportunities Portfolio- Q 10.000000 12.196412 21.96% 14,976 1997(2)
Fidelity Variable Insurance 14.985858 15.407270 2.81% 194,054 1999
Products Fund III - VIP III Growth 12.196412 14.985852 22.87% 175,401 1998
Opportunities Portfolio-NQ 10.000000 12.196412 21.96% 108,817 1997(2)
Nationwide Separate Account 11.981662 11.536586 -3.71% 7,558 1999
Trust- Government Bond 11.157782 11.981662 7.38% 9,045 1998
Fund - Q 10.318689 11.157782 8.13% 7,513 1997
10.000000 10.318689 3.19% 8,959 1996(1)
Nationwide Separate Account 11.981662 11.536586 -3.71% 101,961 1999
Trust- Government Bond 11.157782 11.981662 7.38% 105,464 1998
Fund - NQ 10.318689 11.157782 8.13% 18,506 1997
10.000000 10.318689 3.19% 12,014 1996(1)
Nationwide Separate Account 11.097664 11.472786 3.38% 247,552 1999
Trust- Money Market 10.691554 11.097664 3.80% 189,512 1998
Fund - Q* 10.301567 10.691554 3.79% 64,006 1997
10.000000 10.301567 3.02% 25,641 1996(1)
Nationwide Separate Account 11.097664 11.472786 3.38% 450,819 1999
Trust- Money Market 10.691554 11.097664 3.80% 290,059 1998
Fund - NQ* 10.301567 10.691554 3.79% 96,090 1997
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, 1999 was 3.97%.
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 Value Fund (formerly,
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.
47
<PAGE> 50
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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, 2000. 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"). Nationwide is a member of the Nationwide
group of companies and all of Nationwide's common stock is owned by Nationwide
Financial Services, Inc. ("NFS"), a holding company. NFS has two classes of
common stock outstanding with different voting rights enabling Nationwide
Corporation (the holder of all of the outstanding Class B Common Stock) to
control NFS. Nationwide Corporation is a holding company, as well. All of its
common stock is held by Nationwide Mutual Insurance Company (95.24%) and
Nationwide Mutual Fire Insurance Company (4.76%), the ultimate controlling
persons of the Nationwide group of companies. The Nationwide group of companies
is one of America's largest insurance and financial services family of
companies, with combined assets of over $120 billion as of December 31, 1999.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each 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
<PAGE> 51
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Investment Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio
43215, a wholly owned subsidiary of Nationwide. During the fiscal years ended
1999, 1998 and 1997, no underwriting commissions have been paid by Nationwide to
NISC.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1999, the
NSAT- Money Market Fund's seven-day current unit value yield was 3.97%. The
NSAT-Money Market Fund's seven-day effective yield is computed similarly but
includes the effect of assumed compounding on an annualized basis of the current
unit value yield quotations of the Fund. At December 31, 1999, the seven-day
effective yield was 4.05%.
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.
If the underlying mutual fund has been available in the variable account for
less than one year (or if the underlying mutual fund has been effective for less
than one year), standardized and non-standardized performance is annualized.
2
<PAGE> 52
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 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
<PAGE> 53
<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 (comprised of the
sub-accounts listed in note 1(b)) (collectively, "the Account") as of December
31, 1999, and the related statements of operations and changes in contract
owners' equity for each of the years in the two year period then ended. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Account as of December
31, 1999, and the results of its operations and its changes in contract owners'
equity for each of the years in the two year period then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 18, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Evergreen - VA Equity Index Fund (EvEIx)
435,045 shares (cost $4,704,110) ............................................................ $ 4,994,314
Evergreen - VA Foundation Fund (EvFound)
7,246,783 shares (cost $99,883,662) ......................................................... 113,774,499
Evergreen - VA Fund (EvFund)
3,047,740 shares (cost $46,678,475) ......................................................... 52,756,379
Evergreen - VA Global Leaders Fund (EvGloLead)
1,267,627 shares (cost $16,176,541) ......................................................... 20,091,883
Evergreen - VA Growth and Income Fund (EvGrInc)
4,230,169 shares (cost $63,819,992) ......................................................... 73,774,146
Evergreen - VA International Growth Fund (EvIntGr)
287,710 shares (cost $2,834,759) ............................................................ 3,659,672
Evergreen - VA Masters Fund (EvMasters)
1,503,793 shares (cost $15,343,546) ......................................................... 18,902,682
Evergreen - VA Omega Fund (EvOmega)
1,223,887 shares (cost $18,798,344) ......................................................... 24,453,255
Evergreen - VA Small Cap Equity Income Fund (EvSmCapEI)
488,293 shares (cost $4,766,153) ............................................................ 4,951,295
Evergreen - VA Strategic Income Fund (EvStratInc)
1,707,035 shares (cost $17,872,299) ......................................................... 18,026,286
Fidelity VIP - High Income Portfolio (FidVIPHI)
178,377 shares (cost $2,185,324) ............................................................ 2,017,449
Fidelity VIP - Overseas Portfolio (FidVIPOv)
134,100 shares (cost $2,523,919) ............................................................ 3,679,713
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
123,623 shares (cost $2,013,516) ............................................................ 2,308,049
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
123,329 shares (cost $2,763,322) ............................................................ 3,595,029
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
158,415 shares (cost $3,080,077) ............................................................ 3,667,312
Nationwide SAT - Government Bond Fund (NSATGvtBd)
117,098 shares (cost $1,356,303) ............................................................ 1,263,484
Nationwide SAT - Money Market Fund (NSATMyMkt)
8,012,224 shares (cost $8,012,224) .......................................................... 8,012,224
---------------
Total investments ........................................................................ 359,927,671
Accounts receivable ............................................................................ 14,064
---------------
Total assets ............................................................................. 359,941,735
ACCOUNTS PAYABLE ..................................................................................... 5,656
---------------
CONTRACT OWNERS' EQUITY .............................................................................. $ 359,936,079
===============
</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 Equity Index Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 132,858 $ 11.381773 $ 1,512,160 14%(a)
Non-tax qualified . . . . . . . . . . . . . . .. 306,687 11.381773 3,490,642 14%(a)
Evergreen - VA Foundation Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 2,178,349 17.085223 37,217,578 9%
Non-tax qualified . . . . . . . . . . . . . . .. 4,480,908 17.085223 76,557,312 9%
Evergreen - VA Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 840,158 19.546002 16,421,730 21%
Non-tax qualified . . . . . . . . . . . . . . .. 1,858,918 19.546002 36,334,415 21%
Evergreen - VA Global Leaders Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 409,028 15.505471 6,342,172 23%
Non-tax qualified . . . . . . . . . . . . . . .. 886,768 15.505471 13,749,756 23%
Evergreen - VA Growth and Income Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 1,173,630 18.858129 22,132,466 17%
Non-tax qualified . . . . . . . . . . . . . . .. 2,738,415 18.858129 51,641,383 17%
Evergreen - VA International Growth Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 58,435 12.730754 743,922 36%
Non-tax qualified . . . . . . . . . . . . . . .. 127,084 12.730754 1,617,875 36%
Initial Funding by Depositor (note 1a) . . . .... 100,000 12.979191 1,297,919 38%
Evergreen - VA Masters Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 368,926 12.595397 4,646,769 26%(a)
Non-tax qualified . . . . . . . . . . . . . . .. 726,670 12.595397 9,152,697 26%(a)
Initial Funding by Depositor (note 1a) . . . .... 400,000 12.758280 5,103,312 28%(a)
Evergreen - VA Omega Growth Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 379,798 19.198916 7,291,710 45%
Non-tax qualified . . . . . . . . . . . . . . .. 789,802 19.198916 15,163,342 45%
Initial Funding by Depositor (note 1a) . . . .... 100,000 19.980000 1,998,000 47%
Evergreen - VA Small Cap Equity Income:
Tax qualified . . . . . . . . . . . . . . . . . . 114,972 10.633805 1,222,590 11%
Non-tax qualified . . . . . . . . . . . . . . .. 248,252 10.633805 2,639,863 11%
Initial Funding by Depositor (note 1a) . . . .... 100,000 10.886886 1,088,689 12%
Evergreen - VA Strategic Income Fund:
Tax qualified . . . . . . . . . . . . . . . . . . 592,386 10.889649 6,450,876 0%
Non-tax qualified . . . . . . . . . . . . . . .. 1,062,973 10.889649 11,575,403 0%
Fidelity VIP - High Income Portfolio:
Tax qualified . . . . . . . . . . . . . . . . . . 36,478 12.623913 460,495 7%
Non-tax qualified . . . . . . . . . . . . . . .. 123,333 12.623913 1,556,945 7%
</TABLE>
(Continued)
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENT OF ASSETS,LIABILITIES AND CONTRACT OWNERS' EQUITY, Continued
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN(b)
--------- ---------- ---------
<S> <C> <C> <C> <C>
Fidelity VIP - Overseas Portfolio:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 32,318 18.736556 605,528 41%
Non-tax qualified . . . . . . . . . . . . . . . . . . .... 164,086 18.736556 3,074,407 41%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 32,327 16.412859 530,578 10%
Non-tax qualified . . . . . . . . . . . . . . . . . . .... 108,297 16.412859 1,777,463 10%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 23,459 18.593650 436,188 23%
Non-tax qualified . . . . . . . . . . . . . . . . . . .... 169,889 18.593650 3,158,857 23%
Fidelity VIP-III - Growth Opportunities Portfolio:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 43,970 15.407270 677,458 3%
Non-tax qualified . . . . . . . . . . . . . . . . . . .... 194,054 15.407270 2,989,842 3%
Nationwide SAT - Government Bond Fund:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 7,558 11.536586 87,194 (4)%
Non-tax qualified . . . . . . . . . . . . . . . . . . .... 101,961 11.536586 1,176,282 (4)%
Nationwide SAT - Money Market Fund:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 247,552 11.472786 2,840,111 3%
Non-tax qualified . . . . . . . . . . . . . . . . . . .... 450,819 11.472786 5,172,150 3%
========= =========== -------------
$ 359,936,079
=============
</TABLE>
(a) Non-annualized. The return was computed for the period 10/01/99 and 2/01/99
(effective dates) through 12/31/99 for Evergreen - VA Equity Index Fund and
Evergreen - VA Masters Fund, respectively.
(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 CHANGES IN
CONTRACT OWNERS' EQUITY
- ---------------------------------
STATEMENTS OF OPERATIONS
- ---------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Total EvEIX
-------------------------------------------------------------
1999 1998 1999 1998
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 3,507,963 2,674,845 12,815 -
Mortality, expense and administration
charges (note 2)............................... (3,718,837) (2,047,220) (16,525) -
-------------- -------------- -------------- --------------
Net investment activity........................ (210,874) 627,625 (3,710) -
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............ 25,344,482 18,362,960 12,392 -
Cost of mutual fund shares sold.................. (19,811,330) (15,304,263) (11,578) -
-------------- -------------- -------------- --------------
Realized gain (loss) on investments............ 5,533,152 3,058,697 814 -
Change in unrealized gain (loss) on investments 30,906,462 1,749,886 290,204 -
-------------- -------------- -------------- --------------
Net gain (loss) on investments................. 36,439,614 4,808,583 291,018 -
-------------- -------------- -------------- --------------
Reinvested capital gains......................... 8,527,021 3,792,356 8,821 -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations........... 44,755,761 9,228,564 296,129 -
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................ 134,498,291 120,644,969 2,716,711 -
Transfers between funds.......................... - - 2,015,594 -
Redemptions...................................... (29,204,207) (9,976,873) (35,186) -
Contingent deferred sales charges (note 2) (621,637) (221,448) (844) -
Adjustments to maintain reserves................. 38,982 (2,045) 10,398 -
-------------- -------------- -------------- --------------
Net equity transactions...................... 104,711,429 110,444,603 4,706,673 -
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.............. 149,467,190 119,673,167 5,002,802 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 210,468,889 90,795,722 - -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD.............. $ 359,936,079 210,468,889 5,002,802 -
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
EvFound EvFund
----------------------------------------------------------------
1999 1998 1999 1998
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 1,986,621 1,205,584 327,041 -
Mortality, expense and administration
charges (note 2)............................... (1,266,346) (683,822) (618,988) (374,658)
------------- -------------- -------------- --------------
Net investment activity........................ 720,275 521,762 (291,947) (374,658)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............ 2,388,932 2,201,565 4,950,958 3,741,560
Cost of mutual fund shares sold.................. (1,597,023) (1,554,017) (3,136,181) (2,464,952)
------------- -------------- -------------- --------------
Realized gain (loss) on investments............ 791,909 647,548 1,814,777 1,276,608
Change in unrealized gain (loss) on investments 7,234,104 1,967,032 3,674,261 (993,694)
------------- -------------- -------------- --------------
Net gain (loss) on investments................. 8,026,013 2,614,580 5,489,038 282,914
------------- -------------- -------------- --------------
Reinvested capital gains......................... 198,134 1,011,705 3,898,701 1,170,913
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations........... 8,944,422 4,148,047 9,095,792 1,079,169
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................ 46,265,474 40,873,811 14,204,940 21,624,968
Transfers between funds.......................... (1,581,847) (345,390) (3,198,407) (264,570)
Redemptions...................................... (8,857,380) (3,807,693) (5,182,813) (1,784,878)
Contingent deferred sales charges (note 2) (199,602) (78,359) (97,994) (36,780)
Adjustments to maintain reserves................. 387 3 (213) (385)
------------- -------------- -------------- --------------
Net equity transactions...................... 35,627,032 36,642,372 5,725,513 19,538,355
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.............. 44,571,454 40,790,419 14,821,305 20,617,524
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 69,203,436 28,413,017 37,934,840 17,317,316
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD.............. $ 113,774,890 69,203,436 52,756,145 37,934,840
============= ============== ============== ==============
(Continued)
</TABLE>
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- --------------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- --------------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EvGloLead EvGrInc
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 81,336 53,046 276,598 445,613
Mortality, expense and administration
charges (note 2)............................... (179,280) (70,467) (872,787) (589,626)
-------------- -------------- -------------- --------------
Net investment activity........................ (97,944) (17,421) (596,189) (144,013)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............ 2,051,911 333,363 4,878,973 2,532,809
Cost of mutual fund shares sold.................. (1,404,129) (320,068) (3,098,368) (1,711,193)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments............ 647,782 13,295 1,780,605 821,616
Change in unrealized gain (loss) on investments 2,929,610 937,511 5,709,832 (1,097,281)
-------------- -------------- -------------- --------------
Net gain (loss) on investments................. 3,577,392 950,806 7,490,437 (275,665)
-------------- -------------- -------------- --------------
Reinvested capital gains......................... - - 3,657,343 1,025,093
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations........... 3,479,448 933,385 10,551,591 605,415
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................ 8,792,541 5,846,998 18,028,055 31,886,459
Transfers between funds.......................... 851,675 106,880 (3,768,754) (880,523)
Redemptions...................................... (2,583,521) (202,140) (6,559,622) (2,663,166)
Contingent deferred sales charges (note 2) (30,441) (1,289) (145,015) (59,682)
Adjustments to maintain reserves................. 53 (281) (298) 243
-------------- -------------- -------------- --------------
Net equity transactions...................... 7,030,307 5,750,168 7,554,366 28,283,331
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.............. 10,509,755 6,683,553 18,105,957 28,888,746
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 9,582,173 2,898,620 55,667,892 26,779,146
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD.............. $ 20,091,928 9,582,173 73,773,849 55,667,892
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
EvIntGr EvMasters
------------------------------- -------------------------------
1999 1998 1999 1998
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 39,598 - 17,853 -
Mortality, expense and administration
charges (note 2)............................... (17,896) (1,172) (95,998) -
------------- -------------- -------------- --------------
Net investment activity........................ 21,702 (1,172) (78,145) -
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............ 235,602 25,398 307,914 -
Cost of mutual fund shares sold.................. (193,938) (28,372) (286,904) -
------------- -------------- -------------- --------------
Realized gain (loss) on investments............ 41,664 (2,974) 21,010 -
Change in unrealized gain (loss) on investments 855,427 (30,514) 3,559,136 -
------------- -------------- -------------- --------------
Net gain (loss) on investments................. 897,091 (33,488) 3,580,146 -
------------- -------------- -------------- --------------
Reinvested capital gains......................... 28,914 - 227,368 -
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations........... 947,707 (34,660) 3,729,369 -
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................ 1,347,355 1,349,323 14,110,206 -
Transfers between funds.......................... (32,232) 109,498 1,297,990 -
Redemptions...................................... (26,285) - (228,112) -
Contingent deferred sales charges (note 2) (1,035) - (6,772) -
Adjustments to maintain reserves................. 44 1 97 -
------------- -------------- -------------- --------------
Net equity transactions...................... 1,287,847 1,458,822 15,173,409 -
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.............. 2,235,554 1,424,162 18,902,778 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 1,424,162 - - -
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD.............. $ 3,659,716 1,424,162 18,902,778 -
============= ============== ============== ==============
</TABLE>
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ----------------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- ----------------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EvOmega EvSmCapEI
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ - - 35,080 26,284
Mortality, expense and administration
charges (note 2)................................ (108,620) (23,680) (36,562) (6,043)
-------------- -------------- -------------- --------------
Net investment activity......................... (108,620) (23,680) (1,482) 20,241
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............. 415,768 661,548 273,569 61,160
Cost of mutual fund shares sold................... (286,660) (637,865) (270,309) (66,317)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments............. 129,108 23,683 3,260 (5,157)
Change in unrealized gain (loss) on investments 4,895,321 663,791 184,094 1,048
-------------- -------------- -------------- --------------
Net gain (loss) on investments.................. 5,024,429 687,474 187,354 (4,109)
-------------- -------------- -------------- --------------
Reinvested capital gains.......................... - - 199,108 2,958
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations. 4,915,809 663,794 384,980 19,090
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.................................. 12,221,252 1,604,948 2,265,039 2,256,250
Transfers between funds............................ 3,830,432 (22,143) 150,571 9,853
Redemptions........................................ (527,899) (76,952) (156,174) (3,501)
Contingent deferred sales charges (note 2) (21,649) (169) (6,643) -
Adjustments to maintain reserves................... (3,503) (30) 31,679 (2)
-------------- -------------- -------------- --------------
Net equity transactions........................ 15,498,633 1,505,654 2,284,472 2,262,600
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 20,414,442 2,169,448 2,669,452 2,281,690
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 4,038,610 1,869,162 2,281,690 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD................ $ 24,453,052 4,038,610 4,951,142 2,281,690
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
EvStratInc FidVIPHI
------------------------------ ------------------------------
1999 1998 1999 1998
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. - 421,087 192,964 166,235
Mortality, expense and administration
charges (note 2)................................. (203,618) (81,408) (30,227) (31,839)
------------- -------------- -------------- --------------
Net investment activity.......................... (203,618) 339,679 162,737 134,396
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.............. 2,710,390 1,064,321 369,935 637,651
Cost of mutual fund shares sold.................... (2,653,412) (1,035,887) (407,073) (608,365)
------------- -------------- -------------- --------------
Realized gain (loss) on investments.............. 56,978 28,434 (37,138) 29,286
Change in unrealized gain (loss) on investments 275,154 (130,808) 3,757 (397,432)
------------- -------------- -------------- --------------
Net gain (loss) on investments................... 332,132 (102,374) (33,381) (368,146)
------------- -------------- -------------- --------------
Reinvested capital gains........................... - - 7,214 105,628
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations. 128,514 237,305 136,570 (128,122)
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.................................. 9,944,768 8,368,709 122,043 560,932
Transfers between funds............................ (778,833) 625,598 (182,540) (309,711)
Redemptions........................................ (2,404,082) (250,007) (143,934) (93,106)
Contingent deferred sales charges (note 2) (46,706) (3,783) (3,570) (1,478)
Adjustments to maintain reserves................... (4) (75) 10 (365)
------------- -------------- -------------- --------------
Net equity transactions........................ 6,715,143 8,740,442 (207,991) 156,272
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 6,843,657 8,977,747 (71,421) 28,150
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 11,182,622 2,204,875 2,088,861 2,060,711
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD................ 18,026,279 11,182,622 2,017,440 2,088,861
============= ============== ============== ==============
(Continued)
</TABLE>
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- ------------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- ------------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
FidVIPOv FidVIPAM
----------------------------- -----------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 44,638 51,626 71,275 60,892
Mortality, expense and administration
charges (note 2)................................. (42,013) (40,291) (30,804) (28,570)
-------------- -------------- -------------- --------------
Net investment activity.......................... 2,625 11,335 40,471 32,322
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.............. 407,605 298,379 264,224 180,711
Cost of mutual fund shares sold.................... (350,564) (271,550) (231,235) (165,427)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments.............. 57,041 26,829 32,989 15,284
Change in unrealized gain (loss) on investments 948,170 100,727 39,345 24,653
-------------- -------------- -------------- --------------
Net gain (loss) on investments................... 1,005,211 127,556 72,334 39,937
-------------- -------------- -------------- --------------
Reinvested capital gains........................... 71,996 152,162 90,281 182,677
Net increase (decrease) in contract owners' -------------- -------------- -------------- --------------
equity resulting from operations............. 1,079,832 291,053 203,086 254,936
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.................................. 33,812 146,809 20,375 157,578
Transfers between funds............................ (238,092) (96,968) 119,203 (49,668)
Redemptions........................................ (104,841) (88,116) (187,208) (91,144)
Contingent deferred sales charges (note 2) (2,597) (1,809) (4,545) (1,133)
Adjustments to maintain reserves................... 253 (595) 10 (287)
-------------- -------------- -------------- --------------
Net equity transactions........................ (311,465) (40,679) (52,165) 15,346
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 768,367 250,374 150,921 270,282
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 2,911,568 2,661,194 2,157,120 1,886,838
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD................ $ 3,679,935 2,911,568 2,308,041 2,157,120
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Fid VIPCon FidVIPGrOp
------------------------------- -------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 10,312 9,259 32,669 19,139
Mortality, expense and administration
charges (note 2)................................. (37,912) (23,433) (50,881) (33,857)
------------- -------------- -------------- --------------
Net investment activity.......................... (27,600) (14,174) (18,212) (14,718)
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold.............. 299,195 486,379 309,430 264,446
Cost of mutual fund shares sold.................... (211,177) (386,936) (203,224) (195,987)
------------- -------------- -------------- --------------
Realized gain (loss) on investments.............. 88,018 99,443 106,206 68,459
Change in unrealized gain (loss) on investments 455,787 269,080 (47,401) 433,931
------------- -------------- -------------- --------------
Net gain (loss) on investments................... 543,805 368,523 58,805 502,390
------------- -------------- -------------- --------------
Reinvested capital gains........................... 75,624 68,120 61,077 66,530
Net increase (decrease) in contract owners' ------------- -------------- -------------- --------------
equity resulting from operations............. 591,829 422,469 101,670 554,202
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.................................. 48,616 337,230 61,100 861,311
Transfers between funds............................ 942,089 179,052 430,707 389,976
Redemptions........................................ (85,928) (30,229) (123,116) (109,496)
Contingent deferred sales charges (note 2) (2,429) (490) (4,014) (4,526)
Adjustments to maintain reserves................... 26 (214) 5 (349)
------------- -------------- -------------- --------------
Net equity transactions........................ 902,374 485,349 364,682 1,136,916
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY................ 1,494,203 907,818 466,352 1,691,118
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 2,100,842 1,193,024 3,200,948 1,509,830
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD................ $ 3,595,045 2,100,842 3,667,300 3,200,948
============= ============== ============== ==============
</TABLE>
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT-6
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
- --------------------------------------------
STATEMENTS OF OPERATIONS, CONTINUED
- --------------------------------------------
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NSATGvtBd NSATMyMkt
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 68,770 43,647 310,393 172,433
Mortality, expense and administration
charges (note 2)............................... (18,162) (10,720) (92,218) (47,634)
-------------- -------------- -------------- --------------
Net investment activity........................ 50,608 32,927 218,175 124,799
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold............ 148,028 315,041 5,319,656 5,558,629
Cost of mutual fund shares sold.................. (149,899) (298,698) (5,319,656) (5,558,629)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments............ (1,871) 16,343 - -
Change in unrealized gain (loss) on investments (100,339) 1,842 - -
-------------- -------------- -------------- --------------
Net gain (loss) on investments................. (102,210) 18,185 - -
-------------- -------------- -------------- --------------
Reinvested capital gains......................... 2,440 6,570 - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations........... (49,162) 57,682 218,175 124,799
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................................ 24,021 67,906 4,291,983 4,701,737
Transfers between funds.......................... 37,137 995,059 105,307 (446,943)
Redemptions...................................... (118,278) (37,892) (1,879,828) (738,553)
Contingent deferred sales charges (note 2) (2,242) (1,011) (45,539) (30,939)
Adjustments to maintain reserves................. (8) (50) 46 341
-------------- -------------- -------------- --------------
Net equity transactions...................... (59,370) 1,024,012 2,471,969 3,485,643
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY.............. (108,532) 1,081,694 2,690,144 3,610,442
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 1,372,008 290,314 5,322,117 1,711,675
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD.............. $ 1,263,476 1,372,008 8,012,261 5,322,117
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT-6
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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 March 3, 1997, the Company (Depositor) transferred to the
Account, 100,000 shares of the Evergreen - VA Omega Growth Fund
(formerly Evergreen - VA Aggressive 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 March 3,
1997 was $1,000,000.
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.
On February 1, 1999, the Company (Depositor) transferred to the
Account, 400,000 shares of the Evergreen - VA Masters Fund, for which
the Account was credited with 400,000 units of the foregoing Evergreen
Fund. The value of the units purchased by the Company on February 1,
1999 was $4,000,000.
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 Equity Index Fund (EvEIx) (this fund became
available on 10/01/99)
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 Masters Fund (EvMasters) (this fund became
available on 2/01/99)
Evergreen - VA Omega Fund (EvOmega) (formerly Evergreen - VA
Aggressive Growth Fund)
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
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
<PAGE> 11
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, 1999, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
A contract owner may choose from among a number of different
underlying mutual fund options. The underlying mutual fund options are
not available to the general public directly. The underlying mutual
funds are available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance
companies or, in some cases, through participation in certain
qualified pension or retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1999. The cost of investments
sold is determined on 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.
(f) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
(Continued)
<PAGE> 12
NATIONWIDE VARIABLE ACCOUNT-6
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(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.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
- --------------------------------------------------------------------------------
<PAGE> 54
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life 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, 1999 and
1998, 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,
1999. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Columbus, Ohio
January 28, 2000
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------------
Assets 1999 1998
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $15,294.0 $14,245.1
Equity securities 92.9 127.2
Mortgage loans on real estate, net 5,786.3 5,328.4
Real estate, net 254.8 243.6
Policy loans 519.6 464.3
Other long-term investments 73.8 44.0
Short-term investments 416.0 289.1
--------- ---------
22,437.4 20,741.7
--------- ---------
Cash 4.8 3.4
Accrued investment income 238.6 218.7
Deferred policy acquisition costs 2,554.1 2,022.2
Other assets 305.9 420.3
Assets held in separate accounts 67,135.1 50,935.8
--------- ---------
$92,675.9 $74,342.1
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $21,861.6 $19,767.1
Other liabilities 914.2 866.1
Liabilities related to separate accounts 67,135.1 50,935.8
--------- ---------
89,910.9 71,569.0
--------- ---------
Commitments and contingencies (notes 8 and 13)
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 766.1 914.7
Retained earnings 2,011.0 1,579.0
Accumulated other comprehensive income (15.9) 275.6
--------- ---------
2,765.0 2,773.1
--------- ---------
$92,675.9 $74,342.1
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Policy charges $ 895.5 $ 698.9 $ 545.2
Life insurance premiums 220.8 200.0 205.4
Net investment income 1,520.8 1,481.6 1,409.2
Realized (losses) gains on investments (11.6) 28.4 11.1
Other 66.1 66.8 46.5
-------- -------- --------
2,691.6 2,475.7 2,217.4
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Other benefits and claims 210.4 175.8 178.2
Policyholder dividends on participating policies 42.4 39.6 40.6
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Other operating expenses 463.4 419.7 384.9
-------- -------- --------
2,085.1 1,918.6 1,787.5
-------- -------- --------
Income before federal income tax expense 606.5 557.1 429.9
Federal income tax expense 201.4 190.4 150.2
-------- -------- --------
Net income $ 405.1 $ 366.7 $ 279.7
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
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, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1996 $ 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
Comprehensive income:
Net income -- -- 405.1 -- 405.1
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (315.0) (315.0)
--------
Total comprehensive income 90.1
--------
Capital contribution -- 26.4 87.9 23.5 137.8
--------
Dividends to shareholder -- (175.0) (61.0) -- (236.0)
------ -------- -------- ------ --------
December 31, 1999 $ 3.8 $ 766.1 $2,011.0 $(15.9) $2,765.0
====== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 405.1 $ 366.7 $ 279.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Capitalization of deferred policy acquisition costs (637.0) (584.2) (487.9)
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Amortization and depreciation 2.4 (8.5) (2.0)
Realized (gains) losses on invested assets, net 11.6 (28.4) (11.1)
Increase in accrued investment income (7.9) (8.2) (0.3)
Decrease (increase) in other assets 122.9 16.4 (12.7)
Decrease in policy liabilities (20.9) (8.3) (23.1)
Increase (decrease) in other liabilities 149.7 (34.8) 230.6
Other, net (8.6) (11.3) (10.9)
--------- --------- ---------
Net cash provided by operating activities 1,386.2 982.9 1,146.1
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,307.9 1,557.0 993.4
Proceeds from sale of securities available-for-sale 513.1 610.5 574.5
Proceeds from repayments of mortgage loans on real estate 696.7 678.2 437.3
Proceeds from sale of real estate 5.7 103.8 34.8
Proceeds from repayments of policy loans and sale of other invested assets 40.9 23.6 22.7
Cost of securities available-for-sale acquired (3,724.9) (3,182.8) (2,828.1)
Cost of mortgage loans on real estate acquired (971.4) (829.1) (752.2)
Cost of real estate acquired (14.2) (0.8) (24.9)
Short-term investments, net (27.5) 69.3 (354.8)
Other, net (110.9) (88.4) (62.5)
--------- --------- ---------
Net cash used in investing activities (1,284.6) (1,058.7) (1,959.8)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- -- 836.8
Cash dividends paid (188.5) (100.0) --
Increase in investment product and universal life insurance
product account balances 3,799.4 2,682.1 2,488.5
Decrease in investment product and universal life insurance
product account balances (3,711.1) (2,678.5) (2,379.8)
--------- --------- ---------
Net cash used in financing activities (100.2) (96.4) 945.5
--------- --------- ---------
Net increase (decrease) in cash 1.4 (172.2) 131.8
Cash, beginning of year 3.4 175.6 43.8
--------- --------- ---------
Cash, end of year $ 4.8 $ 3.4 $ 175.6
========= ========= =========
</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, 1999, 1998 and 1997
(1) Organization and Description of Business
Nationwide Life Insurance Company (NLIC) is a leading provider of
long-term savings and retirement products in the United States and is a
wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
The Company develops and sells a diverse range of products including
variable annuities, fixed annuities and life insurance as well as
investment management and administrative services. NLIC markets its
products through a broad network of distribution channels, including
independent broker/dealers, national and regional brokerage firms,
financial institutions, pension plan administrators, life insurance
specialists, Nationwide Retirement Solutions sales representatives, and
Nationwide agents.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
Nationwide Investment Services Corporation. NLIC and its subsidiaries
are collectively referred to as "the Company."
(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.
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. All significant intercompany
balances and transactions have been eliminated.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(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 accumulated other comprehensive income in
shareholder's equity. The adjustment to deferred policy
acquisition costs represents the change in amortization of
deferred policy acquisition costs that would have been required as
a charge or credit to operations had such unrealized amounts been
realized. The Company has no fixed maturity securities classified
as held-to-maturity or trading as of December 31, 1999 or 1998.
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.
(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.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(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. 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). 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.
(e) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $915.4 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 5.6%, 6.0% and 6.1% for the years ended
December 31, 1999, 1998 and 1997, 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 29% in 1999 (40%
in 1998 and 50% in 1997) of the Company's life insurance in force,
69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
in 1997) 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.
(j) Recently Issued Accounting Pronouncements
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $8.3 million.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(k) Reclassification
Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
<PAGE> 10
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, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 428.4 $ 23.4 $ (2.4) $ 449.4
Obligations of states and political subdivisions 0.8 -- -- 0.8
Debt securities issued by foreign governments 110.6 0.6 (0.8) 110.4
Corporate securities 11,414.7 118.9 (218.6) 11,315.0
Mortgage-backed securities 3,422.8 25.8 (30.2) 3,418.4
--------- ------ ------- ---------
Total fixed maturity securities 15,377.3 168.7 (252.0) 15,294.0
Equity securities 84.9 12.4 (4.4) 92.9
--------- ------ ------- ---------
$15,462.2 $181.1 $(256.4) $15,386.9
========= ====== ======= =========
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
========= ====== ======= =========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions) cost fair value
--------- ---------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 847.0 $ 847.0
Due after one year through five years 5,240.5 5,205.7
Due after five years through ten years 5,046.9 5,005.2
Due after ten years 4,242.9 4,236.1
--------- ---------
$15,377.3 $15,294.0
========= =========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized (losses) gains on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
------ -------
<S> <C> <C>
Gross unrealized (losses) gains $(75.3) $ 540.6
Adjustment to deferred policy acquisition costs 50.9 (116.6)
Deferred federal income tax 8.5 (148.4)
------ -------
$(15.9) $ 275.6
====== =======
</TABLE>
An analysis of the change in gross unrealized (losses) gains on
securities available-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(607.1) $52.6 $137.5
Equity securities (8.8) 4.2 (2.7)
------- ----- ------
$(615.9) $56.8 $134.8
======= ===== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
respectively. During 1999, gross gains of $10.4 million ($9.0 million
and $9.9 million in 1998 and 1997, respectively) and gross losses of
$28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
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 Company had $15.6 million of real estate investments at December
31, 1999 that were non-income producing the preceding twelve months.
During 1998 the Company had investments of $42.4 million that were
non-income producing, which consisted of $32.7 million of securities
available-for-sale and $9.7 million of real estate.
Real estate is presented at cost less accumulated depreciation of $24.8
million as of December 31, 1999 ($21.5 million as of December 31, 1998)
and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
million as of December 31, 1998).
The recorded investment of mortgage loans on real estate considered to
be impaired was $3.7 million as of both December 31, 1999 and 1998. No
valuation allowance has been recorded for these loans as of December
31, 1999 or 1998. During 1999, the average recorded investment in
impaired mortgage loans on real estate was approximately $3.7 million
($9.1 million in 1998) and there was no interest income recognized on
those loans. Interest income recognized on impaired loans was $0.3
million in 1998 which is equal to interest income recognized using a
cash-basis method of income recognition.
<PAGE> 12
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) 1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Allowance, beginning of year $42.4 $42.5 $51.0
Additions (reductions) charged to operations 0.7 (0.1) (1.2)
Direct write-downs charged against the allowance -- -- (7.3)
Allowance on acquired mortgage loans 1.3 -- --
----- ----- -----
Allowance, end of year $44.4 $42.4 $42.5
===== ===== =====
</TABLE>
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $1,031.3 $ 982.5 $ 911.6
Equity securities 2.5 0.8 0.8
Mortgage loans on real estate 460.4 458.9 457.7
Real estate 28.8 40.4 42.9
Short-term investments 18.6 17.8 22.7
Other 26.5 30.7 21.0
-------- -------- --------
Total investment income 1,568.1 1,531.1 1,456.7
Less investment expenses 47.3 49.5 47.5
-------- -------- --------
Net investment income $1,520.8 $1,481.6 $1,409.2
======== ======== ========
</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) 1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(25.0) $(0.7) $ 3.6
Equity securities 7.4 2.1 2.7
Mortgage loans on real estate (0.6) 3.9 1.6
Real estate and other 6.6 23.1 3.2
------ ----- -----
$(11.6) $28.4 $11.1
====== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $9.1 million as of
December 31, 1999 and $6.5 million as of December 31, 1998 were on
deposit with various regulatory agencies as required by law.
(4) Derivative Financial Instruments
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest rate swaps are primarily used to convert specific investment
securities and interest bearing policy liabilities from a fixed-rate to
a floating-rate basis. Amounts receivable or payable under these
agreements are recognized as an adjustment to net investment income or
interest credited to policyholder account balances consistent with the
nature of the hedged item. The changes in fair value of the interest
rate swap agreements are not recognized on the balance sheet, except
for interest rate swaps designated as hedges of fixed maturity
securities available-for-sale, for which changes in fair values are
reported in accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
policy liabilities and investments denominated in foreign currencies
into U.S. dollars at specified exchange rates. Gains and losses on
foreign currency swaps are recorded in earnings based on the related
spot foreign exchange rate at the end of the reporting period. Gains
and losses on these contracts offset those recorded as a result of
translating the hedged foreign currency denominated liabilities and
investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $362.7
Pay variable/receive fixed rate swaps hedging investments $ 28.5
Other contracts hedging investments $ 19.1
Pay variable/receive fixed rate swaps hedging liabilities $577.2
Foreign currency swaps
Hedging foreign currency denominated investments $ 14.8
Hedging foreign currency denominated liabilities $577.2
Interest rate futures contracts $781.6
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(5) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Fixed maturity securities $ 5.3 $ --
Future policy benefits 149.5 207.7
Liabilities in separate accounts 373.6 319.9
Mortgage loans on real estate and real estate 18.5 17.5
Other assets and other liabilities 51.1 58.9
----- ------
Total gross deferred tax assets 598.0 604.0
Less valuation allowance (7.0) (7.0)
----- ------
Net deferred tax assets 591.0 597.0
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 724.4 568.7
Fixed maturity securities -- 212.2
Deferred tax on realized investment gains 34.7 34.8
Equity securities and other long-term investments 10.8 9.6
Other 26.5 21.6
------ ------
Total gross deferred tax liabilities 796.4 846.9
------ ------
Net deferred tax liability $205.4 $249.9
====== ======
</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, 1999, 1998 and 1997.
The Company's current federal income tax liability was $104.7 million
and $72.8 million as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 1999 1998 1997
------ ------ ------
Currently payable $ 53.6 $186.1 $121.7
Deferred tax expense 147.8 4.3 28.5
------ ------ ------
$201.4 $190.4 $150.2
====== ====== ======
<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, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $212.3 35.0 $195.0 35.0 $150.5 35.0
Tax exempt interest and dividends
received deduction (7.3) (1.2) (4.9) (0.9) -- --
Income tax credits (4.3) (0.7) -- -- -- --
Other, net 0.7 0.1 0.3 0.1 (0.3) (0.1)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $201.4 33.2 $190.4 34.2 $150.2 34.9
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $29.8 million, $173.4 million and
$91.8 million during the years ended December 31, 1999, 1998 and 1997,
respectively.
(6) Comprehensive Income
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
equity that bypass net income. Currently, the Company's only component
of Other Comprehensive Income is unrealized gains (losses) on
securities available-for-sale. The related before and after federal tax
amounts are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $(665.3) $ 58.2 $141.1
Adjustment to deferred policy acquisition costs 167.5 (12.9) (21.8)
Related federal income tax (expense) benefit 171.4 (15.9) (41.7)
------- ------ ------
Net (326.4) 29.4 77.6
------- ------ ------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross 17.6 (1.4) (6.3)
Related federal income tax expense (benefit) (6.2) 0.5 2.2
------- ------ ------
Net 11.4 (0.9) (4.1)
------- ------ ------
Total Other Comprehensive Income $(315.0) $ 28.5 $ 73.5
======= ====== ======
</TABLE>
(7) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<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 fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
equity securities.
Mortgage loans on real estate, 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 8.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Interest rate and foreign currency swaps: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------------------ -------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $15,294.0 $15,294.0 $14,245.1 $14,245.1
Equity securities 92.9 92.9 128.5 128.5
Mortgage loans on real estate, net 5,786.3 5,745.5 5,328.4 5,527.6
Policy loans 519.6 519.6 464.3 464.3
Short-term investments 416.0 416.0 289.1 289.1
Cash 4.8 4.8 3.4 3.4
Assets held in separate accounts 67,135.1 67,135.1 50,935.8 50,935.8
Liabilities:
Investment contracts (16,977.7) (16,428.6) (15,468.7) (15,158.6)
Policy reserves on life insurance contracts (4,883.9) (4,607.9) (3,914.0) (3,768.9)
Liabilities related to separate accounts (67,135.1) (66,318.7) (50,935.8) (49,926.5)
Derivative financial instruments:
Interest rate swaps hedging assets 4.3 4.3 - -
Interest rate swaps hedging liabilities - (24.2) - -
Foreign currency swaps (11.8) (11.8) - -
Futures contracts 1.3 1.3 (1.3) (1.3)
</TABLE>
(8) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, 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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
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 and derivative financial instruments. 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 $216.2 million
extending into 2000 were outstanding as of December 31, 1999. The
Company also had $28.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1999.
Notional amounts of derivative financial instruments, primarily
interest rate swaps, interest rate futures contracts and foreign
currency swaps, significantly exceed the credit risk associated with
these instruments and represent contractual balances on which
calculations of amounts to be exchanged are based. Credit exposure is
limited to the sum of the aggregate fair value of positions that have
become favorable to NLIC, including accrued interest receivable due
from counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of high quality institutions,
collateral agreements and other contract provisions. At December 31,
1999, NLIC's credit risk from these derivative financial instruments
was $6.1 million.
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 23% (22% in 1998) in any geographic area and no more than 2% (2%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999, 39% (42% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 $143.6 million and $187.9 million as of December 31,
1999 and 1998, 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.
(9) Pension Plan and Postretirement Benefits Other Than Pensions
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
million and $7.5 million, respectively. The Company has recorded a
prepaid pension asset of $13.3 million and $5.0 million as of December
31, 1999 and 1998, respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1999 and 1998 was $49.6 million and $40.1 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
1997 was $4.9 million, $4.1 million and $3.0 million, respectively.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------ -----------------------
(in millions) 1999 1998 1999 1998
--------------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185.0 $2,033.8 $ 270.1 $ 237.9
Service cost 80.0 87.6 14.2 9.8
Interest cost 109.9 123.4 17.6 15.4
Actuarial (gain) loss (95.0) 123.2 (64.4) 15.6
Plan settlement in 1999/curtailment in 1998 (396.1) (107.2) -- --
Benefits paid (72.4) (75.8) (11.0) (8.6)
Acquired companies -- -- 13.3 --
-------- -------- ------- -------
Benefit obligation at end of year 1,811.4 2,185.0 239.8 270.1
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541.9 2,212.9 77.9 69.2
Actual return on plan assets 161.8 300.7 3.5 5.0
Employer contribution 12.4 104.1 20.9 12.1
Plan settlement (396.1) -- -- --
Benefits paid (72.4) (75.8) (11.0) (8.4)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,247.6 2,541.9 91.3 77.9
-------- -------- ------- -------
Funded status 436.2 356.9 (148.5) (192.2)
Unrecognized prior service cost 28.2 31.5 -- --
Unrecognized net (gains) losses (402.0) (345.7) (46.7) 16.0
Unrecognized net (asset) obligation at transition (7.7) (11.0) 1.1 1.3
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 54.7 $ 31.7 $(194.1) $(174.9)
======== ======== ======= =======
</TABLE>
<PAGE> 21
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
---------------- -----------------------
1999 1998 1999 1998
---- ---- ------- ------
<S> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 8.00%
Uniform declining period -- -- 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80.0 $ 87.6 $ 77.3
Interest cost on projected benefit obligation 109.9 123.4 118.6
Expected return on plan assets (160.3) (159.0) (139.0)
Recognized gains (9.1) (3.8) --
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.4) 4.2 4.2
------- ------- --------
$ 22.3 $ 55.6 $ 64.3
======= ======= ========
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide Insurance and employees of WSC ended
participation in the plan. A curtailment gain of $67.1 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). During 1999, the
plan transferred assets to settle its obligation related to WSC
employees . A settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
<PAGE> 22
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, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $14.2 $ 9.8 $ 7.0
Interest cost on accumulated postretirement benefit obligation 17.6 15.4 14.0
Actual return on plan assets (3.5) (5.0) (3.6)
Amortization of unrecognized transition obligation of affiliates 0.6 0.2 0.2
Net amortization and deferral (1.8) 1.2 (0.5)
----- ----- -----
$27.1 $21.6 $17.1
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, 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, 1999, 1998
and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
$111.7 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, 1999
$40.2 million of dividends could be paid by NLIC without prior
approval.
<PAGE> 23
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.
(11) Transactions With Affiliates
During second quarter 1999 the Company entered into a modified
coinsurance arrangement to reinsure the 1999 operating results of an
affiliated company, Employers Life Insurance Company of Wausau (ELOW)
retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
for $120.8 million and immediately merged ELOW into NLIC terminating
the modified coinsurance arrangement. Because ELOW was an affiliate,
the Company accounted for the merger similar to poolings-of-interests;
however, prior period financial statements were not restated due to
immateriality. The reinsurance and merger combined contributed $1.46
million to year to date net income.
The Company has a reinsurance agreement with NMIC whereby all of the
Company's accident and health business is ceded to NMIC on a modified
coinsurance basis. The agreement covers individual accident and health
business for all periods presented and group and franchise accident and
health business since July 1, 1999. Either party may terminate the
agreement on January 1 of any year with prior notice. Prior to July 1,
1999 group and franchise accident and health business and a block of
group life insurance policies were ceded to ELOW under a modified
coinsurance agreement. Under a modified coinsurance agreement, 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
the reinsurer. Risk of asset default is retained by the Company,
although a fee is paid to the Company for the retention of such risk.
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. Revenues ceded to NMIC and ELOW for the years
ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
million, and $315.3 million, respectively, while benefits, claims and
expenses ceded were $216.9 million, $259.3 million, and $326.6 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 such agreement are subject to
allocation among NMIC and such subsidiaries. Measures used to allocate
expenses among companies include individual employee estimates of time
spent, special cost studies, salary expense, commission expense and
other methods agreed to by the participating companies that are within
industry guidelines and practices. In addition, beginning in 1999
Nationwide Services Company, a subsidiary of NMIC, provides computer,
telephone, mail, employee benefits administration, and other services
to NMIC and certain of its direct and indirect subsidiaries, including
the Company, based on specified rates for units of service consumed.
For the years ended December 31, 1999, 1998 and 1997, the Company made
payments to NMIC and Nationwide Services Company totaling $124.1
million, $95.0 million, and $85.8 million, respectively. In addition,
the Company does not believe that expenses recognized under these
agreements are materially different than expenses that would have been
recognized had the Company operated on a stand-alone basis.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $9.9
million, $8.0 million and $8.4 million, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 1999 and
1998 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.
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 $411.7 million and $248.4 million as
of December 31, 1999 and 1998, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
As part of certain restructuring activities that occurred prior to the
March 1997 IPO, the Company paid a dividend valued at $485.7 million to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of ELOW, National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
the Company 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.
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, 1999 were $56.0
million, $60.0 million and $66.1 million, respectively.
(12) Bank Lines of Credit
NFS, NLIC and NMIC are parties to 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 any party. NFS, NLIC and
NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. As of December 31, 1999 the
Company had no amounts outstanding under the agreement.
(13) Contingencies
On October 29, 1998, the Company was named in a lawsuit filed in Ohio
state court related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company affiliates which were
used to fund certain tax-deferred retirement plans. The amended
complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, the Company and the other named
defendants filed a motion to dismiss the amended complaint. On March 8,
2000, the court denied the motion to dismiss the amended complaint
filed by the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(14) 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.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Variable Annuities segment consists of annuity contracts that
provide the customer with access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate fixed for a
prescribed period, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. Such contracts consist of single premium deferred
annuities, flexible premium deferred annuities and single premium
immediate annuities. The Fixed Annuities segment includes the fixed
option under variable annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary, revenues
and expenses related to group annuity contracts sold to Nationwide
Insurance employee and agent benefit plans and all realized gains and
losses on investments in a Corporate and Other segment.
During 1999 the Company revised the allocation of net investment income
among its Life Insurance and Corporate and Other segments. Also,
certain amounts previously reported as other income were reclassified
to operating expense. Amounts reported for prior periods have been
restated to reflect these changes.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (41.5) $ 1,134.5 $ 253.1 $ 174.7 $ 1,520.8
Other operating revenue 668.2 43.4 393.0 77.8 1,182.4
--------- --------- -------- -------- ---------
Total operating revenue (2) 626.7 1,177.9 646.1 252.5 2,703.2
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 837.5 130.5 128.3 1,096.3
Amortization of deferred policy
acquisition costs 162.8 49.7 60.1 -- 272.6
Other benefits and expenses 173.6 113.5 334.7 94.4 716.2
--------- --------- -------- -------- ---------
Total expenses 336.4 1,000.7 525.3 222.7 2,085.1
--------- --------- -------- -------- ---------
Operating income before
federal income tax 290.3 177.2 120.8 29.8 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 290.3 $ 177.2 $ 120.8 $ 18.2 $ 606.5
========= ========= ======== ======== =========
Assets as of year end $62,599.7 $17,134.8 $6,616.7 $6,324.7 $92,675.9
========= ========= ======== ======== =========
</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) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 225.6 $ 170.7 $ 1,481.6
Other operating revenue 532.9 35.7 318.5 78.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 501.6 1,152.3 544.1 249.3 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 159.3 104.2 293.5 78.1 635.1
--------- --------- -------- -------- ---------
Total expenses 283.2 977.0 455.3 203.1 1,918.6
--------- --------- -------- -------- ---------
Operating income before federal
income tax 218.4 175.3 88.8 46.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 88.8 $ 74.6 $ 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) $ (26.8) $ 1,098.2 $ 184.9 $ 152.9 $ 1,409.2
Other operating revenue 413.9 43.2 283.4 56.6 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 387.1 1,141.4 468.3 209.5 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
Benefits and expenses 148.4 108.7 283.5 63.1 603.7
--------- --------- -------- -------- ---------
Total expenses 236.2 971.9 401.6 177.8 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 66.7 31.7 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 66.7 $ 42.8 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
- ----------
(1) The Company's method of allocating net investment income results in
a charge (negative net investment income) to the Variable Annuities
segment which is recognized in the Corporate and Other segment. The
charge relates to non-invested assets which support this segment on
a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 55
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) To be filed by Financial Statements:
(1) Financial statements included in Prospectus (Part A):
Condensed Financial Information.
(2) Financial statements included in Part B:
Those financial statements required by Item 23 to be
included in Part B have been incorporated therein by
reference to the Statement of Additional Information (Part
A).
Nationwide Variable Account-6
Independent Auditors' Report.
Statements of Assets, Liabilities and Contract Owners'
Equity as of December 31, 1999.
Statements of Operations for the years ended December 31,
1999, and 1998.
Statements of Changes in Contract Owners' Equity for the
years ended December 31, 1999 and 1998.
Notes to Financial Statements.
Notes to Financial Statements.
Nationwide Life Insurance Company:
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1999 and
1998.
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
<PAGE> 56
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors authorizing
the establishment of the Registrant - Filed previously with
this Registration Statement and hereby incorporated by
reference.
(2) Not Applicable
(3) Underwriting or Distribution contracts between the
Registrant and Principal Underwriter - Attached hereto.
(4) The form of the variable annuity contract - Filed previously
with this Registration Statement and hereby incorporated by
reference.
(5) Variable Annuity Application - Filed previously with this
Registration Statement and hereby incorporated by reference.
(6) Articles of Incorporation of Depositor Filed previously with
this Registration Statement and hereby incorporated herein
by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with this Registration
Statement and hereby incorporated herein by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule - Filed
previously with this Registration Statement and hereby
incorporated herein by reference.
<PAGE> 57
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365-6107
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
301 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
Xerox Corporation
Suite 200
1401 H Street NW
Washington, DC 20005-2110
Ralph M. Paige Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1767D Westwood Avenue
Alliance, OH 44601
Richard D. Headley Executive Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
Charles A. Bryan Senior Vice President -
One Nationwide Plaza Chief Actuary - Property and Casualty
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Thomas L. Crumrine Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Senior Vice President -
One Nationwide Plaza Corporate Controller
Columbus, OH 43215
Philip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary - Nationwide Financial
Columbus, OH 43215
Patricia R. Hatler Senior Vice President,
One Nationwide Plaza General Counsel and Secretary
Columbus, OH 43215
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
David K. Hollingsworth Senior Vice President -
One Nationwide Plaza Business Development and
Columbus, OH 43215 Sponsor Relations
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
Donna A James Senior Vice President - Chief Human
One Nationwide Plaza Resources Officer
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Gregory S. Lashutka Senior Vice President -
One Nationwide Plaza Corporate Relations
Columbus, OH 43215
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Mark D. Phelan Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
Douglas C. Robinette Senior Vice President -
One Nationwide Plaza Claims and Finance Services
Columbus, OH 43215
Mark R. Thresher Senior Vice President -
One Nationwide Plaza Finance - Nationwide Financial
Columbus, OH 43215
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Operations
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Product
One Nationwide Plaza Management and Nationwide
Columbus, OH 43215 Financial Marketing
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 60
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
The 401(k) Companies, Inc. Texas Holding Company
The 401(k) Company Texas Third-party administrator for 401(k)
plans
401(k) Investment Advisors, Inc. Texas Investment advisor registered with the
SEC
401(k) Investments Services, Inc. Texas NASD registered broker-dealer
Affiliate Agency, Inc. Delaware Insurance agency marketing life
insurance & annuity products through
financial institutions
Affiliate Agency of Ohio, Inc. Ohio Insurance agency marketing life
insurance & annuity products through
financial institutions
AID Finance Services, Inc. Iowa Holding Company
ALLIED General Agency Company Iowa Managing general agent and surplus
lines broker for property & casualty
insurance products
ALLIED Group, Inc. Iowa Property & casualty holding company
ALLIED Group Insurance Marketing Iowa Direct marketer for property and
Company casualty insurance products
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
ALLIED Property and Casualty Insurance Iowa Underwrites general property &
Company casualty insurance
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
AMCO Insurance Company Iowa Underwrites general property &
casualty insurance
American Marine Underwriters, Inc. Florida Underwriting manager for ocean cargo
and bulk insurance
Auto Direkt Insurance Company Germany Insurance Company
Cal-Ag Insurance services, Inc. California Captive insurance brokerage firm
CalFarm Insurance Agency California Former marketing company for
traditional agent producers of CalFarm
Insurance Company
CalFarm Insurance Company California Multi-line insurance company
Caliber Funding Delaware A limited purpose corporation
Colonial County Mutual Insurance Texas Insurance Company
Company
Columbus Insurance Brokerage and Germany General service insurance broker
Service GmbH
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance agency that sells and
services commercial insurance
Depositors Insurance Company Iowa Underwrites property & casualty
insurance
eNationwide, LLC Ohio A limited liability company to provide
administrative services to
Nationwide's direct operations
Excaliber Funding Corporation Delaware Limited purpose corporation
F&B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Agency Alabama Insurance agency marketing life
of Alabama, Inc. insurance and annuity products through
financial institutions
Financial Horizons Distributors Agency Ohio Insurance marketing life insurance and
of Ohio, Inc. annuity products through financial
institutions
Financial Horizons Distributors Agency Oklahoma Insurance marketing life insurance and
of Oklahoma, Inc. annuity products through financial
institutions
Financial Horizons Distributors Agency Texas Insurance marketing life insurance and
of Texas, Inc. annuity products through financial
institutions
*Financial Horizons Investment Trust Massachusetts Diversified, open-end investment
company
Financial Horizons Securities Oklahoma Limited broker-dealer doing business
Corporation solely in the financial institution
market
GatesMcDonald Health Plus Inc. Ohio Managed Care Organization
Gates, McDonald & Company Ohio Services employers for managing
workers' and unemployment compensation
matters
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
Gates, McDonald & Company of New York, New York Workers' compensation/self-insured
Inc. claims administration services to
employers with exposure in New York
Insurance Intermediaries, Inc. Ohio Insurance agency providing commercial
property & casualty brokerage services
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Landmark Financial Services of New New York Insurance agency marketing life
York, Inc. insurance and annuity products through
financial institutions
Leben Direkt Insurance Company Germany Life insurance through direct mail
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas General agent to market non-standard
automobile and motorcycle insurance
for Colonial Mutual Insurance Company
MedProSolutions, Inc. Massachusetts Provides third-party administration
services for workers compensation,
automobile injury and disability claims
Midwest Printing Services, Ltd. Iowa General printing services
Morley & Associates, Inc. Oregon Insurance brokerage
Morley Capital Management, Inc. Oregon Investment adviser and stable value
money management
Morley Financial Services, Inc. Oregon Holding Company
Morley Research Associates, Ltd. Delaware Credit research consulting
**MRM Investments, Inc. Ohio Owns and operates a recreational ski
facility
**National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, England Insurance Company
Ltd.
National Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
**National Premium and Benefit Delaware Provides third-party administration
Administration Company services
Nationwide Advisory Services, Inc. Ohio Registered broker-dealer providing
investment management and
administrative services
**Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Provides property & casualty insurance
Company primarily to agricultural business
Nationwide Arena, LLC Ohio A limited liability company related to
arena development
*Nationwide Asset Allocation Trust Ohio Diversified open-end investment company
Nationwide Assurance Company Wisconsin Underwrites non-standard automobile
and motorcycle insurance
Nationwide Cash Management Company Ohio Investment Securities Agent
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF ORGANIZATION SECURITIES
(SEE
ATTACHED
CHART
UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Corporation Ohio Holding company for
entities affiliated with
Nationwide Mutual
Insurance Company
Nationwide Exclusive Ohio A limited liability
Distribution Company, LLC company providing agency
support services to
Nationwide exclusive agents
Nationwide Financial Ohio An assignment company to
Assignment Company administer structured
settlement business
Nationwide Financial Delaware Insurance Agency
Institution Distributors
Agency, Inc.
Nationwide Financial New Mexico Insurance Agency
Institution Distributors
Agency, Inc. of New Mexico
Nationwide Financial Massachusetts Insurance Agency
Institution Distributors
Agency, Inc. of
Massachusetts
Nationwide Financial Bermuda Long-term insurer which
Services (Bermuda) Ltd. issued variable annuity
and variable life products
to persons outside the
U.S. & Bermuda
Nationwide Financial Delaware Trust which issues and
Services Capital Trust sells securities & uses
proceeds to acquire
debentures
Nationwide Financial Delaware Trust which issues and
Services Capital Trust II sells securities & uses
proceeds to acquire
debentures
Nationwide Financial Delaware Holding Company for
Services, Inc. entities associated with
Nationwide Mutual
Insurance Company
Nationwide Foundation Ohio Not-for profit corporation
Nationwide General Ohio Primarily provides
Insurance Company automobile and fire
insurance to select
customers
Nationwide Global Finance, Ohio Act as a support company
LLC for Nationwide Global
Holdings, Inc. & its
international
capitalization efforts
Nationwide Global Funds Cayman Islands Exempted company with
limited liability for
purpose of issuing
investment shares to
segregated asset accounts
of Nationwide Financial
Services (Bermuda) Ltd.
and to non-U.S. resident
investors
Nationwide Global Ohio Holding Company for
Holdings, Inc. Nationwide Insurance
Enterprise international
operations
Nationwide Global Grand Duchy of Analyze European market of
Holdings, Inc.-NGH Luxembourg life insurance
Luxembourg Branch
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF ORGANIZATION SECURITIES
(SEE
ATTACHED
CHART
UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Global Hong Kong Primarily a holding
Holdings-Hong Kong, company for Nationwide
Limited Global Holdings, Inc.
Asian operations
Nationwide Global Brazil Holding company
Holdings-NGH Brasil
Participacoes LTDA
Nationwide Health Plans, Ohio Health insuring
Inc. organization
Nationwide Home Mortgage Iowa Mortgage lendor
Company
*Nationwide Indemnity Ohio Reinsurance company
Company assuming business from
Nationwide Mutual
Insurance Company and
other insurers within the
Nationwide Insurance
Enterprise
Nationwide Insurance Wisconsin Independent agency
Company of America personal lines underwriter
of property & casualty
insurance
Nationwide Insurance Ohio Transacts general
Company of Florida insurance business except
life insurance
Nationwide Insurance Golf Ohio Not-for-profit corporation
Charities, Inc.
Nationwide International California Special risks, excess &
Underwriters surplus lines underwriting
manager
Nationwide Investing Michigan Provide investors with
Foundation continuous source of
investment under
management of trustees
*Nationwide Investing Massachusetts Diversified, open-end
Foundation II investment company
Nationwide Investment Oklahoma Registered broker-dealer
Services Corporation
Nationwide Investors Ohio Stock Transfer Agent
Services, Inc.
**Nationwide Life and Ohio Life Insurance Company
Annuity Insurance Company
**Nationwide Life Ohio Life Insurance Company
Insurance Company
Nationwide Lloyds Texas Commercial property
insurance in Texas
Nationwide Management Ohio Preferred provider
Systems, Inc. organization, products and
related services
Nationwide Mutual Fire Ohio Mutual Insurance Company
Insurance Company
*Nationwide Mutual Funds Ohio Diversified, open-end
investment company
Nationwide Mutual Ohio Mutual Insurance Company
Insurance Company
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF ORGANIZATION SECURITIES
(SEE
ATTACHED
CHART
UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Properties, Ohio Develop, own and operate
Ltd. real estate and real
estate investments
Nationwide Property and Ohio Insurance Company
Casualty Insurance Company
Nationwide Realty Ohio Develop, own and operate
Investors, Inc. real estate and real
estate investments
Nationwide Retirement Delaware Market and administer
Solutions, Inc. deferred compensation
plans for public employees
Nationwide Retirement Alabama Market and administer
Solutions, Inc. of Alabama deferred compensation
plans for public employees
Nationwide Retirement Arizona Market and administer
Solutions, Inc. of Arizona deferred compensation
plans for public employees
Nationwide Retirement Arkansas Market and administer
Solutions, Inc. of deferred compensation
Arkansas plans for public employees
Nationwide Retirement Montana Market and administer
Solutions, Inc. of Montana deferred compensation
plans for public employees
Nationwide Retirement Nevada Market and administer
Solutions, Inc. of Nevada deferred compensation
plans for public employees
Nationwide Retirement New Mexico Market and administer
Solutions, Inc. of New deferred compensation
Mexico plans for public employees
Nationwide Retirement Ohio Market variable annuity
Solutions, Inc. of Ohio contracts to members of
the National Education
Association in the state
of Ohio
Nationwide Retirement Oklahoma Market variable annuity
Solutions, Inc. of contracts to members of
Oklahoma the National Education
Association in the state
of Oklahoma
Nationwide Retirement South Dakota Market and administer
Solutions, Inc. of South deferred compensation
Dakota plans for public employees
Nationwide Retirement Texas Market and administer
Solutions, Inc. of Texas deferred compensation
plans for public employees
Nationwide Retirement Wyoming Market variable annuity
Solutions, Inc. of Wyoming contracts to members of
the National Education
Association in the state
of Wyoming
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF ORGANIZATION SECURITIES
(SEE
ATTACHED
CHART
UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
Nationwide Retirement Massachusetts Market and administer
Solutions Insurance Agency deferred compensation
Inc. plans for public employees
Nationwide Seguradora S.A. Brazil Engage in elementary,
health & life insurance;
private open pension and
wealth concession plans
*Nationwide Separate Massachusetts Diversified, open-end
Account Trust investment company
Nationwide Services Ohio Single member limited
Company, LLC. liability company
performing shared services
functions for the
Nationwide Insurance
Enterprise
Nationwide Trust Company, United States Federal savings bank
FSB chartered by the Office of
Thrift Supervision in U.S.
Department of Treasury to
exercise custody &
fiduciary powers
Neckura Holding Company Germany Administrative services
for Neckura Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Germany Life and health insurance
Company company
Nevada Independent Nevada Workers' compensation
Companies-Construction administrative services to
Nevada employers in the
construction industry
Nevada Independent Nevada Workers' compensation
Companies-Health and administrative services to
Nonprofit Nevada employers in health
& nonprofit industries
Nevada Independent Nevada Workers' compensation
Companies- Hospitality and administrative services to
Entertainment Nevada employers in the
hospitality &
entertainment industries
Nevada Independent Nevada Workers' compensation
Companies- Manufacturing, administrative services to
Transportation and Nevada employers in the
Distribution manufacturing,
transportation and
distribution industries
NFS Distributors, Inc. Delaware Holding company for
Nationwide Financial
Services, Inc.
distribution companies
NGH Luxembourg, S.A Luxembourg Acts primarily as holding
company for Nationwide
Global Holdings, Inc.
European operations
NGH Netherlands, B.V. The Netherlands Holding company for other
overseas companies
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF ORGANIZATION SECURITIES
(SEE
ATTACHED
CHART
UNLESS
OTHERWISE
INDICATED)
<S> <C> <C> <C>
NGH UK, Ltd. United Kingdom Assist Nationwide Global
Holdings, Inc. with
European operations and
marketing
Northpointe Capital LLC Delaware Limited liability company
for investments
PanEuroLife Luxembourg Life Insurance company
providing individual life
insurance primarily in the
UK, Belgium and France
Pension Associates, Inc. Wisconsin Pension plan
administration and record
keeping services
Portland Investment Oregon NASD registered
Services, Inc. broker-dealer
Premier Agency, Inc. Iowa Insurance Agency
Riverview Agency, Inc. Texas Has a pending application
to become a licensed
insurance agency with the
Texas Department of
Insurance
Scottsdale Indemnity Ohio Insurance Company
Company
Scottsdale Insurance Ohio Insurance Company
Company
Scottsdale Surplus Lines Arizona Provides excess and
Insurance Company surplus lines insurance
coverage on a non-admitted
basis
SVM Sales GmbH, Neckura Germany Recruits and supervises
Insurance Group external sales partners
who obtain new business
for the Neckura Group as
well as to offer financial
services
Union Bond & Trust Company Oregon Oregon state bank with
trust powers
Villanova Capital, Inc. Delaware Holding Company
Villanova Mutual Fund Delaware Trust designed to act as a
Capital Trust registered investment
advisor
Villanova SA Capital Trust Delaware Trust designed to act as a
registered investment
advisor
Western Heritage Insurance Arizona Underwrites excess and
Company surplus lines of property
and casualty insurance
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF ORGANIZATION SECURITIES
(SEE ATTACHED
CHART)
UNLESS OTHERWISE
INDICATED
<S> <C> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* NACo Variable Account Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide DC Variable Ohio Nationwide Life Issuer of Annuity
Account Separate Account Contracts
Nationwide DCVA-II Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Separate Account No. 1 Ohio Nationwide Life Issuer of Annuity
Separate Account Contracts
* Nationwide Multi-Flex Ohio Nationwide Life Issuer of Annuity
Variable Account Separate Account Contracts
* Nationwide VA Separate Ohio Nationwide Life Issuer of Annuity
Account-A and Annuity Contracts
Separate Account
* Nationwide VA Separate Ohio Nationwide Life Issuer of Annuity
Account-B and Annuity Contracts
Separate Account
* Nationwide VA Separate Ohio Nationwide Life Issuer of Annuity
Account-C and Annuity Contracts
Separate Account
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-II Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-3 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-4 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-5 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-6 Separate Account Contracts
* Nationwide Fidelity Ohio Nationwide Life Issuer of Annuity
Advisor Variable Account Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-8 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-9 Separate Account Contracts
* Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-10 Separate Account Contracts
Nationwide Variable Ohio Nationwide Life Issuer of Annuity
Account-11 Separate Account Contracts
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF ORGANIZATION SECURITIES
(SEE ATTACHED
CHART)
UNLESS OTHERWISE
INDICATED
<S> <C> <C> <C> <C>
* Nationwide VL Separate Ohio Nationwide Life Issuer of Life
Account-A and Annuity Insurance Policies
Separate Account
Nationwide VL Separate Ohio Nationwide Life Issuer of Life
Account-B and Annuity Insurance Policies
Separate Account
* Nationwide VL Separate Ohio Nationwide Life Issuer of Life
Account-C and Annuity Insurance Policies
Separate Account
* Nationwide VL Separate Ohio Nationwide Life Issuer of Life
Account-D and Annuity Insurance Policies
Separate Account
* Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account Separate Account Insurance Policies
* Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account-2 Separate Account Insurance Policies
* Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account-3 Separate Account Insurance Policies
* Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account-4 Separate Account Insurance Policies
Nationwide VLI Separate Ohio Nationwide Life Issuer of Life
Account-5 Separate Account Insurance Policies
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
- --------------------------- --------------------------- ----------------------------
| ALLIED GROUP | | ALLIED | | |
| MERCHANT BANKING | | GROUP, INC. | | |
| CORPORATION | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 10,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|100% $150,055 | | |100% $243,344,521 | | | |
- --------------------------- | --------------------------- | ----------------------------
| |
- --------------------------- | --------------------------- | ----------------------------
| NATIONWIDE INSURANCE | | | AMCO | | | DEPOSITORS |
| COMPANY OF AMERICA | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
| | | | (AMCO) | | | (DEPOSITORS) |
|Common Stock: 12,000 | | |Common Stock: 500,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | |---|---| |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
| | | | | | | |
|AGI-100% $215,273,000 | | |AGI-100% $147,425,540| | |AGI 100% $22,251,842 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| AID FINANCE | | | ALLIED | | | ALLIED PROPERTY |
| SERVICES, INC. | | | GENERAL AGENCY | | | AND CASUALTY |
| (AID FINANCE) | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 10,000 | | |Common Stock: 5,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AGI-100% $19,545,634| |AMCO-100% $135,342 | | |AGI-100% $47,018,643 |
- --------------------------- --------------------------- | ----------------------------
| |
- --------------------------- --------------------------- | ----------------------------
| ALLIED | | MIDWEST | | | NATIONWIDE |
| GROUP INSURANCE | | PRINTING SERVICES, | | | HOME MORTGAGE |
| MARKETING COMPANY | | LTD. | | | COMPANY (NHMC) |
| | |Common Stock: 10,000 | | | |
|Common Stock: 20,000 | |------------ Shares | | |Common Stock: 54,348 |
|------------ Shares | | |---|---|------------ Shares |
| | | | | | |
| | | | | | |
| | | | | | |
| Cost | | Cost | | | |
| ---- | | ---- | | | |
| Aid | |AGI-100% $610,000 | | |AGI-80% |
| Finance-100% $16,059,469| --------------------------- | ----------------------------
- -------------------------- | |
--------------------------- | ----------------------------
| PREMIER | | | AGMC |
| AGENCY, | | | REINSURANCE, LTD. |
| INC. | | | |
|Common Stock: 100,000 | | |Common Stock: 11,000 |
|------------ Shares | | |------------ Shares |
| |---| | |
| Cost | | Cost |
| ---- | | ---- |
|AGI-100% $100,000 | |NHMC-100% $11,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
NATIONWIDE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |==============================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
- --| || |--------------------------------------------------------------------| |-----------------------
|| |
|| |--------------------------------------------------------------|-------------------
|| | |
|| -------------------------------- | -------------------------------- -----------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | INSURANCE COMPANY | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| |Guaranty Fund | | | | | |
=====||==|------------ |---| | |Common Stock: 20,000 | |Common Stock: 10,000 |
|Certificate | | |---|------------ Shares | |--|------------ Shares |
|----------- | | | | | | | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|Casualty $500,000 | | | |Casualty-100% $5,944,422 | | |Casualty-100% $142,943,140 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | NATIONWIDE PROPERTY | | | NECKURA |
| | | | | AND CASUALTY | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | INSURANCE COMPANY | | | |
|------------ | | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
| |---| |---|------------ Shares | | |------------ Shares |
| Cost | | | | | | | |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $6,000,000 | | |Neckura-100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | NATIONWIDE ASSURANCE | | | NECKURA LIFE |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| | | |------------ Shares | | |------------ Shares |
| Cost | | | | |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $3,506,173 | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681|
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| SCOTTSDALE | | | NATIONWIDE AGRIBUSINESS | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | BROKERAGE AND SERVICE |
| (SIC) | | | | | | GmbH |
|Common Stock: 30,136 | | |Common Stock: 1,000,000 | | |Common Stock: 1 Share |
|---|------------ Shares |--------|---|------------ Shares | |--|------------ |
| | | | | | | | |
| | | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-99.9% $26,714,335 | | |Neckura-100% DM 51,639 |
| |Casualty-100% $150,000,500 | | |Other Capital | | | |
| | | | |------------- | | | |
| | | | |Casualty-Ptd. $713,576 | | | |
| -------------------------------- | ------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | --------------------------------
| | SCOTTSDALE | | | NATIONAL CASUALTY | | | LEBEN DIREKT |
| | SURPLUS LINES | | | COMPANY | | | INSURANCE COMPANY |
| | INSURANCE COMPANY | | | (NC) | | | |
| |Common Stock: 10,000 | | | Common Stock: 100 Shares | | |Common Stock: 4,000 Shares |
|---|------------ Shares | ----| ------------- | |--|------------ |
| | | | | | | |
| | Cost | | Cost | | | Cost |
| | ---- | | ---- | | | ---- |
| |SIC-100% $6,000,000 | |Casualty-100% $67,442,439 | | |Neckura-100% DM 4,000,000 |
| | | | | | | |
| -------------------------------- -------------------------------- | --------------------------------
| | |
| -------------------------------- -------------------------------- | --------------------------------
| | NATIONAL PREMIUM & | | NCC OF AMERICAN, LTD. | | | AUTO DIREKT |
| | BENEFIT ADMINISTRATION | | (INACTIVE) | | | INSURANCE COMPANY |
| | COMPANY | | | | | |
| |Common Stock: 10,000 | | | | |Common Stock: 1500 Shares |
|---|------------ Shares | | | |--|------------ |
| | | | | | | |
| | Cost | | | | | Cost |
| | ---- | | | | | ---- |
| |SIC-100% $10,000 | |NC-100% | | |Neckura-100% DM 1,643,149 |
| -------------------------------- -------------------------------- | --------------------------------
| |
| -------------------------------- -------------------------------- | --------------------------------
| | WESTERN . | | SUN DIRECT | | | SVM SALES |
| | HERITAGE INSURANCE | | VERSICHERUNGS - | | | GmbH |
| | COMPANY | | AKTIENGESCLISCHAFT | | | |
| |Common Stock: 4,776,076 | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|---|------------ Shares | |------------ |------------| |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|SIC-100% $57,000,000 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- ---------------------------------------------------------------------------------------------------------------------|
|
- --------------------------------------------------------------------------------------------------------------- |
| | | |
| | | |
-------------------------------- -------------------------------- | -------------------------------------
| SCOTTSDALE | | NATIONWIDE | | | NATIONWIDE |
| INDEMNITY COMPANY | | COMMUNITY URBAN | | | CORPORATION |
| | | REDEVELOPMENT | | | |
| | | CORPORATION | | |Common Stock: Control: |
|Common Stock: 50,000 | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | | | | Cost | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $1,008,497,908 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 36,862,514 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE CASH | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 100 Shares | |-----| ---- |
| |------------ Shares | | |------------ | | |Casualty-18.6% $90,630 |
| | | | | Cost | | |Fire-18.6% $90,722 |
| | Cost | | | ---- | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-100% $11,226 | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE INSURANCE | | | CALFARM INSURANCE |
| | GENERAL AGENCY, INC. | | | COMPANY OF FLORIDA | | | COMPANY |
| | | | | | | |Common Stock: 49,800 Shares |
------|Common Stock: 1,000 | |----|Common Stock: 10,000 Shares| |-----|------------- |
| |------------ Shares | | |------------ | | |
| | | | | Cost | | |
| | Cost | | | ---- | | |
| | ---- | | |Casualty-100% $300,000,000 | |Casualty-100% |
| |Casualty-100% $5,000,000 | | | | | |
| -------------------------------- | -------------------------------- -------------------------------------
| || | |
| -------------------------------- | -------------------------------- -------------------------------------
| | COLONIAL COUNTY | | | NATIONWIDE INTERNATIONAL | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | UNDERWRITERS | | AGENCY |
| | COMPANY | | |Common Stock: 1,000 Shares | | |
| | | |----|------------ | | |
| | | | | | | |
| | | | | Cost | |Common Stock: 1,000 shares |
| |Surplus Debentures: | | | ---- | |------------- |
| |------------------- | | |Casualty-100% $10,000 | | |
| | Cost | | -------------------------------- | |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- |CalFarm Insurance |
| |Lone Star 150,000 | | | NATIONWIDE | |Company - 100% |
| -------------------------------- | | ARENA LLC | -------------------------------------
| | | | |
| -------------------------------- | | | -------------------------------------
| | NATIONWIDE SERVICES | | | | | CAL-AG INSURANCE |
| | COMPANY, LLC | | | | | SERVICES |
| | | | | | | |
| |Single Member Limited | |....| | |Common Stock: 1,000 Shares |
|.....|Liability Company | | | | |------------ |
| | | | | | | |
| | | | |Casualty-90% | |CalFarm Insurance |
| |Casualty-100% | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| | | NATIONWIDE |
| -------------------------------- | | EXCLUSIVE DISTRIBUTION |
| | AMERICAN MARINE | | | COMPANY, LLC (NEDCO) |
| | UNDERWRITERS, INC. | | | |
| | | | | Single Member Limited |
| |Common Stock: 20 Shares | |....| Liability Compnany |
|-----|------------ | | | |
| | Cost | | | |
| | ---- | | |Casualty-100% |
| |Casualty-100% $5,020 | | | |
| | | | --------------------------------
| -------------------------------- | |
| | --------------------------------
| --------------------------------- | | INSURANCE |
| | eNATIONWIDE, LLC | | | INTERMEDIARIES, INC |
| | | | | |
| | Single Member Limited | | |Common Stock 1,615 Shares |
| | Liability Company | |----|------------ |
| | | | Cost |
|.....| | | ---- |
| | |Casualty-100% $1,615,000 |
| | | |
|Casualty-100% | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1999
</TABLE>
Page 1
<PAGE> 73
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-----------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE TRUST |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | COMPANY, FSB |
| | | CAPITAL TRUST | | Common Stock: 2,800,000 |
| Common Stock: 3,814,779 | | Preferred Stock: | | ------------ Shares |
| ------------ Shares | | --------------- | | Cost |
| | | | | ---- |
| NFS--100% | | NFS--100% | | NFS--100% $3,000,000 |
----------------|------------ ----------------------------- -----------------------------
|
| ||--------------------------
- ----------------------------- | ----------------------------- -----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC | | INSTITUTION DISTRIBUTORS |
| | | | (NW ADV. SERV.) | | AGENCY, INC. (NFIDAI) |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | |
| ------------ Shares |--|--| ------------ Shares |==== | |
| | | | | || | |
| Cost | | | Cost | || | Common Stock: 1,000 Shares|
| ---- | | | ---- | || | ------------ |
| NW Life-100% $58,070,003 | | | NW Life-100% $5,996,261 | || | NFSDI-100% |
- ----------------------------- | ----------------------------- || --------------|--||----------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE INVESTMENT | | | NATIONWIDE MUTUAL | || | FINANCIAL HORIZONS | | || | |
| SERVICES CORPORATION | | | FUNDS | || | DISTRIBUTORS AGENCY | | || | |
| | | | | || | OF ALABAMA, INC. | | || | |
| Common Stock: 5,000 | | | OHIO BUSINESS TRUST | || | | | || | FLORIDA |
| ------------ Shares | | | | || | Common Stock: 10,000 | | || | RECORDS |===
| |--| | |==|| | ------------ Shares |-- || | ADMINISTRATOR |
| | | | | || | | | || | |
| Cost | | | | || | Cost | | || | |
| ---- | | | | || | ---- | | || | |
| NW Life-100% $529,728 | | | | || | NFIDAI-100% $100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ------------------------------| || -----------------------
| NATIONWIDE FINANCIAL | | | NATIONWIDE | || | LANDMARK FINANCIAL | | || | |
| ASSIGNMENT | | | SEPARATE ACCOUNT | || | SERVICES OF | | || | |
| COMPANY | | | TRUST | || | NEW YORK, INC. | | || | |
| | | | | || | | | || | |
| | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| |--| | MASSACHUSETTS |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | BUSINESS TRUST | || | | | || | OF OHIO, INC. |
| | | | | || | Cost | | || | |
| | | | | || | ---- | | || | |
| NW Life-100% | | | | || | NFIDAI-100% $10,100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | FINANCIAL HORIZONS | | || | |
| INVESTORS, LTD. | | | GLOBAL FUND | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | CAYMAN ISLANDS | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |--| | EXEMPTED LLC |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | | | || | OF OKLAHOMA, INC |
| | | | | || | Cost | | || | |
| NW Life-90% | | | | || | ---- | | || | |
| NW Mutual-10% | | | | || | NFIDAI-100% $153,000 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | ASSET ALLOCATION TRUST | || | | | || | |
| | | | | || | | | || | |
| Units: |--| | | || | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | OHIO BUSINESS TRUST |==== | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | || | OF TEXAS, INC |
| | | | | Cost | | || | |
| NW Life-97.6% | | | | ---- | | || | |
| NW Mutual-2.4% | | | | NFIDAI-100% $100 | | || | |
- ----------------------------- ----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | |
| INSTITUTION DISTRIBUTORS | | || | |
| INS. AGENCY, INC. | | || | |
| OF MASS. | | || | AFFILIATE |
| |-- ====| AGENCY OF |
|Common Stock: 100 Shares | | | OHIO, INC |
|------------ | | | |
| | | | |
|NFIDAI-100% | | | |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INS. AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
(Center)
NATIONWIDE(R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $1,008,497,908 |
|Fire 649,510 36,862,514 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------|-------------------------|--------------------------|-----------------------------|----------------------|--------------
| | | | |
- -----------|------------ ------------|-------------- -----------|------------- ---------------|--------- ------------|--------------
|NFS DISTRIBUTORS, INC.| | IRVIN L. SCHWARTZ | | NATIONWIDE FINANCIAL | |VILLANOVA CAPITAL, INC.| | NATIONWIDE FINANCIAL |
| (NFSDI) | | AND ASSOCIATES, INC. | |SERVICES (BERMUDA) INC.| |Common Stock: 958,750 | | SERVICES CAPITAL |
| | |Common Stock: Control: | |Common Stock: 250,000 | |------------- Shares | | TRUST II |
| | |------------- -------- | |------------- Shares | |NFS-96% | | |
| | |Class A Other-100%| | Cost | |Preferred Stock:500,000| | |
|NFS-100% | |Class B NFS -100%| | ---- | |--------------- Shares | | |
| | | | |NFS-100% $3,500,000 | |NFS-100% | | NFS-100% |
- -----------|------------ --------------------------- ------------------------- ---------------|--------- -------------------------
| | |
- -----------|---------------------------- -----------------------------|-----------------------|
- -----------|------------ --------------|----------- ------------|------------ --------------|---------- ------------|-------------
| NATIONAL DEFERRED | | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL | | VILLANOVA MUTUAL FUND |
| COMPENSATION, INC. | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)| | CAPITAL TRUST (VMF) |
| | |Common Stock: 236,494 | | | |Common Stock: 82,343 | | |
| | |------------- Shares | | | |------------ Shares | | |
| | | | | | | | | |
|NFSDI-100% | | | | | |VILLANOVA CAPITAL, INC.| | |
| | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% | |DELAWARE BUSINESS TRUST|
- ----------||------------ -------------------|------ ---------------------|--- ---------------------|--- -------------------------
|| | | |
|| | | -----
|| ---------------------------- | ------------------------- | ------------------------- | ------------------------
|| | NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | | | MORLEY & |
|| |SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | |INVESTORS SERVICES, INC.| | | ASSOCIATES, INC. |
|| | | | | NEW MEXICO | | | | | | |
|| |Common Stock: 10,000 | | | Common Stock: 1,000 | | | Common Stock: 5 Shares | | | Common Stock: 3,500 |
|| |------------- Shares |--|--| ------------- Shares | |--|------------- | |--| ------------- Shares |
============ | Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | | |Morley-100% $1,000|
---------------------------- | -------------------------- | -------------------------- | ------------------------
| | |
---------------------------- | -------------------------- | -------------------------- | -----------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | VILLANOVA VALUE | | | EXCALIBER FUNDING |
|SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | INVESTOR, LLC | | | CORPORATION |
| | | | SO. DAKOTA | | | | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | | | | |Common Stock: 1,000 |
|------------- Shares |--|--|------------- Shares | ...| | |--|------------- Shares |
| Cost | | | Cost | | | | | Cost |
| ---- | | | ---- | | | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | VSA-100% | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | -----------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | MORLEY CAPITAL | | | CALIBER FUNDING |
| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | MANAGEMENT | | | CORPORATION |
| ARKANSAS | | | OF WYOMING | | | | | |
|Common Stock: 50,000 |-----|Common Stock: 500 Shares| |Common Stock: 500 Shares| | | |
|------------- Shares | | |------------- | |------------- |--|--| |
| Cost | | | Cost | | Cost | | | |
| ---- | | | ---- | | ---- | | | |
|NRS-100% $500 | | |NRS-100% $500 | |Morley-100% $5,000 | | |Morley-100% |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | UNION BOND | | | MORLEY RESEARCH |
| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | & TRUST COMPANY | | | ASSOCIATES, LTD. |
| AGENCY, INC. | | | OF OHIO | | | | | |
|Common Stock: 1,000 | | | | |Common Stock: 2,000 | | | Common Stock: 1,000 |
|------------- Shares |--|==| | |------------- Shares |--|--| ------------- Shares |
| | | | | | | | | |
| Cost | | | | | Cost | | | Cost |
| ---- | | | | | ---- | | | ---- |
|NRS-100% $1,000 | | | | | Morley-100% $50,000 | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
|SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| | | | OKLAHOMA | | | |
|Common Stock: 500 | | | | | Common Stock: 1,000 | |
|------------- Shares |--|==| | | ------------- Shares |--
| Cost | | | | | Cost |
| ---- | | | | | ---- |
|NRS-100% $500 | | | | | Morley-100% $25,000 |
---------------------------- | -------------------------- --------------------------
|
---------------------------- | --------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT|
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. |
| | | | OF TEXAS |
|Common Stock: 1,000 |-- ==| |
|------------- Shares | | |
| Cost | | |
| ---- | | |
|NRS-100% $1,000 | | |
---------------------------- --------------------------
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
------------------------------- | ---------------------------- -----------------------------
| GATES MCDONALD | | | NATIONWIDE | | NATIONWIDE GLOBAL |
| & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) | | HOLDINGS, INC. (NGH) |
| | | | | | |
- ------------------- --|Common Stock: 254 Shares | |--|Common Stock: 100 Shares | |Common Stock: 1 Share |
| | | |------------ | || |------------ | --|------------ |
| ---------------|-------------- | | Cost | || | Cost || | Cost |
| | | | | ---- | || | ---- || | ---- |
| | THE 401(k) COMPANIES, INC. | | |NW Corp.-100% $25,683,532 | || | || | |
| | (401(k)) | | |------------------------------ || |NW Corp.-100% $14,603,732|| |NW Corp.-100% $257,000,000|
| | | | || --------------------------- | -----------------------------
| |Common Stock: Control | | |------------------------------ || ----------------------------| -----------------------------
||--|------------- ------- | | | MEDPROSOLUTIONS, INC. | || | NATIONWIDE MANAGEMENT || | NATIONWIDE GLOBAL |
|| |Class A Other-100% | --| | |--| SYSTEMS, INC. || | HOLDINGS, INC. - |
|| |Class B NFS-100% | | | Cost | || | || | LUXEMBOURG BRANCH |
|| | | | | ---- | || |Common Stock: 100 Shares || | (BRANCH) |
|| ------------------------------ | |Gates-100% $6,700,000 | || |------------- || | |
|| | | | || | Cost ||--| |
|| | | | || | ---- || |Endowment Capital - |
|| ------------------------------ | ------------------------------- || |NHP Inc.-100% $25,149 || | $1,000,000 |
|| | 401(k) INVESTMENT | | || ----------------------------| --------------|--------------
|| | SERVICES, INC. | | |------------------------------ || ----------------------------| --------------|--------------
|| | | | | GATES MCDONALD & | || | NATIONWIDE || | NGH LUXEMBOURG S.A. |
|| |Common Stock: 1,000,000 | | | COMPANY OF NEW YORK, INC. | || | AGENCY, INC. || | (LUX SA) |
|| |------------ Shares | --| | |--| || | |
||--| | | |Common Stock: 3 Shares | | |Common Stock: 100 Shares || |Common Stock: 5894 Shares |
|| | Cost | | |------------ | | |------------ || -|------------ |
|| | ---- | | | Cost | | | Cost || || Cost |
|| |401(k)-100% $7,800 | | | ---- | | | ---- || || ---- |
|| ------------------------------ | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 || ||BRANCH.-99.98% $115,470,723|
|| | ------------------------------- | ----------------------------| |-----------------------------
|| ------------------------------ | | | |
|| | 401(k) INVESTMENT | | ------------------------------- | ----------------------------| |-----------------------------
|| | ADVISORS, INC. | | | GATES MCDONALD & | | |NATIONWIDE GLOBAL HOLDINGS|| || PAN EURO LIFE |
|| | | | | COMPANY OF NEVADA | | | -HONG KONG, LIMITED || || |
|| |Common Stock: 1,000 Shares | --| | | | || ||Common Stock: 1,300,000 |
||--|------------ | | |Common Stock: 40 Shares | | |Common Stock: 2 Shares || ||------------ Shares |
|| | Cost | | |------------ | | |------------ Cost -- -- |
|| | ---- | | | Cost | | | ---- || || Cost |
|| |401(k)-100% $1,000 | | | ---- | | |NGH-50% || || ---- |
|| ------------------------------ | |Gates-100% $93,750 | | |Casualty--50% || ||LUX SA-90% 3,817,832,685|
|| | ------------------------------- | ----------------------------| || LUF |
|| ------------------------------ | | | |-----------------------------
|| | 401(k) COMPANY | | ------------------------------- | ----------------------------| |-----------------------------
|| | | | | GATES MCDONALD | | | NGH || ||NATIONWIDE GLOBAL HOLDINGS |
|| |Common Stock: 855,000 Shares| | | HEALTH PLUS, INC. | | | NETHERLANDS B.V. || ||- NGH BRASIL PARTICIPACOES,|
|| | | --| | | | || || LTDA (NGH BRASIL) |
|| | Cost | | |Common Stock: 200 Shares | | |Common Stock: 40 Shares || || |
||--| ---- | | |------------ | | |------------ -- -- Shares Cost |
|| |401(k)-100% $1,000 | | | Cost | | | Cost || | ------ ---- |
|| ------------------------------ | | ---- | | | ---- || |LUX SA 6,164,899 R6,164,899|
|| | |Gates-100% $2,000,000 | | |NGH-100% NLG 52,500 || |NGH 1 R1 |
|| ------------------------------ | ------------------------------- | ----------------------------| --------------|--------------
|| | | | | | |
|===| | | ------------------------------- | ----------------------------| --------------|--------------
| | RIVERVIEW AGENCY, INC. | | |NEVADA INDEPENDENT COMPANIES-| | | NATIONWIDE || | NATIONWIDE |
| | | | |MANUFACTURING TRANSPORTATION | | | SERVICES SP. Z.O.O. || | SEGURADORA S.A. |
| | | | | AND DISTRIBUTION | | | || | |
| | | --| | | |Common Stock: 80 Shares || | Shares Cost |
| | | | |Common Stock: 1,000 Shares | | |------------ Cost -- | ------ ---- |
| ------------------------------ | |------------ | | | ---- || |NGH |
| | |Gates-100% | | |NGH-100% 4,000 PLN || |BRASIL 9,999,999 R9,999,999|
| ------------------------------ | ------------------------------- | --------------------------- | |LUX SA 1 R1 |
| | | | | | -----------------------------
| | PENSION ASSOCIATES, INC. | | ------------------------------- | ----------------------------| -----------------------------
| | | | | NEVADA INDEPENDENT | | | MRM INVESTMENTS, INC. || | NATIONWIDE GLOBAL |
- ----| Common Stock: 1,000 Shares | | | COMPANIES-HEALTH AND PROFIT | | | || | FINANCE, LLC |
| | --| | ---|Common Stock: 1 Share || | Single Member Limited |
| Cost | | |Common Stock: 1,000 Shares | |------------ || | Liability Company |
| ---- | | |------------ | | Cost |...| |
| NFS-100% $2,839,392 | | | | | ---- | | |
------------------------------ | |Gates-100% | |NW Corp.-100% $7,000,000 | |NGH-100% |
| ------------------------------- ---------------------------- -----------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-CONSTRUCTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| | |
| |Gates-100% |
| -------------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-HOSPITALITY AND | Subsidiary Companies - Solid Line
--| ENTERTAINMENT | Contractual Association - Double Line
| | Limited Liability Company - Dotted Line
|Common Stock: 1,000 Shares |
|Gates-100% | December 31, 1999
-------------------------------
Page 2
</TABLE>
<PAGE> 76
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified Contracts
as of January 31, 2000 was 224 and 637, 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 Investment Services Corporation ("NISC") acts as
principal underwriter and general distributor for the
Nationwide Multi-Flex Variable Account, Nationwide Variable
Account, Nationwide Variable Account-II, Nationwide Variable
Account-5, Nationwide Variable Account-6, Nationwide Variable
Account-8, Nationwide Variable Account-9, Nationwide Variable
Account-10, Nationwide Variable Account-11, Nationwide VA
Separate Account-A, Nationwide VA Separate Account-B,
Nationwide VA Separate Account-C, Nationwide VL Separate
Account-A, Nationwide VL Separate Account-B, Nationwide VL
Separate Account-C, Nationwide VL Separate Account-D,
Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, Nationwide VLI Separate Account-4, Nationwide VLI
Separate Account-5, Nationwide DC Variable Account, Nationwide
DCVA - II, and the NACo Variable Account, all of which are
separate investment accounts of Nationwide or its affiliates.
<PAGE> 77
(b) NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
- ------------------------- ----------------
<S> <C>
Joseph J. Gasper Chairman of the Board and
One Nationwide Plaza Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Richard A. Karas Vice Chairman and Director
One Nationwide Plaza
Columbus, OH 43215
Duane C. Meek President
One Nationwide Plaza
Columbus, OH 43215
Philip C. Gath Director
One Nationwide Plaza
Columbus, OH 43215
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodard Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
Mark R. Thresher Senior Vice President and Treasurer
One Nationwide Plaza
Columbus, OH 43215
Barbara J. Shane Vice President - Compliance Officer
Two Nationwide Plaza
Columbus, OH 43215
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
John F. Delaloye Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Glenn W. Soden Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
E. Gary Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
Duane M. Campbell Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<PAGE> 78
<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> <C>
Nationwide
Investment N/A N/A N/A N/A
Services
Corporation
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than 16
months old for so long as payments under the variable annuity
contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included
in the prospectus that the applicant can remove to send for a
Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any financial
statements required to be made available under this form promptly
upon written or oral request.
The Registrant represents that any of the contracts which are issued
pursuant to Section 403(b) of the 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.
<PAGE> 79
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of 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 28, 2000
<PAGE> 80
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 - 9 and has caused this Post-Effective Amendment to be
signed on its behalf in the City of Columbus, and State of Ohio, on this 28th of
April, 2000.
NATIONWIDE VARIABLE ACCOUNT-6
-------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-------------------------------------------
(Depositor)
By /s/ STEVEN SAVINI, ESQ.
-------------------------------------------
Steven Savini, Esq.
As required by the Securities Act of 1933, this Post-effective Amendment has
been signed by the following persons in the capacities indicated on the 28th of
April, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ----------------------------
Lewis J. Alphin
A. I. BELL Director
- ----------------------------
A. I. Bell
KENNETH D. DAVIS Director
- ----------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- ----------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ----------------------------
Willard J. Engel
FRED C. FINNEY Director
- ----------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief
- ---------------------------- Operating
Joseph J. Gasper Officer and Director
DIMON R. MCFERSON Chairman and Chief
- ---------------------------- Executive
Dimon R. McFerson Officer and Director
DAVID O. MILLER Chairman of the Board and
- ---------------------------- Director
David O. Miller
YVONNE L. MONTGOMERY Director
- ----------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President
- ---------------------------- and Chief
Robert A. Oakley Financial Officer
RALPH M. PAIGE Director
- ----------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
- ----------------------------
James F. Patterson
ARDEN L. SHISLER Director By: /s/ STEVEN SAVINI, ESQ.
- ---------------------------- ---------------------------
Arden L. Shisler Steven Savini, Esq.
Attorney-in-Fact
ROBERT L. STEWART Director
- ----------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ----------------------------
Nancy C. Thomas
</TABLE>
<PAGE> 1
MARKETING COORDINATION AND
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement entered into this 1st day of May, 2000, between Nationwide Life
Insurance Company ("Nationwide"), and Nationwide Investment Services Corporation
("NISC").
Nationwide proposes to develop, issue and administer, and NISC proposes to
provide the exclusive national distribution services for certain annuity and
life products (the "Products"). The parties hereby agree as follows:
A. ADMINISTRATION OF PRODUCTS
1. Appointment of Product Administration
Nationwide is hereby appointed Product Administrator for the
Products.
2. Duties of Nationwide
Nationwide will perform in a proper and timely manner, those
functions enumerated in the column marked "Nationwide" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
3. Duties of NISC
NISC will perform in a proper and timely manner, those
functions enumerated in the column marked "NISC" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
B. MARKETING COORDINATION AND SALES ADMINISTRATION
1. Distribution of Products
The Products will be distributed through registered
representatives of NASD broker-dealer firms, appointed by
Nationwide, who shall be duly qualified and licensed as agents
(the "Agents"), in accordance with applicable state insurance
authority.
2. NISC shall be the exclusive National Distributor of the
Products.
<PAGE> 2
3. Appointment and Termination of Agents
Appointment and termination of Agents shall be processed and
executed by Nationwide. NISC reserves the right to require
Nationwide to consult with it regarding licensing decisions.
4. Advertising
NISC shall not print, publish or distribute any advertisement,
circular or document relating to the Products or relating to
Nationwide unless such advertisement, circular or document has
been approved in writing by Nationwide. Such approval shall
not be unreasonably withheld, and shall be given promptly,
normally within five (5) business days. Neither Nationwide nor
any of its affiliates shall print, publish or distribute any
advertisement, circular or document relating to the Products
or relating to NISC unless such advertisement, circular or
document has been approved in writing by NISC. Such approval
shall not be unreasonably withheld, and shall be given
promptly, normally within five (5) business days. However,
nothing herein shall prohibit any person from advertising the
Products on a generic basis.
5. Marketing Conduct
The parties will jointly develop standards, practices and
procedures respecting the marketing of the Products. Such
standards, practices and procedures are intended to help
Nationwide meet its obligations as an issuer under the
securities laws, to assure compliance with state insurance
laws, and to help NISC meet its obligations under the
securities laws as National Distributor. These standards,
practices and procedures are subject to continuing review and
neither Nationwide nor NISC will object unreasonably to
changes to such standards, practices and procedures
recommended by the other to comply with the intent of this
provision.
6. Sales Material and Other Documents
a. Sales Material
1) Nationwide shall develop and prepare all
promotional material to be used in the
distribution of the Products, in
consultation with NISC.
2) Nationwide is responsible for the printing
and the expense of providing such
promotional material.
3) Nationwide is responsible for approval of
such promotional material by state insurance
regulators, where required.
<PAGE> 3
4) NISC and Nationwide agree to abide by the
Advertising and Sales Promotion Material
Guidelines, attached hereto as EXHIBIT B,
and incorporated herein by reference.
b. Prospectuses
1) Nationwide is responsible for the
preparation and regulatory clearance of any
required registration statements and
prospectuses for the Products.
2) Nationwide is responsible for the printing
of Product prospectuses in such quantities
as the parties agree are necessary to assure
sufficient supplies.
3) Nationwide is responsible for supplying
Agents with sufficient quantities of Product
prospectuses.
c. Contracts, Applications and Related Forms
1) Nationwide, in consultation with NISC, is
responsible for the design and printing of
adequate supplies of Product applications,
contracts, related forms, and such service
forms as the parties agree are necessary.
2) Nationwide is responsible for supplying
adequate quantities of all such forms to the
Agents.
7. Appointment of Agents
a. NISC will assist Nationwide in facilitating the
appointment of Agents by Nationwide.
b. Nationwide will forward all appointment forms and
applications to the appropriate states and maintain
all contacts with the states.
c. Nationwide will maintain appointment files on Agents,
and NISC will have access to such files as needed.
8. Licensing and Appointment Guide
Nationwide shall provide to NISC a Licensing and Appointment
Guide (as well periodic updates thereto), setting forth the
requirements for licensing and appointment, in such quantities
as NISC may reasonably require.
<PAGE> 4
9. Other
a. Product Training
Nationwide is responsible for any Product training
for the Agents.
b. Field Sales Material
1) Nationwide, in consultation with NISC, is
responsible for the development, printing
and distribution of non-public field sales
material to be used by Agents.
2) NISC shall have the right to review all
field sales materials and to require any
modification mandated by regulatory
requirements.
c. Production Reports
Nationwide will deliver to NISC the items listed in
Production Reports to be Provided, attached hereto as
EXHIBIT C, and incorporated herein by reference.
d. Customer Service
Each party will notify the other of all material
pertinent inquiries and complaints it receives, from
whatever source and to whomever directed, and will
consult with the other in responding to such
inquiries and complaints.
e. Records and Books
All books and records maintained by Nationwide in
connection with the offer and sale of variable
annuity interests funded by a Separate Account are
maintained and preserved in conformity with the
requirements of Rule 17a-3 and 17a-4 under the 1934
Exchange Act, to the extent such requirements are
applicable to the variable annuity operations.
All such books and records are maintained and held by
Nationwide on behalf of and as agent for NISC, whose
property they are and shall remain. Such books and
records are at all times subject to inspection by the
Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
<PAGE> 5
C. GENERAL PROVISIONS
1. Waiver
The forbearance or neglect of either party to insist upon
strict compliance by the other with any of the provisions of
this Agreement, whether continuing or not, or to declare a
forfeiture of termination against the other, shall not be
construed as a waiver of any rights or privileges of the
forbearing party in the event of a further default or failure
of performance.
2. Limitations
Neither party shall have authority on behalf of the other to:
make, alter or discharge any contractual terms of the
Products; waive any forfeiture; extend the time of making any
contributions to the products; guarantee dividends; alter the
forms which either may prescribe; nor substitute other forms
in place of those prescribed by the other.
3. Binding Effect
This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective successors
and assigns, provided that neither party shall assign or
sub-contract this Agreement or any rights or obligations
hereunder without prior written consent of the other.
4. Indemnification
Each party ("Indemnifying Party") hereby agrees to release,
indemnify and hold harmless the other party, its officers,
directors, employers, agents, servants, predecessors or
successors from any claims or liability arising out of the
acts or omissions of the Indemnifying Party not authorized by
this Agreement, including the violation of any federal or
state law or regulation.
5. Notices
All notices, requests, demands and other communication under
this Agreement shall be in writing and shall be deemed to have
been given on the date of service if served personally on the
party to whom notice is to be given, or on the date of mailing
if sent postage prepaid by First Class Mail, Registered or
Certified mail, by overnight mail, properly addressed as
follows:
TO NATIONWIDE:
Nationwide Life Insurance Company
Michael C. Butler, Vice President-Sales
Three Nationwide Plaza
Columbus, Ohio 43215
<PAGE> 6
TO NISC:
Nationwide Investment Services Corporation.
Barbara Shane, Vice President-Compliance Officer
Two Nationwide Plaza
Columbus, Ohio 43215
6. Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio.
7. Arbitration
The parties agree that misunderstandings or disputes arising
from this Agreement shall be decided by arbitration, conducted
upon request of either party before three arbitrators (unless
the parties agree on a single arbitrator) designated by the
American Arbitration Association, and in accordance with the
rules of such Association. The expenses of the arbitration
proceedings conducted hereunder shall be borne equally by both
parties.
8. Confidentiality
Any information, documents and materials, whether printed or
oral, furnished by either party or its agents or employees to
the other shall be held in confidence. No such information
shall be given to any third party, other than to such
sub-contractors of NISC as may be permitted herein, or under
requirements of a lawful authority, without the express
written consent of the other party.
D. TERM OF AGREEMENT
This Agreement, including the Exhibits attached hereto, shall remain in
full force and effect until terminated, and may be amended only by
mutual agreement of the parties in writing. Any decision by either
party to cease issuance or distribution of any specific Product shall
not effect a termination of the Agreement unless such termination is
mutually agreed upon, or unless notice is given pursuant to Section
E.2. hereof.
E. TERMINATION
1. Either party may terminate this Agreement for cause at any
time, upon written notice to the other, if the other knowingly
and willfully: (a) fails to comply with the laws or
regulations of any state or governmental agency or body having
jurisdiction over the sale of insurance or securities; (b)
misappropriates any money or property belonging to the other;
(c) subjects the other to any actual or potential liability
due to misfeasance, malfeasance, or nonfeasance; (d) commits
any fraud upon the other; (e) has an assignment for the
benefit of creditors; (f) incurs bankruptcy; or (g) commits a
material breach of this Agreement.
<PAGE> 7
2. Either party may terminate this Agreement, without regard to
cause, upon six months prior written notice to the other.
3. In the event of termination of this Agreement, the following
conditions shall apply:
a) The parties irrevocably acknowledge the continuing
right to use any Product trademark that might then be
associated with any Products, but only with respect
to all business in force at the time of termination.
b) In the event this Agreement is terminated the parties
will use their best efforts to preserve in force the
business issued pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
NATIONWIDE LIFE INSURANCE
COMPANY
By: __________________________
Michael C. Butler
Title: Vice President - Sales
NATIONWIDE INVESTMENT SERVICES
CORPORATION
By: ________________________
Barbara Shane
Title: Vice President - Compliance Officer
<PAGE> 8
EXHIBIT A
ANALYSIS OF ADMINISTRATIVE FUNCTIONS
A. PRODUCT UNDERWRITING/ISSUE
NATIONWIDE NISC
- - Establishes underwriting criteria for - Consults with regard to new business
application processing and rejections. procedures and processing.
- - Reviews the completed application.
Applies underwriting/issue criteria to
application.
- - Notifies Agent and/or customer of
any error or missing data necessary to
underwrite application and establish
records for owner of Product ("Contract
Owner").
- - Prepares policy data page for
approved business and mails with policy
to Contract Owner.
- - Establishes and maintains all records
required for each Contract Owner, as
applicable.
- - Prepares and mails confirmation and
other statements to Contract Owners and
Agents, as required.
- - Prints, provides all forms ancillary
to issue of contract/policy forms for
Products.
- - Maintains supply of approved specimen
policy forms and all ancillary forms,
distributes same to Agents.
<PAGE> 9
B. BILLING AND COLLECTION
NATIONWIDE
- - Receives premium/purchase
payments and reconciles amount
received with remittance media.
- - Updates Contract Owner records to
reflect receipt of premium/purchase
payment and performs accounting/
investment allocation of each
payment received.
- - Deposits all cash received under the
Products in accordance with the
terms of the Products.
C. BANKING
NATIONWIDE
- - Balances, edits, endorses and prepares daily deposit.
- - Places deposits in depository account.
- - Prepares daily cash journal summary reports and
maintains same for review by NISC.
<PAGE> 10
D. PRICING/VALUATION/ACCOUNTING/TRADING
NATIONWIDE NISC
- - Maintains and makes available, as - Cooperates in annual audit of separate
reasonably requested, records used in account financials conducted for purposes
determining "Net Amount Available for of financial statement certification and
Investment." publication.
- - Collects information needed in - Will clear and settle Mutual Fund
determining Variable Account unit trades on behalf of the separate accounts
values from the Funds including using the National Securities Clearing
daily net asset value, capital Corporation FUND/Serv System.
gains or dividend distributions,
and the number of Fund Shares
acquired or sold during the
immediately preceding valuation
period.
- - Performs daily unit valuation
calculation.
<PAGE> 11
E. CONTRACT OWNER SERVICE/
RECORD MAINTENANCE
NATIONWIDE NISC
- - Receives and processes all - Accommodates customer service function
Contract Owner service requests, by providing any supporting information
including but not limited to or documentation which may be in the
informational requests, beneficiary control of NISC.
changes, and transfers of Contract
Value among eligible investment
options.
- - Maintains daily records of all
changes made to Contract Owner
accounts.
- - Researches and responds to all
Contract Owner/Agent inquiries.
- - Keeps all required Contract Owner
records.
- - Maintains adequate number of toll
free lines to service Contract Owner/
Agent inquiries.
F. DISBURSEMENTS (SURRENDERS,
DEATH CLAIMS, LOANS)
NATIONWIDE NISC
- - Receives and processes surrenders,
loans, and death claims in accordance
with established guidelines.
- - Prepares checks for surrenders,
loans, and death claims, and forwards
to Contract Owner or Beneficiary.
Prepares and mails confirmation
statement of disbursement to Contract
Owner/Beneficiary with copy to Agent.
<PAGE> 12
G. COMMISSIONS
NATIONWIDE NISC
- - Ascertains, on receipt of - Receives and performs record keeping
applications, whether writing Agent for investment company payments made
is appropriately licensed. under a 12b-1 Plan.
- - Pays commissions and other fees
in accordance with agreements
relating to same.
H. PROXY PROCESSING
NATIONWIDE NISC
- - Receives record date information
from Funds Receives proxy
solicitation materials from Funds.
- - Prepares Voting Instruction cards
and mails solicitation, if necessary.
- - Tabulates and votes all Fund Shares
in accordance with SEC requirements.
I. PERIODIC REPORTS TO CONTRACT OWNERS
NATIONWIDE NISC
- - Prepares and mails quarterly and
annual Statements of Account to
Contract Owners.
- - Prepares and mails all semi-annual
and annual reports of Variable
Account(s) to Contract Owners.
<PAGE> 13
J. REGULATORY/STATEMENT REPORTS
NATIONWIDE NISC
- - Prepares and files Separate Account - Prepares and files periodic FOCUS
Annual Statements. Reports with the NASDR and SEC, as
applicable.
- - Prepares and mails the appropriate, - Prepares and files annual audited
required IRS reports at the Contract financial statements with required
Owner level. Files same with required regulatory agencies.
regulatory agencies.
- - Prepares and files form N-SAR for
the Separate Account.
K. PREMIUM TAXES
NATIONWIDE NISC
- - Collects, pays and accounts for
premium taxes as appropriate.
- - Prepares and maintains all premium
tax records by state.
- - Maintains liabilities in General
Account ledger for accrual of premium
tax collected.
- - Integrates all company premium taxes
due and performs related accounting.
L. FINANCIAL AND MANAGEMENT REPORTS
NATIONWIDE NISC
- - Provides periodic reports in - Provides periodic reports in accordance
accordance with the Schedule of with the Schedule of Reports to be
Reports to be prepared jointly by prepared jointly by Nationwide and NISC.
Nationwide and NISC. (See EXHIBIT C) (See EXHIBIT C)
<PAGE> 14
M. AGENT LICENSE RECORDKEEPING
NATIONWIDE NISC
- - Receives, establishes, processes, - Maintains securities registrations and
and maintains Agent appointment assumes supervisory responsibility for
records. representatives of affiliated sales and
marketing companies involved in the
wholesale distribution of Nationwide
variable contract products.
- Maintains training, supervisory, and
other required records for and on behalf
of registered representatives of NISC.
<PAGE> 15
EXHIBIT B
ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES
FOR APPROVAL BY NATIONWIDE AND NISC
In order to assure compliance with state and federal regulatory requirements and
to maintain control over the distribution of promotional materials dealing with
the Products, Nationwide and NISC require that all variable contract promotional
materials be reviewed and approved by both Nationwide and NISC prior to their
use. These guidelines are intended to provide appropriate regulatory and
distribution controls.
1. Sufficient lead time must be allowed in the submission of all
promotional material. Nationwide and NISC shall approve in writing all
promotional material. Such approval shall not be unreasonably withheld,
and shall be given promptly, normally within five (5) days.
2. All promotional material will be submitted in "draft" form to permit
any changes or corrections to be made prior to the printing.
3. Nationwide and NISC will provide each other with details as to each and
every use of all promotional material submitted. Approval for one use
will not constitute approval for any other use. Different standards of
review may apply when the same advertising material is intended for
different uses. The following information will be provided for each
item of promotional material:
a. In what jurisdiction(s) the material will be used.
b. Whether distribution will be to broker/dealer, entity,
participant, etc.
c. How the material will be used (e.g., brochure, mailing, web
site, etc.)
d. The projected date of initial use.
4. Each party will advise the other of the date it discontinues the use of
any material.
5. Any changes to previously approved promotional material must be
resubmitted, following these procedures. When approved material is to
be put to a different use, request for approval of the material for the
new use must be submitted.
6. Nationwide will assign a form number to each item of advertising and
sales promotional material. This number will appear on each piece of
advertising and sales promotional material. It will be used to aid in
necessary filings, and to maintain appropriate controls.
7. Nationwide and NISC will provide written approval for all material to
be used.
8. Nationwide will be responsible to effect necessary state filings.
9 NISC will coordinate SEC/NASD filings of sales and promotional
material.
10. All telephone communication and written correspondence regarding
promotional materials should be directed to Office of Product and
Market Compliance, Nationwide Life Insurance Company, One Nationwide
Plaza, Columbus, Ohio 43215
