<PAGE> 1
As filed with the Securities and Exchange Commission.
`33 Act File No. 33-62637
`40 Act File No. 811-7357
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 3 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 [x]
NATIONWIDE VARIABLE ACCOUNT-8
(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, the Statement of Additional Information and the Financial
Statements.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[X] on October 1, 1999 pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
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<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-8
REFERENCE TO ITEMS REQUIRED BY FORM N-4
Caption in Prospectus and Statement of Additional Information and Other
Information
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C> <C> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page.................................................................................3
Item 2. Definitions................................................................................5
Item 3. Synopsis or Highlights....................................................................13
Item 4. Condensed Financial Information..........................................................N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies.....................13
Item 6. Deductions and Expenses...................................................................16
Item 7. General Description of Variable Annuity Contracts.........................................18
Item 8. Annuity Period............................................................................28
Item 9. Death Benefit and Distributions...........................................................30
Item 10. Purchases and Contract Value..............................................................20
Item 11. Redemptions...............................................................................23
Item 12. Taxes.....................................................................................34
Item 13. Legal Proceedings.........................................................................40
Item 14. Table of Contents of the Statement of Additional Information..............................43
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page................................................................................53
Item 16. Table of Contents.........................................................................53
Item 17. General Information and History...........................................................53
Item 18. Services..................................................................................53
Item 19. Purchase of Securities Being Offered......................................................54
Item 20. Underwriters..............................................................................54
Item 21. Calculation of Performance Information....................................................54
Item 22. Annuity Payments..........................................................................55
Item 23. Financial Statements......................................................................56
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.........................................................83
Item 25. Directors and Officers of the Depositor...................................................85
Item 26. Persons Controlled by or Under Common Control with the Depositor Registrant...............87
Item 27. Number of Contract Owners.................................................................98
Item 28. Indemnification...........................................................................98
Item 29. Principal Underwriter.....................................................................98
Item 30. Location of Accounts and Records.........................................................100
Item 31. Management Services......................................................................100
Item 32. Undertakings.............................................................................100
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company
through its Nationwide Variable Account - 8
The date of this prospectus is October 1, 1999.
- --------------------------------------------------------------------------------
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
The following underlying mutual funds are available under the contracts:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
o American Century VP Income & Growth
o American Century VP International
o American Century VP Value
DREYFUS
o The Dreyfus Socially Responsible Growth Fund, Inc.
o Dreyfus Stock Index Fund, Inc.
o Dreyfus Variable Investment Fund - Capital Appreciation Portfolio
FEDERATED INSURANCE SERIES
o Federated Quality Bond Fund II
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
o VIP Equity-Income Portfolio: Service Class
o VIP Growth Portfolio: Service Class
o VIP High Income Portfolio: Service Class*
o VIP Overseas Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
o VIP II Contrafund Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
o VIP III Growth Opportunities Portfolio: Service Class
MORGAN STANLEY
o Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging Markets
Debt Portfolio
o Van Kampen Life Investment Trust - Morgan Stanley Real Estate
Securities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
o Capital Appreciation Fund
o Government Bond Fund
o Money Market Fund
o Total Return Fund
o Nationwide Balanced Fund* (subadviser: Salomon Brothers Asset
Management, Inc.)
o Nationwide Equity Income Fund (subadviser: Federated Investment
Counseling)
o Nationwide Global Equity Fund (subadviser: J.P. Morgan Investment
Management Inc.)
o Nationwide High Income Bond Fund* (subadviser: Federated Investment
Counseling)
o Nationwide Multi Sector Bond Fund* (subadviser: Salomon Brothers Asset
Management, Inc. with Salomon Brothers Asset Management Limited)
o Nationwide Select Advisers Mid Cap Fund (First Pacific Advisors, Inc.,
Pilgrim Baxter & Associates, Ltd., and Rice, Hall, James & Associates)
o Nationwide Select Advisers Small Cap Growth Fund (subadvisers:
Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP, Neuberger
Berman, LLC.)
o Nationwide Small Cap Value Fund (subadviser: The Dreyfus Corporation)
o Nationwide Small Company Fund (subadvisers: The Dreyfus Corporation,
Neuberger Berman, LLC., Lazard Asset Management, Strong Capital
Management, Inc. and Credit Suisse Asset Management, LLP)
o Nationwide Strategic Growth Fund (subadviser: Strong Capital
Management, Inc.)
o Nationwide Strategic Value Fund (subadviser: Strong Capital
Management, Inc./Schafer Capital Management, Inc.)
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<PAGE> 4
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
o AMT Guardian Portfolio
o AMT Mid-Cap Growth Portfolio*
o AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
o Oppenheimer Aggressive Growth Fund/VA (formerly "Oppenheimer Capital
Appreciation Fund")
o Oppenheimer Capital Appreciation Fund/VA (formerly "Oppenheimer Growth
Fund")
o Oppenheimer Main Street Growth & Income Fund/VA (formerly "Oppenheimer
Growth & Income Fund")
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
o Growth & Income Portfolio
*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 funds of the Nationwide
Variable Account - 8 ("variable account") may be allocated to the fixed account
or the Guaranteed Term Options (Guaranteed Term Options may not be available in
every jurisdiction - refer to your contract for specific information).
The Statement of Additional Information (dated October 1, 1999) which contains
additional information about the contracts and the variable account, has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The table of contents for the Statement of Additional
Information is on page 41.
For general information or to obtain FREE copies of the:
o Statement of Additional Information;
o prospectus for any underlying mutual fund;
o prospectus for the Guaranteed Term Options; or
o required Nationwide forms,
call: 1-800-848-6331
1-800-238-3035 (TDD)
or write:
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, 1-05-P1
COLUMBUS, OHIO 43215
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
Information about this and other Best of America products can be found at:
www.bestofamerica.com
THIS ANNUITY IS NOT:
o A BANK DEPOSIT o FEDERALLY INSURED
o ENDORSED BY A BANK OR o AVAILABLE IN
GOVERNMENT AGENCY EVERY STATE
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
In the future, additional underlying mutual funds managed by certain financial
institutions or brokerage firms may be added to the variable account. These
additional underlying mutual funds may be offered exclusively to purchasing
customers of the particular financial institution or brokerage firm.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit used to calculate the variable payment annuity
payments.
CONTRACT VALUE- The total of all accumulation units in a contract, any amount
held in the fixed account, and any amount held under Guaranteed Term Options.
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.
INVESTMENT-ONLY CONTRACT- A contract purchased by a Qualified Pension,
Profit-Sharing or Stock Bonus Plan as defined by Section 401(a) of the Internal
Revenue Code.
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, 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.
SIMPLE IRA- An annuity contract which qualifies for favorable tax treatment
under Section 408(p) of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
TAX SHELTERED ANNUITY- An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide Variable Account - 8, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
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<PAGE> 6
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF SPECIAL TERMS.............................................................................3
SUMMARY OF CONTRACT EXPENSES..........................................................................6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES................................................................7
EXAMPLE...............................................................................................9
SYNOPSIS OF THE CONTRACTS............................................................................11
FINANCIAL STATEMENTS.................................................................................12
NATIONWIDE LIFE INSURANCE COMPANY....................................................................12
NATIONWIDE ADVISORY SERVICES, INC....................................................................12
INVESTING IN THE CONTRACT............................................................................12
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS......................................................................15
Mortality and Expense Risk Charge
Contract Maintenance Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP...................................................................................16
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT............................................................................17
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE......................................................................................21
SURRENDER (REDEMPTION)...............................................................................21
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Texas Optional Retirement Program or Louisiana Optional Retirement Plan
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE.......................................................................................22
Minimum & Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Loan Interest
Loan Repayment
Distributions & Annuity Payments
Transferring the Contract
Grace Period & Loan Default
ASSIGNMENT...........................................................................................24
CONTRACT OWNER SERVICES..............................................................................24
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE............................................................................26
ANNUITIZING THE CONTRACT.............................................................................26
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS.......................................................................................28
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
Death Benefit Payment
REQUIRED DISTRIBUTIONS...............................................................................29
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
Required Distributions for Individual Retirement Annuities and Simple IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS...........................................................................32
Federal Income Taxes
Individual Retirement Annuities, Simple IRAs, and Tax Sheltered Annuities
Roth IRAs
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Puerto Rico
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS...............................................................................37
YEAR 2000 COMPLIANCE ISSUES..........................................................................38
LEGAL PROCEEDINGS....................................................................................39
ADVERTISING..........................................................................................39
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.............................................41
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS...................................................42
</TABLE>
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<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless the contract owner
meets an available exception.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments surrendered)..................7%(1)
Range of CDSC over time:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED YEARS FROM CDSC
DATE OF PURCHASE PAYMENT PERCENTAGE
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
</TABLE>
(1) Each contract year, the contract owner may withdraw without a CDSC the
greater of:
a) 15% of all purchase payments made to the contract; or
b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This free withdrawal privilege is non-cumulative. Free amounts not taken during
any given contract year cannot be taken as free amounts in a subsequent contract
year (see "Contingent Deferred Sales Charge").
Withdrawals may be restricted for contracts issued to fund a Tax Sheltered
Annuity plan.
CONTRACT MAINTENANCE CHARGE......................$30(2)
VARIABLE ACCOUNT CHARGES(3)
(as a percentage of average account value)
Mortality and Expense Risk Charge..............1.40%
Total Variable Account Charges............1.40%
LOAN PROCESSING FEE
(per loan transaction)..........................$25(4)
(2) Nationwide will deduct the Contract Maintenance Charge annually on each
contract anniversary and upon full surrender of the contract.
(3) These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account or to the Guaranteed Term Options.
They are charged on a daily basis at the annual rate noted above.
(4) Nationwide assesses a $25 loan processing fee at the time each new loan is
processed. Loans are only available for contracts issued as Tax Sheltered
Annuities. Loans are not available in all states. In addition, some states
may not allow Nationwide to assess a loan processing fee (see "Loan
Privilege").
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<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
American Century Variable Portfolios, Inc. - American 1.47% 0.00% 0.00% 1.47%
Century VP International
American Century Variable Portfolios, Inc. - American 1.00% 0.00% 0.00% 1.00%
Century VP Value
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.05% 0.00% 0.80%
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
Dreyfus Variable Investment Fund - Capital 0.75% 0.05% 0.00% 0.80%
Appreciation Portfolio
Federated Insurance Series - Federated Quality Bond 0.23% 0.47% 0.00% 0.70%
Fund II
Fidelity VIP Equity-Income Portfolio: Service Class 0.49% 0.08% 0.10% 0.67%
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
Fidelity VIP High Income Portfolio: Service Class 0.58% 0.14% 0.10% 0.82%
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.13% 0.10% 0.97%
Fidelity VIP II Contrafund Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
Fidelity VIP III Growth Opportunities Portfolio: 0.59% 0.10% 0.10% 0.79%
Service Class
Morgan Stanley Dean Witter Universal Funds, Inc. - 0.27% 1.03% 0.00% 1.30%
Emerging Markets Debt Portfolio
NSAT Capital Appreciation Fund 0.58% 0.22% 0.00% 0.80%
NSAT Government Bond Fund 0.44% 0.22% 0.00% 0.66%
NSAT Money Market Fund 0.34% 0.21% 0.00% 0.55%
NSAT Total Return Fund 0.57% 0.21% 0.00% 0.78%
NSAT Nationwide Balanced Fund 0.54% 0.36% 0.00% 0.90%
NSAT Nationwide Equity Income Fund 0.45% 0.50% 0.00% 0.95%
NSAT Nationwide Global Equity Fund 0.59% 0.61% 0.00% 1.20%
NSAT Nationwide High Income Bond Fund 0.48% 0.47% 0.00% 0.95%
NSAT Nationwide Multi-Sector Bond Fund 0.54% 0.36% 0.00% 0.90%
NSAT Nationwide Select Advisers Mid Cap Fund 0.56% 0.64% 0.00% 1.20%
NSAT Nationwide Select Advisers Small Cap Growth Fund 0.57% 0.73% 0.00% 1.30%
NSAT Nationwide Small Cap Value Fund 0.47% 0.58% 0.00% 1.05%
NSAT Nationwide Small Company Fund 1.00% 0.25% 0.00% 1.25%
NSAT Nationwide Strategic Growth Fund 0.20% 0.80% 0.00% 1.00%
NSAT Nationwide Strategic Value Fund 0.52% 0.48% 0.00% 1.00%
Neuberger Berman AMT Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.85% 0.15% 0.00% 1.00%
Neuberger Berman AMT Partners Portfolio 0.78% 0.06% 0.00% 0.84%
Oppenheimer Variable Account Funds - Oppenheimer 0.69% 0.02% 0.00% 0.71%
Aggressive Growth Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer 0.72% 0.03% 0.00% 0.75%
Capital Appreciation Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer Main 0.74% 0.05% 0.00% 0.79%
Street Growth & Income Fund/VA
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
<S> <C> <C> <C> <C>
Van Eck Worldwide Insurance Trust - Worldwide Emerging 0.69% 0.61% 0.00% 1.30%
Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide Hard 1.00% 0.16% 0.00% 1.16%
Assets Fund
Van Kampen Life Investment Trust - Morgan Stanley Real 1.00% 0.08% 0.00% 1.08%
Estate Securities Portfolio
Warburg Pincus Trust - Growth & Income Portfolio 0.51% 0.49% 0.00% 1.00%
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
Management Other Total Underlying
Fees Expenses 12b-1 Fees Mutual Fund Expenses
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio: Service 0.49% 0.09% 0.10% 0.68%
Class
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.11% 0.10% 0.80%
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.17% 0.10% 1.01%
Fidelity VIP II Contrafund Portfolio: Service 0.59% 0.11% 0.10% 0.80%
Class
Fidelity VIP III Growth Opportunities Portfolio: 0.59% 0.11% 0.10% 0.80%
Service Class
Morgan Stanley Dean Witter Universal Funds, Inc. 0.80% 1.25% 0.00% 2.05%
- - Emerging Markets Debt Portfolio
NSAT Capital Appreciation Fund 0.60% 0.22% 0.00% 0.82%
NSAT Government Bond Fund 0.50% 0.22% 0.00% 0.72%
NSAT Money Market Fund 0.40% 0.21% 0.00% 0.61%
NSAT Total Return Fund 0.59% 0.21% 0.00% 0.80%
NSAT Nationwide Balanced Fund 0.75% 0.36% 0.00% 1.11%
NSAT Nationwide Equity Income Fund 0.80% 0.50% 0.00% 1.30%
NSAT Nationwide Global Equity Fund 1.00% 0.61% 0.00% 1.61%
NSAT Nationwide High Income Bond Fund 0.80% 0.47% 0.00% 1.27%
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.36% 0.00% 1.11%
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 0.64% 0.00% 1.69%
NSAT Nationwide Select Advisers Small Cap Growth 1.10% 0.73% 0.00% 1.83%
Fund
NSAT Nationwide Small Cap Value Fund 0.90% 0.58% 0.00% 1.48%
NSAT Nationwide Strategic Growth Fund 0.90% 0.80% 0.00% 1.70%
NSAT Nationwide Strategic Value Fund 0.90% 0.48% 0.00% 1.38%
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.61% 0.00% 1.61%
Emerging Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.20% 0.00% 1.20%
Hard Assets Fund
</TABLE>
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<PAGE> 11
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under this contract assuming a $1,000 investment, 5% annual return, and
no change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown below.
The chart reflects expenses of both the variable account and the underlying
mutual funds. The chart reflects variable account charges of 1.40%. The Contract
Maintenance Charge is reflected as a percentage of the average account size for
existing contracts. Since average account size is greater than $1,000, the
expense effect of the Contract Maintenance Charge is reduced accordingly.
Deductions for premium taxes are not reflected but may apply.
The summary of contract expenses and example are to help contract owners
understand the expenses associated with the contract.
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Variable 82 121 154 256 23 70 120 256 * 70 120 256
Portfolios, Inc. - American
Century VP Income & Growth
American Century Variable 90 145 194 335 31 94 160 335 * 94 160 335
Portfolios, Inc. - American
Century VP International
American Century Variable 85 130 170 288 26 79 136 288 * 79 136 288
Portfolios, Inc. - American
Century VP Value
The Dreyfus Socially 83 124 159 267 24 73 125 267 * 73 125 267
Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund, Inc. 78 107 130 208 18 56 96 208 * 56 96 208
Dreyfus Variable Investment 83 124 159 267 24 73 125 267 * 73 125 267
Fund - Capital Appreciation
Portfolio
Federated Insurance Series - 82 121 154 256 23 70 120 256 * 70 120 256
Federated Quality Bond Fund II
Fidelity VIP Equity-Income 82 120 152 253 22 69 118 253 * 69 118 253
Portfolio: Service Class
Fidelity VIP Growth 83 123 156 262 23 72 122 262 * 72 122 262
Portfolio: Service Class
Fidelity VIP High Income 83 125 160 269 24 74 126 269 * 74 126 269
Portfolio: Service Class
Fidelity VIP Overseas 85 129 168 285 26 78 134 285 * 78 134 285
Portfolio: Service Class
Fidelity VIP II Contrafund 83 123 156 262 23 72 122 262 * 72 122 262
Portfolio: Service Class
Fidelity VIP III Growth 83 124 159 266 24 73 125 266 * 73 125 266
Opportunities Portfolio:
Service Class
Morgan Stanley Dean Witter 89 140 185 319 29 89 151 319 * 89 151 319
Universal Funds, Inc. -
Emerging Markets Debt
Portfolio
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NSAT Capital Appreciation Fund 83 124 159 267 24 73 125 267 * 73 125 267
NSAT Government Bond Fund 82 120 152 252 22 69 118 252 * 69 118 252
NSAT Money Market Fund 81 116 146 240 21 65 112 240 * 65 112 240
NSAT Total Return Fund 83 124 158 265 24 73 124 265 * 73 124 265
NSAT Nationwide Balanced Fund 84 127 164 278 25 76 130 278 * 76 130 278
NSAT Nationwide Equity Income 85 129 167 283 25 78 133 283 * 78 133 283
Fund
NSAT Nationwide Global Equity 87 137 180 308 28 86 146 308 * 86 146 308
Fund
NSAT Nationwide High Income 85 129 167 283 25 78 133 283 * 78 133 283
Bond Fund
NSAT Nationwide Multi-Sector 84 127 164 278 25 76 130 278 * 76 130 278
Bond Fund
NSAT Nationwide Select 87 137 180 308 28 86 146 308 * 86 146 308
Advisers Mid Cap Fund
NSAT Nationwide Select 89 140 185 319 29 89 151 319 * 89 151 319
Advisers Small Cap Growth Fund
NSAT Nationwide Small Cap 86 132 172 293 26 81 138 293 * 81 138 293
Value Fund
NSAT Nationwide Small Company 88 138 183 314 28 87 149 314 * 87 149 314
Fund
NSAT Nationwide Strategic 85 130 170 288 26 79 136 288 * 79 136 288
Growth Fund
NSAT Nationwide Strategic 85 130 170 288 26 79 136 288 * 79 136 288
Value Fund
Neuberger Berman AMT- 85 130 170 288 26 79 136 288 * 79 136 288
Guardian Portfolio
Neuberger Berman AMT- Mid-Cap 85 130 170 288 26 79 136 288 * 79 136 288
Growth Portfolio
Neuberger Berman AMT- 84 125 161 271 24 74 127 271 * 74 127 271
Partners Portfolio
Oppenheimer Variable Account 82 121 154 257 23 70 120 257 * 70 120 257
Funds - Oppenheimer
Aggressive Growth Fund/VA
Oppenheimer Variable Account 83 123 156 262 23 72 122 262 * 72 122 262
Funds - Oppenheimer Capital
Appreciation Fund/VA
Oppenheimer Variable Account 83 124 159 266 24 73 125 266 * 73 125 266
Funds - Oppenheimer Main
Street Growth & Income Fund/VA
Van Eck Worldwide Insurance 89 140 185 319 29 89 151 319 * 89 151 319
Trust - Worldwide Emerging
Markets Fund
Van Eck Worldwide Insurance 87 135 178 304 28 84 144 304 * 84 144 304
Trust - Worldwide Hard Assets
Fund
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Van Kampen Life Investment 86 133 174 296 27 82 140 296 * 82 140 296
Trust - Morgan Stanley Real
Estate Securities Portfolio
Warburg Pincus Trust - Growth 85 130 170 288 26 79 136 288 * 79 136 288
& Income Portfolio
</TABLE>
* The contracts sold under this prospectus do not permit annuitization during
the first two contract years.
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are flexible purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)" and
"contract owner(s)" will mean "participant(s)," unless the plan otherwise
permits or requires the contract owner to exercise contract rights under the
authority of the plan terms.
The contracts can be categorized as:
o 401(a) Investment-only Contracts;
o Non-Qualified;
o IRAs, with contributions rolled over or transferred from certain
tax-qualified plans;
o Simple IRAs;
o Roth IRAs;
o Tax Sheltered Annuities, with contributions rolled over or transferred
from other Tax Sheltered Annuity plans; and
o Charitable Remainder Trusts.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
401(a) $50,000 $1,000
Investment-only
Non-Qualified $5,000 $1,000
IRA $5,000 $1,000
Simple IRA $5,000 $1,000
Roth IRA $5,000 $1,000
Tax Sheltered $5,000 $1,000
Annuity
Charitable $5,000 $1,000
Remainder Trust
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
CHARGES AND EXPENSES
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 1.40% of the daily net assets of the variable account. Nationwide assesses
these charges in return for bearing certain mortality and administrative risks.
A $30 Contract Maintenance Charge is assessed against each contract on the
contract anniversary date and on the surrender date upon full surrender of the
contract.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
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<PAGE> 14
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for 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 2 of this prospectus.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929, with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account - 8 is a separate account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
separate account on August 3, 1995, pursuant to Ohio law. Although the separate
account is registered with the SEC as a unit investment trust pursuant to the
Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise the
management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions. There are two sub-accounts for each underlying mutual fund.
One sub-account contains shares attributable to accumulation units under
Non-Qualified Contracts. The other contains shares attributable to accumulation
units under Individual Retirement Annuities, Simple IRAs, Investment-only
Contracts, 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 the 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.
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<PAGE> 15
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more 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.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus must be read along with this prospectus. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Allocations to the Guaranteed Term Options are not subject to variable account
charges.
Guaranteed Term Options provide a guaranteed rate of interest over four
different maturity durations: three (3), five (5), seven (7) or ten (10) years.
Note: The guaranteed term may last for up to 3 months beyond the 3, 5, 7, or 10
year period since every guaranteed term will end on the final day of a calendar
quarter.
For the duration selected, Nationwide will declare a guaranteed interest rate.
That rate will be credited to amounts allocated to the Guaranteed Term Option
UNLESS a distribution is taken before the maturity date. If a distribution
occurs before the maturity date, the amount distributed will be subject to a
market value adjustment. A market value adjustment can increase or decrease the
amount distributed depending on current interest rate fluctuations. No market
value adjustment will be applied if Guaranteed Term Option allocations are held
to maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options.
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<PAGE> 16
When actual interest rates are higher than the guaranteed rate, a market value
adjustment would reduce the value of the amount distributed. When actual
interest rates are lower than the guaranteed rate, the value of the amount
distributed would increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are not available for use with asset rebalancing, Dollar
Cost Averaging, or systematic withdrawals.
Guaranteed Term Options may not be available in every state.
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 the
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 rates(s) depending on the following
categories of fixed account allocations:
o 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.
o Variable Account to Fixed Rate - Allocations transferred from any of
the underlying mutual funds 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.
o Renewal Rate - The rate available for maturing fixed account
allocations that 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
underlying mutual fund options.
o Dollar Cost Averaging - From time to time, Nationwide may offer a more
favorable rate for an initial purchase payment into a new contract
when used in conjunction with a Dollar Cost Averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during the 12 month anniversary in which the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3.0%
per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
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<PAGE> 17
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any applicable charges including
CDSC.
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
Nationwide deducts a Mortality and Expense Risk Charge from the variable
account. This amount is computed on a daily basis, and is equal to an annual
rate of 1.40% of the daily net assets of the variable account.
The mortality risk charge (0.80%) compensates Nationwide for guaranteeing the
annuity rate of the contracts. This guarantee ensures that the annuity rates
will not change regardless of the death rates of annuity payees or the general
population.
The expense risk charge (0.60%) 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.
CONTRACT MAINTENANCE CHARGE
Nationwide deducts an annual Contract Maintenance Charge of $30 on each contract
anniversary and upon full surrender of the contract.
The Contract Maintenance Charge compensates Nationwide for expenses related to
contract issuance and maintenance.
If this charge is insufficient to cover actual expenses, the loss is borne by
Nationwide.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will deduct a CDSC. The CDSC will not exceed 7% of
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. For tax purposes, a surrender is usually treated
as a withdrawal of earnings first.
The CDSC applies as follows:
NUMBER OF YEARS FROM DATE CDSC
OF PURCHASE PAYMENT PERCENTAGE
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
The CDSC is used to cover sales expenses, including commissions (maximum of 6.5%
of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general account, which may indirectly include portions of the
variable account charges, since Nationwide may generate a profit from these
charges.
Contract owners taking withdrawals before age 59-1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes (see "Non-Qualified Contracts - Natural Persons as Contract
Owners").
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the greater
of:
1) 15% of all purchase payments; or
2) 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.
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<PAGE> 18
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
Guaranteed Term Options, 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.
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 CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
1) the time the contract is surrendered;
2) annuitization; or
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. 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:
o on a Nationwide form;
o signed by the contract owner; and
o received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. If the contract owner is
not a natural person and there is a change of the annuitant, distributions will
be made as if the contract owner died at the time of the change.
On the annuitization date, the annuitant will become the contract owner, unless
the contract owner is Charitable Remainder Trust.
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<PAGE> 19
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract.
If a contract owner who is NOT the annuitant dies before the annuitization date,
the joint owner becomes the contract owner.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
o Joint owners can only be named for Non-Qualified Contracts;
o Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint
owners;
o The exercise of any ownership right in the contract will generally
require a written request signed by both joint owners;
o 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
o 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 who will receive annuity payments 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 before the annuitization date with Nationwide's consent.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary(ies) is the person(s) who is entitled to the death benefit if
the annuitant dies before the annuitization date and there is no joint owner.
The contract owner can name more than one beneficiary. The beneficiaries will
share the death benefit equally, unless otherwise specified.
The contract owner may change the beneficiary(ies) or contingent
beneficiary(ies) during the annuitant's lifetime by submitting a written request
to Nationwide. Once recorded, the change will be effective as of the date it was
signed, whether or not the annuitant was living at the time it was recorded. The
change will not affect any action taken by Nationwide before the change was
recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
401(a) $50,000 $1,000
Investment-only
Non-Qualified $5,000 $1,000
IRA $5,000 $1,000
Simple IRA $5,000 $1,000
Roth IRA $5,000 $1,000
Tax Sheltered $5,000 $1,000
Annuity
Charitable $5,000 $1,000
Remainder Trust
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
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<PAGE> 20
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 Nationwide 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:
o New Year's Day o Independence Day
o Martin Luther King, Jr. Day o Labor Day
o Presidents' Day o Thanksgiving
o Good Friday o Christmas
o Memorial Day
Nationwide also will not price purchase payments if:
1) trading on the New York Stock Exchange is restricted;
2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist.
If Nationwide is closed on days when the New York Stock Exchange is open,
contract value may be affected since the contract owner would not have access to
their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts, the fixed account,
and/or Guaranteed Term Options 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, the fixed account or
Guaranteed Term Options. However, no change may be made that would result in an
amount less than 1% of the purchase payments being allocated to any sub-account
for any contract owner. Certain transactions may be subject to conditions
imposed by the underlying mutual funds, as well as those set forth in the
contract.
DETERMINING THE CONTRACT VALUE
The contract value is the sum of:
1) the value of amounts allocated to the sub-accounts of the variable
account;
2) amounts allocated to the fixed account; and
3) amounts allocated to a Guaranteed Term Option.
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, the fixed account and any Guaranteed Term Option 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.
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<PAGE> 21
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; less
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 change in 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.
Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
1) adding all amounts allocated to any Guaranteed Term Option, minus
amounts previously transferred or withdrawn (which may be subject to a
market value adjustment);
2) adding any interest earned on the amounts allocated to any Guaranteed
Term Option; and
3) subtracting charges deducted in accordance with the contract.
TRANSFERS
Transfers from the Fixed Account to the Variable Account or a Guaranteed Term
Option
Fixed account allocations may be transferred to the variable account or to a
Guaranteed Term Option 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 or a Guaranteed Term Option; 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.
Contract owners who use Dollar Cost Averaging may transfer from the fixed
account to the variable account (but not to Guaranteed Term Options) under the
terms of that program (see "Dollar Cost Averaging").
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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 and Guaranteed Term Option allocation, 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 may refuse transfers or purchase
payments to the fixed account (whether from the variable account or a Guaranteed
Term Option) 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 from a Guaranteed Term Option
Transfers from a Guaranteed Term Option prior to maturity are subject to a
market value adjustment.
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.
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
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.
Within 45 days of the end of an interest rate guarantee period, transfers may be
made from the fixed account to the variable account or to the Guaranteed Term
Options. Nationwide will determine the amount that may be transferred and will
declare this amount at the end of the guarantee period. This amount will not be
less than 10% of the amount in the fixed account that is maturing.
For new purchase payments allocated to the fixed account, or transfers to the
fixed account from the variable account or a Guaranteed Term Option, 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.
The interest rate guarantee period does not in any way refer to interest rate
crediting practices connected with Guaranteed Term Options.
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
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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:
o submitted by any agent acting under a power of attorney on behalf of
more than one contract owner; or
o 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, Simple 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 amounts 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 REDEMPTIONS)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account and Guaranteed Term Options. 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
from either:
1) the amount requested; or
2) the contract value remaining after the contract owner has received the
amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
FULL SURRENDERS (FULL REDEMPTIONS)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account charges, underlying mutual fund charges and the investment performance
of the underlying mutual funds. A CDSC may apply.
SURRENDERS UNDER A TEXAS OPTIONAL RETIREMENT PROGRAM OR A LOUISIANA OPTIONAL
RETIREMENT PLAN
Redemption restrictions apply to contracts issued under the Texas Optional
Retirement Program or the Louisiana Optional Retirement Plan.
The Texas Attorney General has ruled that participants in contracts issued under
the Texas Optional Retirement Program may only take withdrawals if:
o the participant dies;
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o the participants retires;
o the participant terminates employment due to total disability; or
o the participant that works in a Texas public institution of higher
education terminates employment.
A participant under a contract issued under the Louisiana Optional Retirement
Plan may only take distributions from the contract upon retirement or
termination of employment. All retirement benefits under this type of plan must
be paid as a lifetime income; lump sum cash payments are not permitted, except
for death benefits.
Due to the restrictions described above, a participant under either of these
plans will not be able to withdraw cash values from the contract unless on the
applicable conditions is met. However, contract value may be transferred to
other carriers, subject to any CDSC.
Nationwide issues this contract to participants in the Texas Optional Retirement
Program in reliance upon and in compliance with Rule 6c-7 of the Investment
Company Act of 1940. Nationwide issues this contract to participants in the
Louisiana Optional Retirement Plan in reliance upon and in compliance with an
exemptive order that Nationwide received from the SEC on August 22, 1990.
SURRENDERS UNDER A TAX SHELTERED ANNUITY
Contract owners of a Tax Sheltered Annuity may surrender part or all of their
contract value before the earlier of the annuitization date or the annuitant's
death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account
(described in Section 403(b)(7) of the Internal Revenue Code), may be
surrendered only:
1. when the contract owner reaches age 59-1/2, separates from service,
dies, or becomes disabled (within the meaning of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may
NOT include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year beginning
before January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except that
earnings and employer contributions as of December 31, 1988 in such
Custodial Accounts may be withdrawn in the case of hardship).
C. Any distribution other than the above, including a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate
the restrictions 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
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30 days after the contract is issued up to the annuitization date. Loans are
subject to the terms of the contract, the plan, and the Internal Revenue Code.
Nationwide may modify the terms of a loan to comply with changes in applicable
law.
MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
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.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide charges a $25 loan processing fee at the time each new loan is
processed. This fee compensates Nationwide for expenses related to administering
and processing loans.
The fee is taken from the sub-accounts, fixed account, and Guaranteed Term
Options in proportion to the contract value at the time the loan is processed.
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. Any
remaining required collateral will be transferred from the Guaranteed Term
Options. Transfers from the Guaranteed Term Options may be subject to a market
value adjustment. No CDSC will be deducted on transfers related to loan
processing.
LOAN INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. It is guaranteed never to fall
below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
Loan repayments to the Guaranteed Term Options must be at least $1,000. If the
proportional share of the repayment to the Guaranteed Term Option is less than
$1,000, that portion of the repayment will be allocated to the NSAT Money Market
Fund unless the contract owner directs otherwise.
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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:
o the contract is surrendered;
o the contract owner/annuitant dies;
o the contract owner who is not the annuitant dies prior to
annuitization; or
o 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.
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.
Investment-only Contracts, Simple IRAs, IRAs, Roth IRAs, and Tax Sheltered
Annuities may not be assigned, pledged or otherwise transferred except where
allowed by law.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account or the Guaranteed Term Options.
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
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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/or the fixed account into other
sub-accounts. Nationwide does not guarantee that this program will result in
profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account and the following underlying mutual funds: Federated
Insurance Series - Federated Quality Bond Fund II, Fidelity VIP High Income
Portfolio, NSAT Government Bond Fund, NSAT Nationwide High Income Bond Fund, and
NSAT Money Market Fund to any other underlying mutual fund. Dollar Cost
Averaging transfers may not be directed to Guaranteed Term Options. The minimum
monthly transfer is $100.
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.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested. A Dollar Cost
Averaging program which transfers amounts from the fixed account to the variable
account is not the same as an Enhanced Rate Dollar Cost Averaging program.
Contract 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
Nationwide may, from time to time, offer Enhanced Rate Dollar Cost Averaging
programs. Dollar Cost Averaging transfers for this program may only be made from
the fixed account. Such Enhanced Rate Dollar Cost Averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. Systematic
withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59-1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
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1) 15% of all purchase payments made to the contract as of the withdrawal
date;
2) an amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
3) a percentage of the contract value based on the contract owner's age,
as shown in the table below:
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 15% 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 Tax
Sheltered Annuity plan, annuitization may occur during the first 2 years subject
to Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
1) an annuity payment option; and
2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payment
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday basis" by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
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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
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a variable payment annuity. An
assumed investment rate 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 payment based on whether actual investment
performance of the underlying mutual fund is higher or lower than the assumed
investment rate of 3.5%.
Value of an Annuity Unit
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
Exchanges among Underlying Mutual Funds
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
o 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
o 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.
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(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.
The beneficiary may elect to receive the death benefit:
1) in a lump sum;
2) as an annuity; or
3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
If no beneficiary(ies) survive the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
If the contract owner is a Charitable Remainder Trust and the annuitant dies
before the annuitization date, the death benefit will accrue to the Charitable
Remainder Trust. Any designation in conflict with the Charitable Remainder
Trust's right to the death benefit will be void.
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
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payable according to the "Death of the Annuitant - Non-Qualified Contracts"
provision.
A joint owner will receive a death benefit if a contract owner/annuitant dies
before the annuitization date.
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.
DEATH BENEFIT PAYMENT
The death benefit value is determined as of the date the home office receives:
1) proper proof of the annuitant's death;
2) an election specifying the distribution method; and
3) any state required forms(s).
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that 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 a contract owner who is also the annuitant dies, and the beneficiary is the
contract owner/annuitant's spouse who is:
a) eligible to continue the contract; and
b) entitled to a death benefit;
then the spousal-beneficiary shall have the option of continuing the contract
with the contract value adjusted to include the difference between the death
benefit (if greater than the contract value) and the contract value at the time
of the contract owner/annuitant's death.
REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
1) If any contract owner dies on or after the annuitization date and before
the entire interest in the contract has been distributed, then the
remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
2) If any contract owner dies before the annuitization date, then the entire
interest in the contract (consisting of either the death benefit or the
contract value reduced by charges set forth elsewhere in the contract) will
be distributed within 5 years of the contract owner's death, provided
however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be distributed
over the life of the designated beneficiary or over a period not
longer than the life expectancy of the designated beneficiary.
Payments must begin within one year of the contract owner's death
unless otherwise permitted by federal income tax regulations; or
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;
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b) any change of annuitant will be treated as the death of a contract
owner; and
c) in either case, the appropriate distribution will be made upon the
death or change, as the case may be.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
REQUIRED DISTRIBUTIONS FOR TAX SHELTERED ANNUITIES
Distributions from Tax Sheltered Annuities will be made according to the Minimum
Distribution and Incidental Benefit ("MDIB") provisions of Section 401(a)(9) of
the Internal Revenue Code. Distributions will be made to the annuitant according
to the selected annuity payment option over a period not longer than:
a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
b) a period not longer than the life expectancy of the annuitant or the
joint life expectancies of the annuitant and the annuitant's
designated beneficiary.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a Tax Sheltered Annuity will be
distributed in equal or substantially equal payments over a period described in
a) or b), the payments will begin on the required beginning date. The required
beginning date is the later of:
a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70-1/2; or
b) the annuitant's retirement date.
Provision b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70-1/2.
Distributions commencing on the required distribution date must satisfy MDIB
provisions set forth in the Internal Revenue Code. Those provisions require that
distribution cannot be less than the amount determined by dividing the
annuitant's interest in the Tax Sheltered Annuity by the end of the previous
calendar year by:
a) the annuitant's life expectancy, or if applicable;
b) the joint and survivor life expectancy of the annuitant and the
annuitant's beneficiary.
The life expectancies and joint life expectancies are determined by reference to
Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the 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
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between the amount that should have been distributed for that year and the
amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLE IRAs
Distributions from an Individual Retirement Annuity or Simple IRA must begin no
later than April 1 of the calendar year following the calendar year in which the
contract owner reaches age 70-1/2. Distribution may be paid in a lump sum or in
substantially equal payments over:
a) the contract owner's life or the lives of the contract owner and his
or her spouse or designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity or Simple IRA must be distributed by December 31
of the calendar year in which the fifth anniversary of the contract owner's
death occurs, unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and such spouse chooses to:
1) treat the contract as an Individual Retirement Annuity or Simple
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 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, Simple IRA, or
Individual Retirement Account of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a surviving spouse who is the beneficiary under
the annuity payment option may treat the contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The owner of an Individual Retirement
Annuity or Simple IRA must annually report the amount of non-deductible purchase
payments, the amount of any distribution, the amount by which non-deductible
purchase payments for all years exceed non-taxable distributions for all years,
and the total balance of all Individual Retirement Annuities or Simple IRAs.
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.
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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
Contract owners should consult a financial consultant, legal counsel or tax
adviser to discuss in detail the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Section 72 of the Internal Revenue Code governs federal income taxation of
annuities in general. That section sets forth different rules for: (1) IRAs,
including Simple IRAs; (2) Roth IRAs; (3) Tax Sheltered Annuities; and (4)
Non-Qualified Contracts. Each type of annuity is discussed below.
Individual Retirement Annuities and Simple IRAs
Distributions from Individual Retirement Annuities and Simple IRAs are generally
taxed when received. The excludable portion of each payment is based on the
ratio between the amount by which non-deductible purchase payments to all the
contracts exceeds prior non-taxable distributions from the contracts, and the
total account balances in the contracts at the time of the distribution. The
owner of the Individual Retirement Annuity or Simple IRA must annually report to
the Internal Revenue Service:
o the amount of nondeductible purchase payments;
o the amount of any distributions;
o the amount by which nondeductible purchase payments for all years
exceed non-taxable distributions for all years; and
o the total balance in all Individual Retirement Annuities, Simple IRAs,
and Individual Retirement Accounts.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
(i) it is made on or after the date on which the contract owner attains
age 59-1/2;
(ii) it is made to a beneficiary (or the contract owner's estate) on or
after the death of the contract owner;
(iii) it is attributable to the contract owner's disability; or
(iv) it is a qualified first-time homebuyer distribution (as defined in
Section 72(t)(2)(F) of the Internal Revenue Code).
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If the Roth IRA does not have any qualified rollover contributions from a
retirement plan other than a Roth IRA (or income allocable thereto), the five
year rule is satisfied if the distribution is not made within the five year
period beginning with the first contribution to the Roth IRA. If the Roth IRA
contains qualified rollover contributions from a retirement plan other than a
Roth IRA (or income allocable thereto), the five year rule is satisfied if the
distribution is not made within the five taxable year period commencing with the
taxable year in which the qualified rollover contribution was made.
A non-qualified distribution is any distribution that is not a qualified
distribution.
A qualified distribution is not included in gross income for federal income tax
purposes. A nonqualified distribution is not includible in gross income to the
extent that the distribution, when added to all previous distributions, does not
exceed that total amount of contributions made to the Roth IRA. Any
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.
If the contract owner dies before the contract is completely distributed, the
balance will also be included in the contract owner's gross estate for tax
purposes.
A change of the annuitant or contingent annuitant may be treated by the Internal
Revenue Service as a taxable transaction.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
required by the Internal Revenue Code. The formula excludes from income the
amount invested in the contract divided by the number of anticipated payments
(as determined pursuant to Section 72(d) of the Internal Revenue Code) until the
full investment in the contract is recovered. Thereafter all distributions are
fully taxable.
Non-Qualified Contracts - Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment is excludable from taxable income based on the ratio between the
contract owner's investment in the contract and the expected return on the
contract until the investment has been recovered. Thereafter the entire amount
is includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income and no additional payments are due
after his or her death, then he or she may be entitled to a deduction for the
balance of the investment on his or her final income tax return.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, dividends, loans, or any portion of the contract
that is assigned or pledged; or for contracts issued after April 22, 1987, any
portion of the contract transferred by gift. For these purposes, a transfer by
gift may occur upon annuitization if the contract owner and the annuitant are
not the same individual.
In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during any 12-month period will be treated as one annuity contract. Additional
limitations on the use of multiple contracts may be imposed by Treasury
Regulations.
Distributions before the annuitization date allocable to a portion of the
contract invested prior to August 14, 1982, are treated first as a recovery of
the investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on earnings from
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contributions made to the contract after February 28, 1986. There are exceptions
for immediate annuities and certain contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium contract on which payments begin within one year of purchase. If this
contract is issued as the result of an exchange described in Section 1035 of the
Internal Revenue Code, for purposes of determining whether the contract is an
immediate annuity, it will generally be considered to have been purchased on the
purchase date of the contract given up in the exchange.
Internal Revenue Code Section 72 also assesses a penalty tax if a distribution
is made before the contract owner reaches age 59-1/2. The amount of the penalty
is 10% of the portion of any distribution that is includible in gross income.
The penalty tax does not apply if the distribution:
1) is the result of a contract owner's death;
2) is the result of a contract owner's disability;
3) is one of a series of substantially equal periodic payments made over
the life or life expectancy of the contract owner (or the joint lives
or joint life expectancies of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner);
4) is for the purchase of an immediate annuity; or
5) is allocable to an investment in the contract before August 14, 1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death. These rules are described in "Required
Distributions for Non-Qualified Contracts."
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code, deemed to be owned)
by individuals. Different rules apply if the contract owner is not a natural
person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities ("non-natural persons") are not treated as annuity contracts under the
Internal Revenue Code. Specifically, they are not treated as annuity contracts
for purposes of Section 72. Therefore, income earned under a Non-Qualified
Contract that is owned by a non-natural person is taxed as ordinary income
during the taxable year that it is earned. Taxation is not deferred, even if the
income is not distributed out of the contract to the contract owner.
This non-natural person rule does not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent for an individual is
treated as owned by the individual. This would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred
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compensation arrangement for one or more employees.
The non-natural person rule also does not apply to contracts that are:
a) acquired by the estate of a decedent by reason of the death of the
decedent;
b) issued in connection with certain qualified retirement plans and
individual retirement plans;
c) used in connection with certain structured settlements;
d) purchased by an employer upon the termination of certain qualified
retirement plans; or
e) an immediate annuity.
INDIVIDUAL RETIREMENT ANNUITIES, SIMPLE IRAs, AND TAX SHELTERED ANNUITIES
Contract owners looking for information on eligibility, limitations on
permissible amounts of purchase payments, and the tax consequences of
distributions from Individual Retirement Annuities, Simple IRAs, and Tax
Sheltered Annuities should contact a qualified adviser. The terms of each plan
may limit the rights available under the contracts.
Section 403(b)(1)(E) of the Internal Revenue Code requires a contract issued as
a Tax Sheltered Annuity to limit purchase payments for any year to an amount
that does not exceed the limit set forth in Section 402(g) of the Internal
Revenue Code. This limit is increased from time to time to reflect increases in
the cost of living. This limit may be reduced by deposits, contributions or
payments made to another Tax Sheltered Annuity or other plan, contract or
arrangement by or on behalf of the contract owner.
The Internal Revenue Code allows most distributions from Qualified Plans to be
rolled into Individual Retirement Annuities or Simple IRAs. Most distributions
from Tax Sheltered Annuities may be rolled into another Tax Sheltered Annuity,
Individual Retirement Annuity, or Simple IRA. Distributions that may NOT be
rolled over are those that are:
a) one of a series of substantially equal annual (or more frequent)
payments made:
1) over the life (or life expectancy) of the contract owner;
2) over the joint lives (or joint life expectancies) of the contract
owner and the contract owner's designated beneficiary; or
3) for a specified period of ten years or more; or
b) a required minimum distribution.
Any distribution that is eligible for rollover will be subject to federal tax
withholding of 20% if the distribution is not rolled into an appropriate plan as
described above.
Individual Retirement Annuities and Simple IRAs may not provide life insurance
benefits. If the death benefit exceeds the greater of the contract's cash value
or the sum of all purchase payments (less any surrenders), the contract could be
considered life insurance.
Consequently, the Internal Revenue Service could determine that the Individual
Retirement Annuity or Simple IRA does not qualify for the desired tax treatment.
ROTH IRAs
The contract may be purchased as a Roth IRA. For detailed information on
purchasing and holding this contract as a Roth IRA, the contract owner should
contact a financial adviser.
The Internal Revenue Code allows distributions from Individual Retirement
Accounts and Individual Retirement Annuities to be rolled into Roth IRAs. The
rollovers are subject to federal income tax as distributions from the Individual
Retirement Account or Individual Retirement Annuity.
For rollovers from Individual Retirement Accounts or Individual Retirement
Annuities, all of the income from the rollover will be required to be included
in income in the year of the rollover distribution from the Individual
Retirement Account or Individual Retirement Annuity.
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A distribution from a Roth IRA that contains the proceeds of a rollover from an
Individual Retirement Account or Individual Retirement Annuity within the
preceding five years could be subject to a 10% penalty, even if the distribution
is not taxable. In addition, if the rollover from the Individual Retirement
Account or Individual Retirement Annuity was made in 1998, and the income from
that rollover was included in income ratably over a four year period, a
distribution from the Roth IRA within four years of the rollover may result in
the loss of all or a portion of the four year spread, subjecting the amount
deferred under the four year election to current taxation.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required) or if it is
an eligible rollover distribution. Mandatory back-up withholding rates are 31%
of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
o a transfer of the contract from one contract owner to another; or
o a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may be subject to
estate taxes, even if all or a portion of the value is also subject to federal
income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
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If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
o 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
o who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
PUERTO RICO
Under the Puerto Rico tax code, distributions from a Non-Qualified Contract
before annuitization are treated as nontaxable return of principal until the
principal is fully recovered. Thereafter all distributions are fully taxable.
Distributions after annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
annuitization is equal to the amount of the distribution in excess of 3% of the
total purchase payments paid, until an amount equal to the total purchase
payments paid has been excluded. Thereafter, the entire distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
distributions of income. A personal adviser should be consulted in these
situations.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless:
o the failure to diversify was accidental;
o the failure is corrected; and
o 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
adviser.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
o statements showing the contract's quarterly activity;
o 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;
o annual and semi-annual reports containing all applicable information
and financial statements or their equivalent, which must
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be sent to the underlying mutual fund beneficial shareholders as
required by the rules under the Investment Company Act of 1940 for the
variable account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999. Like many
organizations, Nationwide is required to renovate or replace many computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. The shareholder services
system that supports mutual fund products was fully deployed during the first
quarter 1999. Conversions of existing traditional life policies to the new
compliant system will continue through second quarter 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide's facilities in Columbus, Ohio have been inventoried, assessed, and
tested as being Year 2000 compliant. Systems supporting Nationwide's
infrastructure such as telecommunications, voice and networks were renovated and
will be brought into compliance before the end of the second quarter 1999.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners utilizing electronic interfaces with
Nationwide and processes have been put in place to allow Nationwide to accept
data regardless of the format.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, Nationwide has contacted mutual fund
organizations that provide funds for Nationwide's variable annuity and life
products and wholesale producers to determine when they will be Year 2000
compliant. The results are currently being gathered and analyzed.
In addition to the contingency plans developed for electronic interfaces between
Nationwide and its business partners, contingency plans were also developed for
wholesale producers who may not become compliant before the end of 1999.
Additional contingency plans will be developed for mutual fund organizations
during the second quarter 1999. Nationwide has identified external risk
scenarios, prioritized those risks and is now in the process of developing
contingency plans to minimize the impact to Nationwide, customers and producers.
Contingency plan efforts are expected to be completed by the end of the third
quarter 1999.
Operating expenses in 1998 and 1997 include approximately $44.7 million and
$45.4 million, respectively, for technology projects, including
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costs related to Year 2000. Nationwide anticipates spending less than $5 million
on Year 2000 activities in 1999, and spent $2.4 million during first quarter
1999. These expenses do not have an effect on the assets of the variable account
and are not charged through to the contract owner.
Management does not anticipate that the completion of Year 2000 renovation and
replacement activities will result in a reduction in operating expenses. Rather,
personnel and resources currently allocated to Year 2000 issues will be assigned
to other technology-related projects.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
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 policy and the other who was the owner of a variable annuity contract,
commenced a lawsuit in a federal court in Texas against Nationwide and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs seek to
represent a class of variable life insurance policy owners and variable annuity
contract owners whom they claim were allegedly misled when purchasing these
variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the district court denied, in part, and granted, in part, Nationwide and
American Century's motions to dismiss the complaint. The remaining claims
against Nationwide allege securities fraud, common law fraud, civil conspiracy
and breach of contract. On December 2, 1998, the district court issued an order
denying plaintiffs' motion for class certification. On December 10, 1998, the
district court stayed the lawsuit pending plaintiffs' petition to the federal
appeals court for interlocutory review of the order denying class certification.
On March 26, 1999, the appeals court denied plaintiffs' petition for
interlocutory review of the order. On April 28, 1999, the court denied
plaintiffs' motion for reconsideration of the denial of interlocutory review.
Nationwide intends to defend the case vigorously.
On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified compensatory and punitive damages. Nationwide
currently is evaluating this lawsuit, which has not been certified as a class.
Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, NAS, is not engaged in any litigation of any material
nature.
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT Money Market
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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:
o precious metals;
o real estate;
o stocks and bonds;
o closed-end funds;
o bank money market deposit accounts and passbook savings;
o CDs; and
o the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
o S&P 500;
o Shearson/Lehman Intermediate Government/Corporate Bond Index;
o Shearson/Lehman Long-Term Government/Corporate Bond Index;
o Donoghue Money Fund Average;
o U.S. Treasury Note Index;
o Bank Rate Monitor National Index of 2-1/2 Year CD Rates; and
o Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
o Lipper Analytical Services, Inc.;
o CDA/Wiesenberger;
o Morningstar;
o Donoghue's;
o 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;
o LIMRA;
o Value;
o Best's Agent Guide;
o Western Annuity Guide;
o Comparative Annuity Reports;
o Wall Street Journal;
o Barron's;
o Investor's Daily;
o Standard & Poor's Outlook; and
o 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.
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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). Any calculation will reflect the CDSC 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.
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.
<TABLE>
<CAPTION>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
<S> <C>
General Information and History...................................................................................1
Services..........................................................................................................1
Purchase of Securities Being Offered..............................................................................2
Underwriters......................................................................................................2
Calculations of Performance.......................................................................................2
Annuity Payments..................................................................................................3
Financial Statements..............................................................................................4
</TABLE>
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investment
vehicles for variable annuity contracts and variable life insurance policies
issued by insurance companies.
There can be no assurance that the investment objectives will be achieved.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
that offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S&P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of
the S&P 500. Such a management technique known as "portfolio optimization"
may cause the Fund to be more heavily invested in some industries than in
others. However, the Fund may not invest more than 25% of its total assets
in companies whose principal business activities are in the same industry.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to achieve
its investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is
the primary intent of the manager to diversify investments across a broad
range of foreign issuers. Although the primary investment of the Fund will
be common stocks (defined to include depository receipts for common stock
and other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up to
35% of its assets in such other securities. There can be no assurance that
the Fund will achieve its objectives.
AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of well-established
companies with intermediate-to-large market capitalizations that are
believed by management to be undervalued at the time of purchase. Under
normal market conditions, the Fund expects to invest at least 80% of the
value of its total asset in equity securities, including common and
preferred stock, convertible preferred stock and convertible debt
obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified, management
investment company incorporated under Maryland law on January 24, 1989 and
commenced operations on September 29, 1989. The Fund offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation
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("Dreyfus") serves as the Fund's manager, while Mellon Equity Associates, an
affiliate of Dreyfus, serves as the Fund's index manager. Dreyfus is a wholly
owned subsidiary of Mellon Bank, N.A., which is a wholly owned subsidiary of
Mellon Bank Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, management investment company.
It was organized as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts on October 29, 1986 and commenced operations on
August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
sub-adviser and provides day-to-day management of the Portfolio.
CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This Portfolio
invests primarily in the common stocks of domestic and foreign issuers.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Dreyfus serves as the Fund's investment adviser. NCM
Capital Management Group, Inc. serves as the Fund's sub-investment adviser and
provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment standards, but which also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of
life in America. Current income is secondary to the primary goal.
FEDERATED INSURANCE SERIES
Federated Insurance Series (the "Trust"), an Open-End Management Investment
Company, was established as a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Trust offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Federated Advisers serves as the investment adviser.
FEDERATED QUALITY BOND FUND II
Investment Objective: Current income by investing in investment grade fixed
income 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 EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
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VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is also
important to point out that this Portfolio makes sense for you if you can
afford to ride out changes in the stock market because it invests primarily
in common stocks. FMR can also make temporary investments in securities
such as investment-grade bonds, high-quality preferred stocks and
short-term notes, for defensive purposes when it believes market conditions
warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
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:
o at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
o 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 Service, 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: SERVICE CLASS
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 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 CONTRAFUND PORTFOLIO: SERVICE CLASS
Investment Objective: To seek capital appreciation by investing primarily
in companies that 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
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companies to fund benefits under variable life insurance policies and variable
annuity contracts. FMR is the manager of VIP III and it's portfolios.
VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
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.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Morgan Stanley Dean Witter Universal Funds, Inc. is a mutual fund designed to
provide investment vehicles for variable annuity contracts and variable life
insurance policies and for certain tax-qualified investors. Its Emerging Markets
Debt Portfolio is managed by Morgan Stanley Dean Witter Investment Management,
Inc.
EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
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 Nationwide Advisory
Services, Inc. ("NAS"), a wholly-owned subsidiary of Nationwide Life Insurance
Company.
CAPITAL APPRECIATION FUND
Investment Objective: Long-term capital appreciation.
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.
MONEY MARKET FUND
Investment Objective: As high a level of current income as is consistent
with the preservation of capital and maintenance of liquidity.
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable, long-term total return on
invested capital.
SUBADVISED NATIONWIDE FUNDS
NATIONWIDE BALANCED FUND
Subadviser: Salomon Brothers Asset Management, Inc.
Investment Objective: Primarily seeks above-average income compared to a
portfolio entirely invested in equity securities. The Fund's secondary
objective is to take advantage of opportunities for growth of capital and
income. The Fund seeks its objective primarily through investments in a
broad variety of securities, including equity securities, fixed-income
securities and short-term obligations. Under normal market conditions, it
is anticipated that the Fund will invest at least 40% of the Fund's total
assets in equity securities and at least 25% in fixed-income senior
securities. The Fund's subadviser, Salomon Brothers Asset Management,
Inc., will have
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discretion to invest in the full range of maturities of fixed-income
securities. Generally, most of the Fund's long-term debt investments will
consist of "investment grade" securities, but the Fund may invest up to
20% of its net assets in non-convertible fixed-income securities rated
below investment grade or determined by the subadviser to be of
comparable quality. These securities are commonly known as junk bonds. In
addition, the Fund may invest an unlimited amount in convertible
securities rated below investment grade.
NATIONWIDE EQUITY INCOME FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks above average income and capital appreciation
by investing at least 65% of its assets in income-producing equity
securities. Such equity securities include common stocks, preferred
stocks, and securities (including debt securities) that are convertible
into common stocks. The portion of the Fund's total assets invested in
each type of equity security will vary according to the Fund's
subadviser's assessment of market, economic conditions and outlook.
NATIONWIDE GLOBAL EQUITY FUND
Subadviser: J. P. Morgan Investment Management Inc.
Investment Objective: To provide high total return from a globally
diversified portfolio of equity securities. Total return will consist of
income plus realized and unrealized capital gains and losses. The Fund
seeks its investment objective through country allocation, stock
selection and management of currency exposure. Under normal market
conditions, J.P. Morgan Investment Management Inc. intends to keep the
Fund essentially fully invested with at least 65% of the value of its
total assets in equity securities consisting of common stocks and other
securities with equity characteristics such as preferred stocks,
warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Fund's primary
equity instruments are the common stock of companies based in the
developed countries around the world. The assets of the Fund will
ordinarily be invested in the securities of at least five different
countries.
NATIONWIDE HIGH INCOME BOND FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks to provide high current income by investing
primarily in a professionally managed, diversified portfolio of fixed
income securities. To meet its objective, the Fund intends to invest at
least 65% of its assets in lower-rated fixed income securities such as
preferred stocks, bonds, debentures, notes, equipment lease certificates
and equipment trust certificates which are rated BBB or lower by Standard
& Poor's or Fitch Investors Service or Baa or lower by Moody's (or if not
rated, are determined by the Fund's subadviser to be of a comparable
quality). Such investments are commonly referred to as "junk bonds." For
a further discussion of lower-rated securities, please see the "High
Yield Securities" section of the Fund's prospectus.
NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Salomon Brothers Asset Management, Inc. with Salomon Brothers
Asset Management Limited
Investment Objective: Primarily seeks a high level of current income.
Capital appreciation is a secondary objective. The Fund seeks to achieve
its objectives by investing in a globally diverse portfolio of
fixed-income investments and by giving the subadviser, Salomon Brothers
Asset Management, Inc. broad discretion to deploy the Fund's assets among
certain segments of the fixed-income market that the subadviser believes
will best contribute to achievement of the Fund's investment objectives.
The Fund reserves the right to invest predominantly in securities rated
in medium or lower categories, or as determined by the
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subadviser to be of comparable quality, commonly referred to as "junk
bonds." Although the subadviser has the ability to invest up to 100% of
the Fund's assets in lower-rated securities, the subadviser does not
anticipate investing in excess of 75% of the Fund's assets in such
securities. The Subadviser has entered into a subadvisory agreement with
its London based affiliate, Salomon Brothers Asset Management Limited,
pursuant to which the subadviser has delegated to Salomon Brothers Asset
Management Limited responsibility for management of the Fund's
investments in non-dollar denominated debt securities and currency
transactions.
NATIONWIDE SELECT ADVISERS MID CAP FUND
Subadvisers: First Pacific Advisors, Inc., Pilgrim Baxter & Associates,
Ltd., and Rice, Hall, James & Associates
Investment Objective: Capital appreciation by investing primarily in
equity securities of medium-sized companies (market capitalization
between $500 million and $7 billion). Under normal market conditions, the
Fund will invest in equity securities consisting of common stock,
preferred stock and securities convertible into common stocks, including
convertible preferred stock and convertible bonds. NAS has chosen the
Fund's subadvisers because they utilize a number of different investment
styles. In utilizing these different styles, NAS hopes to increase
prospects for investment return and to reduce market risk and volatility.
NATIONWIDE SELECT ADVISERS SMALL CAP GROWTH FUND
Subadvisers: Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP,
Neuberger Berman, LLC.
Investment Objective: Seeks capital growth by investing in a broadly
diversified portfolio of equity securities issued by U.S. and foreign
companies with market capitalizations in the range of companies
represented by the Russell 2000, known has small cap companies. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of small cap companies. The balance of
the Fund's assets may be invested in equity securities of larger cap
companies.
NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: The Fund intends to pursue its investment objective
by investing, under normal market conditions, at least 75% of the Fund's
total assets in equity securities of companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index.
NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC., Lazard
Asset Management, Strong Capital Management, Inc. and Credit Suisse Asset
Management, LLP Investment Objective: Under normal market conditions, the
Fund will invest at least 65% of its total assets in equity securities of
companies whose equity market capitalizations at the time of investment
are similar to the market capitalizations of companies in the Russell
2000 Small Stock Index.
NATIONWIDE STRATEGIC GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by investing primarily in equity
securities that the Fund's subadviser believes have above-average growth
prospects. The Fund will generally invest in companies whose earnings are
believed to be in a relatively strong growth trend, and to a lesser
extent, in companies in which significant further growth is not
anticipated but whose market value is thought to be undervalued. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities, including common stocks,
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preferred stocks, and securities convertible into common or preferred
stocks, such as warrants and convertible bonds. The Fund may invest up to
35% of its total assets in debt obligations, including intermediate- to
long-term corporate or U.S. Government debt securities.
NATIONWIDE STRATEGIC VALUE FUND
Subadviser: Strong Capital Management Inc./Schafer Capital Management
Inc.
Investment Objective: Primarily long-term capital appreciation; current
income is a secondary objective. The Fund seeks to meet its objectives by
investing in securities which are believed to offer the possibility of
increase in value, primarily common stocks of established companies
having a strong financial position and a low stock market valuation at
the time of purchase in relation to investment value. Other than
considered appropriate for cash reserves, the Fund will generally
maintain a fully invested position in common stocks of publicly held
companies, primarily in stocks of companies listed on a national
securities exchange or other equity securities (common stock or
securities convertible into common stock). Investments may also be made
in debt securities which are convertible into common stocks and in
warrants or other rights to purchase common stock, which in such case are
considered equity securities by the Fund. Strong Capital Management, Inc.
has subcontracted with Schafer Capital Management, Inc. to subadvise the
Fund.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust ("NB AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of NB AMT are offered in connection with certain variable annuity
contracts and variable life insurance policies issued through life insurance
company separate accounts and are also offered directly to qualified pension and
retirement plans outside of the separate account context.
The Guardian, Partners and Mid-Cap Growth Portfolios of NB AMT invest all of
their investable assets in a corresponding series of Advisers Managers Trust
managed by Neuberger & Berman Management Incorporated ("NB Management"). Each
series then invests in securities in accordance with an investment objective,
policies and limitations identical to those of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of securities.
(For more information regarding "master/feeder fund" structure, see "Special
Information Regarding Organization, Capitalization, and Other Matters" in the
underlying mutual fund prospectus.) The investment advisor is NB Management.
AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current income.
The Portfolio and its corresponding series seek to achieve these objectives
by investing in common stocks of long-established, high-quality companies.
NB Management uses a value-oriented investment approach in selecting
securities, looking for low price-to-earnings ratios, strong balance
sheets, solid management, and consistent earnings.
AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital appreciation by investing in equity
securities of medium-sized companies that NB Management believes have the
potential for long-term, above-average capital appreciation. Medium-sized
companies have market capitalizations form $300 million to $10 billion at
the time of investment. The Portfolio and its corresponding series may
invest up to 10% of its net assets, measured at the time of investment, in
corporate debt securities that are below investment grade or, if unrated,
deemed by NB Management to be of comparable quality. Securities that are
below investment grade, as well as unrated securities, are often considered
to be speculative and usually entail greater risk. As a part of the
Portfolio's investment strategy, the Portfolio may invest up to 20% of its
net assets in securities of issuers
48
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<PAGE> 51
organized and doing business principally outside the United States. This
limitation does not apply with respect to foreign securities that are
denominated in U.S. dollars.
AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth by investing primarily in the common
stock of established companies. Its investment program seeks securities
believed to be undervalued based on fundamentals such as low
price-to-earnings ratios, consistent cash flows, and the company's track
record through all parts of the market cycle.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer variable account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold to provide benefits under variable life insurance policies
and variable annuity contracts. OppenheimerFunds, Inc. is the investment
adviser.
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA (FORMERLY "OPPENHEIMER CAPITAL
APPRECIATION FUND")
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or
to be developing new products, services or markets and normally retain a
relatively larger portion of their earnings for research, development and
investment in capital assets. The Fund may also invest in cyclical
industries in "special situations" that OppenheimerFunds, Inc. believes
present opportunities for capital growth.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA (FORMERLY "OPPENHEIMER GROWTH
FUND)
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history
of earnings and dividends and are issued by seasoned companies (companies
which have an operating history of at least five years including
predecessors). Current income is a secondary consideration in the selection
of the Fund's portfolio securities.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA (FORMERLY "OPPENHEIMER
GROWTH & INCOME FUND")
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities
and U.S. debt obligations, and cash and cash equivalents. From time to
time, the Fund may focus on small to medium capitalization issuers, the
securities of which may be subject to greater price volatility than those
of larger capitalized issuers.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Shares of Van Eck Trust are offered only to
separate accounts of insurance companies to fund the benefits of variable life
insurance policies and variable annuity contracts. The investment advisor and
manager is Van Eck Associates Corporation.
WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund emphasizes investment in countries that, compared to the world's major
economies, exhibit relatively low gross national product per capita, as
well as the potential for rapid economic growth.
WORLDWIDE HARD ASSETS FUND
Investment Objective: Long-term capital appreciation by investing primarily
in "Hard Asset Securities." For the Fund's purpose,
49
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<PAGE> 52
"Hard Assets" are real estate, energy, timber, and industrial and precious
metals. Income is a secondary consideration.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares are offered in
separate portfolios which are sold only to insurance companies to provide
funding for variable life insurance policies and variable annuity contracts. Van
Kampen Asset Management Inc. serves as the Fund's investment adviser.
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in
a diversified portfolio of securities of companies operating in the real
estate industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, including
common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies. A
"real estate industry company" is a company that derives at least 50% of
its assets (marked to market), gross income or net profits from the
ownership, construction, management or sale of residential, commercial or
industrial real estate. Under normal market conditions, at least 65% of the
Fund's total assets will be invested in Real Estate Securities, primarily
equity securities of real estate investment trusts. The Portfolio may
invest up to 25% of its total assets in securities issued by foreign
issuers, some or all of which may also be Real Estate Securities.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. Portfolios are managed by Credit Suisse Asset Management, LLP
("Credit Suisse").
GROWTH & INCOME PORTFOLIO
Investment Objective: Long-term growth of capital and income by investing
primarily in dividend-paying equity securities. Under normal market
conditions, the Portfolio will invest substantially all of its asset in
equity securities that Credit Suisse considers to be relatively undervalued
based upon research and analysis, taking into account factors such as
price/book ratio, price/cash flow ratio, earnings growth, debt/capital
ratio and multiples of earnings of comparable securities. Although the
Portfolio may hold securities of any size, it currently expects to focus on
companies with market capitalizations of $1 billion or greater at the time
of initial purchase.
50
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<PAGE> 53
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 1, 1999
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT - 8
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 October 1, 1999. The
prospectus may be obtained from Nationwide Life Insurance Company by writing
Nationwide Life Insurance Company, One Nationwide Plaza 1-05-P1, Columbus, Ohio
43215, or calling 1-800-848-6331, TDD 1-800-238-3035.
TABLE OF CONTENTS
PAGE
General Information and History.............................................1
Services....................................................................1
Purchase of Securities Being Offered........................................2
Underwriters................................................................2
Calculations of Performance.................................................2
Annuity Payments............................................................3
Financial Statements........................................................4
GENERAL INFORMATION AND HISTORY
Nationwide Variable Account-8 is a separate investment account of Nationwide
Life Insurance Company ("Nationwide"). All of Nationwide's common stock is owned
by Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. Nationwide Corporation is a holding company, as well. All
of its common stock is held by Nationwide Mutual Insurance Company (95.24%) and
Nationwide Mutual Fire Insurance Company (4.76%), the ultimate controlling
persons of Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise
is one of America's largest insurance and financial services family of
companies, with combined assets of over $98.28 billion as of December 31, 1998.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each such 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. Nationwide, or affiliates of Nationwide may have
entered into agreements with either the investment adviser or distributor for
several of the underlying mutual funds. The agreements relate to administrative
services furnished by Nationwide or an affiliate of Nationwide and provide for
an annual fee based on the average aggregate net assets of the variable account
(and other separate accounts of Nationwide or life insurance company
subsidiaries of Nationwide) invested in particular underlying mutual funds.
These fees in no way affect the net asset value of the underlying mutual funds
or fees paid by the contract owner.
The audited financial statements have been included herein in reliance upon the
report 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.
1
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<PAGE> 54
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be 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").
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215, a
wholly owned subsidiary of Nationwide. During the fiscal years ended December
31, 1998, 1997 and 1996, no underwriting commissions were paid by Nationwide to
NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. The NSAT Money Market Fund
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.
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 variable account charges of 1.40% and the
Contract Maintenance 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 $10,000 and does not reflect
the deduction of any applicable CDSC. Reflecting the CDSC would decrease the
level of the performance advertised. The CDSC is not reflected because the
contract is designed for long term investment. An assumed initial investment of
$10,000 will be used because that figure more closely approximates the size of a
typical contract than does the $1,000 figure used in
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<PAGE> 55
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.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the underlying mutual fund has been available in the variable account if
the underlying mutual fund has not been available for one of the prescribed
periods. The nonstandardized annual total return will be based on rolling
calendar quarters and will cover periods of one, five and ten years, or a period
covering the time the underlying mutual fund has been in existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance is not a
guarantee of future performance. Factors affecting a sub-account's performance
include general market conditions, operating expenses and investment management.
A contract owner's account when redeemed may be more or less than the original
cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
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<PAGE> 56
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars, except per share amounts)
December 31,
-----------------------
Assets 1998 1997
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $14,245.1 $13,204.1
Equity securities 127.2 80.4
Mortgage loans on real estate, net 5,328.4 5,181.6
Real estate, net 243.6 311.4
Policy loans 464.3 415.3
Other long-term investments 44.0 25.2
Short-term investments 289.1 358.4
--------- ---------
20,741.7 19,576.4
--------- ---------
Cash 3.4 175.6
Accrued investment income 218.7 210.5
Deferred policy acquisition costs 2,022.2 1,665.4
Other assets 420.3 438.4
Assets held in separate accounts 50,935.8 37,724.4
--------- ---------
$74,342.1 $59,790.7
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $19,767.1 $18,702.8
Other liabilities 866.1 885.6
Liabilities related to separate accounts 50,935.8 37,724.4
--------- ---------
71,569.0 57,312.8
--------- ---------
Commitments and contingencies (notes 7 and 12)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 914.7
Retained earnings 1,579.0 1,312.3
Accumulated other comprehensive income 275.6 247.1
--------- ---------
2,773.1 2,477.9
--------- ---------
$74,342.1 $59,790.7
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
Years ended December 31,
-----------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Policy charges $ 698.9 $ 545.2 $ 400.9
Life insurance premiums 200.0 205.4 198.6
Net investment income 1,481.6 1,409.2 1,357.8
Realized gains (losses) on investments 28.4 11.1 (0.3)
Other 66.8 46.5 35.9
-------- -------- --------
2,475.7 2,217.4 1,992.9
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Other benefits and claims 175.8 178.2 178.3
Policyholder dividends on participating policies 39.6 40.6 41.0
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Other operating expenses 419.7 384.9 342.4
-------- -------- --------
1,918.6 1,787.5 1,677.4
-------- -------- --------
Income from continuing operations before federal income tax expense 557.1 429.9 315.5
Federal income tax expense 190.4 150.2 110.9
-------- -------- --------
Income from continuing operations 366.7 279.7 204.6
Income from discontinued operations (less federal income tax expense
of $4.5 in 1996) -- -- 11.3
-------- -------- --------
Net income $ 366.7 $ 279.7 $ 215.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
(in millions of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 3.8 $ 657.2 $1,583.2 $ 384.3 $2,628.5
Comprehensive income:
Net income -- -- 215.9 -- 215.9
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (170.9) (170.9)
--------
Total comprehensive income 45.0
--------
Dividends to shareholder -- (129.3) (366.5) (39.8) (535.6)
------ ------- -------- ------- --------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ ------- -------- ------- --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ ------- -------- ------- --------
December 31, 1998 $ 3.8 $ 914.7 $1,579.0 $ 275.6 $2,773.1
====== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 366.7 $ 279.7 $ 215.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Capitalization of deferred policy acquisition costs (584.2) (487.9) (422.6)
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Amortization and depreciation (8.5) (2.0) 7.0
Realized gains on invested assets, net (28.4) (11.1) (0.3)
(Increase) decrease in accrued investment income (8.2) (0.3) 2.8
(Increase) decrease in other assets 16.4 (12.7) (38.9)
Decrease in policy liabilities (8.3) (23.1) (151.0)
(Decrease) increase in other liabilities (34.8) 230.6 191.4
Other, net (11.3) (10.9) (61.7)
--------- --------- ---------
Net cash provided by operating activities 982.9 1,146.1 858.3
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,557.0 993.4 1,162.8
Proceeds from sale of securities available-for-sale 610.5 574.5 299.6
Proceeds from repayments of mortgage loans on real estate 678.2 437.3 309.0
Proceeds from sale of real estate 103.8 34.8 18.5
Proceeds from repayments of policy loans and sale of other invested assets 23.6 22.7 22.8
Cost of securities available-for-sale acquired (3,182.8) (2,828.1) (1,573.6)
Cost of mortgage loans on real estate acquired (829.1) (752.2) (972.8)
Cost of real estate acquired (0.8) (24.9) (7.9)
Policy loans issued and other invested assets acquired (88.4) (62.5) (57.7)
Short-term investments, net 69.3 (354.8) 28.0
--------- --------- ---------
Net cash used in investing activities (1,058.7) (1,959.8) (771.3)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- 836.8 --
Cash dividends paid (100.0) -- (50.0)
Increase in investment product and universal life insurance
product account balances 2,682.1 2,488.5 1,781.8
Decrease in investment product and universal life insurance
product account balances (2,678.5) (2,379.8) (1,784.5)
--------- --------- ---------
Net cash (used in) provided by financing activities (96.4) 945.5 (52.7)
--------- --------- ---------
Net (decrease) increase in cash (172.2) 131.8 34.3
Cash, beginning of year 175.6 43.8 9.5
--------- --------- ---------
Cash, end of year $ 3.4 $ 175.6 $ 43.8
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Organization and Description of Business
----------------------------------------
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11,
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 10 and 14. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products, including variable annuities, fixed annuities and life
insurance.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Operations that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "Income from discontinued operations" in
the accompanying consolidated statements of income. All
significant intercompany balances and transactions have been
eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1998 or 1997.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life insurance
products, these deferred policy acquisition costs are
predominantly being amortized with interest over the premium
paying period of the related policies in proportion to the ratio
of actual annual premium revenue to the anticipated total premium
revenue. Such anticipated premium revenue was estimated using the
same assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) Separate Accounts
-----------------
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $743.9 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 6.0%, 6.1% and 6.3% for the years ended
December 31, 1998, 1997 and 1996, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 40% in 1998 (50%
in 1997 and 52% in 1996) of the Company's life insurance in force,
74% in 1998 (77% in 1997 and 78% in 1996) of the number of life
insurance policies in force, and 14% in 1998 (27% in 1997 and 40%
in 1996) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
------------------
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 10 and 14.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(j) Recently Issued Accounting Pronouncements
-----------------------------------------
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 13.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Statement does not change
the measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(k) Reclassification
----------------
Certain items in the 1997 and 1996 consolidated financial
statements have been reclassified to conform to the 1998
presentation.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
-----------
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1998 and
1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
------------------------ ---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------ ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------ ---------
$13,831.7 $563.2 $(22.6) $14,372.3
========= ====== ====== =========
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ -- $ 313.7
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
--------- ------ ------ ---------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
--------- ------ ------ ---------
$12,800.7 $498.3 $(14.5) $13,284.5
========= ====== ====== =========
</TABLE>
As of December 31, 1998 the Company had entered into S&P 500 futures
contracts with a notional amount of $20.0 million to reduce the risk of
changes in the fair market value of certain investments classified as
equity securities. These contracts had an unrealized loss of $1.3
million as of December 31, 1998 which is included in the recorded
amount of the equity securities and in accumulated other comprehensive
income, net of tax, similar to other unrealized gains and losses on
securities available-for-sale.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 2,019.9 $ 2,048.0
Due after one year through five years 8,169.1 8,470.6
Due after five years through ten years 2,795.0 2,927.7
Due after ten years 737.3 798.8
--------- ---------
$13,721.3 $14,245.1
========= =========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 540.6 $ 483.8
Adjustment to deferred policy acquisition costs (116.6) (103.7)
Deferred federal income tax (148.4) (133.0)
------- -------
$ 275.6 $ 247.1
======= =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $52.6 $137.5 $(289.2)
Equity securities 4.2 (2.7) 8.9
----- ------ -------
$56.8 $134.8 $(280.3)
===== ====== =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $610.5 million, $574.5 million and $299.6 million,
respectively. During 1998, gross gains of $9.0 million ($9.9 million
and $6.6 million in 1997 and 1996, respectively) and gross losses of
$7.6 million ($18.0 million and $6.9 million in 1997 and 1996,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $3.7 million. No valuation
allowance has been recorded for these loans as of December 31, 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million which includes
$3.9 million of impaired mortgage loans on real estate for which the
related valuation allowance was $0.1 million and $16.0 million of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 1998, the average recorded investment in impaired
mortgage loans on real estate was approximately $9.1 million ($31.8
million in 1997) and interest income recognized on those loans was $0.3
million ($1.0 million in 1997), which is equal to interest income
recognized using a cash-basis method of income recognition.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $42.5 $51.0
Reductions credited to operations (0.1) (1.2)
Direct write-downs charged against the allowance -- (7.3)
----- -----
Allowance, end of year $42.4 $42.5
===== =====
</TABLE>
Real estate is presented at cost less accumulated depreciation of $21.5
million as of December 31, 1998 ($45.1 million as of December 31, 1997)
and valuation allowances of $5.4 million as of December 31, 1998 ($11.1
million as of December 31, 1997).
Investments that were non-income producing for the twelve month period
preceding December 31, 1998 amounted to $42.4 million ($19.4 million
for 1997) and consisted of $32.7 million ($3.0 million in 1997) in
securities available-for-sale and $9.7 million ($16.4 million in 1997)
in real estate.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 982.5 $ 911.6 $ 917.1
Equity securities 0.8 0.8 1.3
Mortgage loans on real estate 458.9 457.7 432.8
Real estate 40.4 42.9 44.3
Short-term investments 17.8 22.7 4.2
Other 30.7 21.0 4.0
-------- -------- --------
Total investment income 1,531.1 1,456.7 1,403.7
Less investment expenses 49.5 47.5 45.9
-------- -------- --------
Net investment income $1,481.6 $1,409.2 $1,357.8
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(0.7) $ 3.6 $(3.5)
Equity securities 2.1 2.7 3.2
Mortgage loans on real estate 3.9 1.6 (4.1)
Real estate and other 23.1 3.2 4.1
----- ----- -----
$28.4 $11.1 $(0.3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $6.5 million and
$6.2 million as of December 31, 1998 and 1997, respectively, were on
deposit with various regulatory agencies as required by law.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) Federal Income Tax
------------------
The Company's current federal income tax liability was $72.8 million
and $60.1 million as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $207.7 $200.1
Liabilities in Separate Accounts 319.9 242.0
Mortgage loans on real estate and real estate 17.5 19.0
Other assets and other liabilities 58.9 59.2
------ ------
Total gross deferred tax assets 604.0 520.3
Less valuation allowance (7.0) (7.0)
------ ------
Net deferred tax assets 597.0 513.3
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 568.7 480.5
Fixed maturity securities 212.2 193.3
Deferred tax on realized investment gains 34.8 40.1
Equity securities and other long-term investments 9.6 7.5
Other 21.6 22.2
------ ------
Total gross deferred tax liabilities 846.9 743.6
------ ------
Net deferred tax liability $249.9 $230.3
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1998, 1997 and 1996.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $186.1 $121.7 $116.5
Deferred tax expense (benefit) 4.3 28.5 (5.6)
------ ------ ------
$190.4 $150.2 $110.9
====== ====== ======
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(in millions of dollars) Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $195.0 35.0 $150.5 35.0 $110.4 35.0
Tax exempt interest and dividends
received deduction (4.9) (0.9) - 0.0 (0.2) (0.1)
Other, net 0.3 0.1 (0.3) (0.1) 0.7 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $190.4 34.2 $150.2 34.9 $110.9 35.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $173.4 million, $91.8 million and
$115.8 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
(5) Comprehensive Income
--------------------
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Gross $ 58.2 $141.1 $(272.4)
Adjustment to deferred policy acquisition costs (12.9) (21.8) 57.0
Related federal income tax (expense) benefit (15.9) (41.7) 44.0
------ ------ ------
Net 29.4 77.6 (171.4)
------ ------ ------
Reclassification adjustment for net (gains) losses
on securities available-for-sale realized
during the period:
Gross (1.4) (6.3) 0.7
Related federal income tax expense (benefit) 0.5 2.2 (0.2)
------ ------ -------
Net (0.9) (4.1) 0.5
------ ------ -------
Total Other Comprehensive Income $ 28.5 $ 73.5 $(170.9)
====== ====== =======
</TABLE>
(6) Fair Value of Financial Instruments
-----------------------------------
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for
equity securities exclude the fair value of futures contracts
designated as hedges of equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 7.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $14,245.1 $14,245.1 $13,204.1 $13,204.1
Equity securities 128.5 128.5 80.4 80.4
Mortgage loans on real estate, net 5,328.4 5,527.6 5,181.6 5,509.7
Policy loans 464.3 464.3 415.3 415.3
Short-term investments 289.1 289.1 358.4 358.4
Cash 3.4 3.4 175.6 175.6
Assets held in separate accounts 50,935.8 50,935.8 37,724.4 37,724.4
Liabilities:
Investment contracts 15,468.7 15,158.6 14,708.2 14,322.1
Policy reserves on life insurance contracts 3,914.0 3,768.9 3,345.4 3,182.4
Liabilities related to separate accounts 50,935.8 49,926.5 37,724.4 36,747.0
Futures contracts 1.3 1.3 -- --
</TABLE>
(7) Risk Disclosures
----------------
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $156.0 million
extending into 1999 were outstanding as of December 31, 1998. The
Company also had $40.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1998.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (20% in 1997) in any geographic area and no more than 2% (2%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998, 42% (46% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $187.9 million and $220.2 million as of December 31,
1998 and 1997, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(8) Pension Plan and Postretirement Benefits Other Than Pensions
------------------------------------------------------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $2.0 million, $7.5 million
and $7.4 million, respectively. The Company has recorded a prepaid
pension asset of $5.0 million as of December 31, 1998 and no prepaid or
accrued pension asset or expense as of December 31, 1997.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1998 and 1997 was $40.1 million and $36.5 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1998, 1997 and
1996 was $4.1 million, $3.0 million and $3.3 million, respectively.
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------- -----------------------
(in millions of dollars) 1998 1997 1998 1997
--------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,033.8 $1,847.8 $237.9 $ 200.7
Service cost 87.6 77.3 9.8 7.0
Interest cost 123.4 118.6 15.4 14.0
Actuarial loss 123.2 60.0 15.6 24.4
Plan curtailment in 1998/merger in 1997 (107.2) 1.5 - -
Benefits paid (75.8) (71.4) (8.6) (8.2)
-------- -------- ------- -------
Benefit obligation at end of year 2,185.0 2,033.8 270.1 237.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212.9 1,947.9 69.2 63.0
Actual return on plan assets 300.7 328.1 5.0 3.6
Employer contribution 104.1 7.2 12.1 10.6
Plan merger - 1.1 - -
Benefits paid (75.8) (71.4) (8.4) (8.0)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,541.9 2,212.9 77.9 69.2
-------- -------- ------- -------
Funded status 356.9 179.1 (192.2) (168.7)
Unrecognized prior service cost 31.5 34.7 - -
Unrecognized net (gains) losses (345.7) (330.7) 16.0 1.6
Unrecognized net (asset) obligation at transition (11.0) 33.3 1.3 1.5
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 31.7 $ (83.6) $(174.9) $(165.6)
======== ======== ======= =======
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
-------------------- -----------------------
1998 1997 1998 1997
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
-------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
Service cost (benefits earned during the period) $ 87.6 $ 77.3 $ 75.5
Interest cost on projected benefit obligation 123.4 118.6 105.5
Expected return on plan assets (159.0) (139.0) (116.1)
Recognized gains (3.8) - -
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation 4.2 4.2 4.1
------- ------- -------
$ 55.6 $ 64.3 $ 72.2
======= ======= =======
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67.1
million resulted (consisting of a $107.2 million reduction in the
projected benefit obligation, net of the write-off of the $40.1 million
remaining unamortized transition obligation related to WSC). The
Company anticipates that the plan will settle the obligation related to
WSC employees with a transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 9.8 $ 7.0 $ 6.5
Interest cost on accumulated postretirement benefit obligation 15.4 14.0 13.7
Actual return on plan assets (5.0) (3.6) (4.3)
Amortization of unrecognized transition obligation of affiliates 0.2 0.2 0.2
Net amortization and deferral 1.2 (0.5) 1.8
----- ----- -----
$21.6 $17.1 $17.9
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
----------------------------------------------------------------------
and Dividend Restrictions
-------------------------
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1998, 1997
and 1996 was $1.32 billion, $1.13 billion and $1.00 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1998, 1997 and 1996 was $171.0 million, $111.7 million and
$73.2 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $71.0
million.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(10) Transactions With Affiliates
----------------------------
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $8.0
million, $8.4 million and $9.1 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $95.0 million, $85.8 million and $101.6
million in 1998, 1997 and 1996, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $31.9 million and $20.5 million as of
December 31, 1998 and 1997, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1998 and
1997 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW NMIC ELICW
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums $90.1 $106.3 $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other
revenue $11.1 $ 9.4 $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and expenses $98.8 $160.5 $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $248.4 million and $211.0 million as
of December 31, 1998 and 1997, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1998 were $60.0
million, $66.1 million and $76.9 million, respectively.
(11) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement. As of December 31, 1998 the Company had
no amounts outstanding under the agreement.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(12) Contingencies
-------------
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(13) Segment Information
-------------------
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
The Variable Annuities segment consists of annuity contracts that
provide the customer with the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for a
prescribed period, with returns accumulating on a tax-deferred basis.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary (other than
the portion allocated to the Variable Annuities and Life Insurance
segments), revenues and expenses related to group annuity contracts
sold to Nationwide Insurance Enterprise employee and agent benefit
plans and all realized gains and losses on investments in a Corporate
and Other segment.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's business
segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
- ------------------------------------ --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 231.6 $ 164.7 $ 1,481.6
Other operating revenue 560.8 35.7 319.6 49.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 529.5 1,152.3 551.2 214.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 187.2 104.2 294.6 49.1 635.1
--------- --------- -------- -------- ---------
Total expenses 311.1 977.0 456.4 174.1 1,918.6
--------- --------- -------- -------- ---------
Operating income (loss) before
federal income tax 218.4 175.3 94.8 40.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 94.8 $ 68.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.9) $ 1,098.2 $ 189.1 $ 148.8 $ 1,409.2
Other operating revenue 430.9 43.2 284.0 39.0 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 404.0 1,141.4 473.1 187.8 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Other benefits and expenses 165.3 108.7 284.1 45.6 603.7
--------- --------- -------- -------- ---------
Total expenses 253.1 971.9 402.2 160.3 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 70.9 27.5 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 70.9 $ 38.6 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
------------------------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (21.5) $ 1,050.6 $ 174.0 $ 154.7 $ 1,357.8
Other operating revenue 306.1 42.0 261.6 25.7 635.4
---------- ---------- --------- --------- ---------
Total operating revenue (2) 284.6 1,092.6 435.6 180.4 1,993.2
---------- ---------- --------- --------- ---------
Interest credited to policyholder
account balances -- 805.0 70.2 107.1 982.3
Amortization of deferred policy
acquisition costs 57.4 38.6 37.4 -- 133.4
Benefits and expenses 136.9 113.6 260.8 50.4 561.7
---------- ---------- --------- --------- ---------
Total expenses 194.3 957.2 368.4 157.5 1,677.4
---------- ---------- --------- --------- ---------
Operating income before federal
income tax 90.3 135.4 67.2 22.9 315.8
Realized losses on investments -- -- -- (0.3) (0.3)
---------- ---------- --------- --------- ---------
Consolidated income from
continuing operations before
federal tax expense $ 90.3 $ 135.4 $ 67.2 $ 22.6 $ 315.5
========== ========== ======== ======== =========
Assets as of year end $ 25,069.7 $ 13,994.7 $3,353.3 $5,348.5 $47,766.2
========== ========== ======== ======== =========
</TABLE>
-----------
(1) The Company's method of allocating net investment income results
in a charge (negative net investment income) to the Variable
Annuities segment which is recognized in the Corporate and Other
segment. The charge relates to non-invested assets which support
this segment on a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
(14) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 10 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C>
Revenues $ -- $ -- $ 668.9
Net income $ -- $ -- $ 11.3
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets, consisting primarily of investments $221.5 $247.3 $3,288.5
Liabilities, consisting primarily of policy benefits and claims $221.5 $247.3 $2,802.8
</TABLE>
<PAGE> 57
PART C. OTHER INFORMATION
<TABLE>
<S> <C>
Item 24. Financial Statements and Exhibits PAGE
(a) Financial Statements:
(1) Financial statements included in Prospectus.
(Part A):
Condensed Financial Information.
(2) Financial statements included in Part B: N/A
Those financial statements required by
Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account-8: N/A
Nationwide Life Insurance Company and subsidiaries:
Independent Auditors' Report. 56
Consolidated Balance Sheets as of December 57
31, 1998 and 1997.
Consolidated Statements of Income for the 58
years ended December 31, 1998, 1997 and
1996.
Consolidated Statements of Shareholder's 59
Equity for the years ended December 31,
1998, 1997 and 1996.
Consolidated Statements of Cash Flows for 60
the years ended December 31, 1998, 1997
and 1996.
Notes to Consolidated Financial Statements. 61
</TABLE>
83 of 103
<PAGE> 58
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing the establishment of the Registrant -
Filed previously with the Registration Statement
and hereby incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts between
the Registrant and Principal Underwriter - Filed
previously with the Registration Statement and
hereby incorporated by reference.
(4) The form of the variable annuity contract -
Attached hereto.
(5) Variable Annuity Application - Attached hereto.
(6) Articles of Incorporation of Depositor - Filed
previously with the Registration Statement and
hereby incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with the
Registration Statement and hereby incorporated by
reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule -
Filed previously with the Registration Statement,
and hereby incorporated by reference.
84 of 103
<PAGE> 59
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
- -------------------------------------------------------------------------------------------------------------------
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
- -------------------------------------------------------------------------------------------------------------------
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
- -------------------------------------------------------------------------------------------------------------------
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
- -------------------------------------------------------------------------------------------------------------------
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
- -------------------------------------------------------------------------------------------------------------------
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
- -------------------------------------------------------------------------------------------------------------------
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman and Chief Executive Officer
One Nationwide Plaza and Director
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
- -------------------------------------------------------------------------------------------------------------------
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
- -------------------------------------------------------------------------------------------------------------------
Ralph M. Paige, Executive Director Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
- -------------------------------------------------------------------------------------------------------------------
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
- -------------------------------------------------------------------------------------------------------------------
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
- -------------------------------------------------------------------------------------------------------------------
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
85 of 103
<PAGE> 60
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Nancy C. Thomas Director
1733A 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 - Chief Actuary
One Nationwide Plaza 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 - Corporate
One Nationwide Plaza Controller
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Phillip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Patricia R. Hatler Senior Vice President and
One Nationwide Plaza General Counsel
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
David K. Hollingsworth Senior Vice President - Marketing
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Donna A. James Senior Vice President -
One Nationwide Plaza Chief Human Resources Officer
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
86 of 103
<PAGE> 61
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Douglas C. Robinette Senior Vice President- Finance
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
James A. Taylor Senior Vice President -
One Nationwide Plaza Property and Casualty Insurance
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President - Finance
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Shared Services
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Susan A. Wolken Senior Vice President -
One Nationwide Plaza Product Management and Marketing
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Bruce C. Barnes Vice President - Technology
One Nationwide Plaza Strategy and Planning
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Matthew S. Easley Vice President -
One Nationwide Plaza Investment Life Actuarial
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
R. Dennis Noice Vice President - Systems
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Joseph P. Rath Senior Vice President - Product
One Nationwide Plaza and Market Compliance
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
87 of 103
<PAGE> 62
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
<S> <C> <C>
The 401K Companies, Inc. Texas Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
The 401(K) Company Texas Third-party administrator for
401(k) plans
- ----------------------------------------- ----------------------- ---------------- --------------------------------
401K Investment Advisors, Inc. Texas Investment Advisor registered
with the SEC
- ----------------------------------------- ----------------------- ---------------- --------------------------------
401K Investments Services, Inc. Texas NASD registered Broker-Dealer
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Affiliate Agency, Inc. Delaware Life Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
AID Finance Services, Inc. Iowa Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED General Agency Company Iowa Managing General Agent and
Surplus Lines Broker (P&C)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Group, Inc. Iowa Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Group Insurance Marketing Company Iowa Direct Marketer (P&C)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Group Mortgage Company Iowa Mortgage Lender
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Life Brokerage Agency, Inc. Iowa Insurance Broker
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Life Financial Corporation Iowa Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Life Insurance Company Iowa Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
ALLIED Property and Casualty Insurance Iowa Underwrites General P&C
Company Insurance
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Allnations, Inc. Ohio Promotes international
cooperative insurance
organizations
- ----------------------------------------- ----------------------- ---------------- --------------------------------
AMCO Insurance Company Iowa Underwrites General P&C
Insurance
- ----------------------------------------- ----------------------- ---------------- --------------------------------
American Marine Underwriters, Inc. Florida Underwriting Manager
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Auto Direkt Insurance Company Germany Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
CalFarm Insurance Company California Stock Corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Caliber Funding Corporation Delaware Stock Corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Colonial County Mutual Insurance Company Texas Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Colonial Insurance Company of Wisconsin Wisconsin Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Columbus Insurance Brokerage and Germany Insurance Broker
Service GmbH
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Cooperative Service Company Nebraska Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Depositors Insurance Company Iowa Underwrites P&C insurance
- ----------------------------------------- ----------------------- ---------------- --------------------------------
</TABLE>
88 of 103
<PAGE> 63
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
<S> <C> <C>
*Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Excaliber Funding Corporation Delaware Limited purpose corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
F&B, Inc. Iowa Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Financial Horizons Distributors Agency Alabama Insurance Agency
of Alabama, Inc.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Financial Horizons Distributors Agency Ohio Insurance Agency
of Ohio, Inc.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Financial Horizons Distributors Agency Oklahoma Insurance Agency
of Oklahoma, Inc.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Financial Horizons Distributors Agency Texas Insurance Agency
of Texas, Inc.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
*Financial Horizons Investment Trust Massachusetts Investment Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Financial Horizons Securities Oklahoma Broker-Dealer
Corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
GatesMcDonald Health Plus, Inc. Ohio Managed Care Organization
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Gates, McDonald & Company Ohio Cost Control
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Gates, McDonald & Company of Nevada Nevada Self-insurance administration,
claims examinations and data
processing services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Gates, McDonald & Company of New York, New York Workers' compensation claims
Inc. administration
- ----------------------------------------- ----------------------- ---------------- --------------------------------
MedPro Solutions, Inc. Massachusetts Third-party administration
services for workers'
compensation, automobile
injury and disability claims
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance
Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Leben Direkt Insurance Company Germany Life Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Lone Star General Agency, Inc. Texas Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Midwest Printing Services, Inc. Iowa General Printing Services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Morley & Associates Oregon Insurance Broker
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Morley Capital Management, Inc. Oregon Investment Adviser and stable
value money management
- ----------------------------------------- ----------------------- ---------------- --------------------------------
</TABLE>
89 of 103
<PAGE> 64
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
<S> <C> <C>
Morley Financial Services, Inc. Oregon Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Morley Research Associates, Ltd. Delaware Credit research consulting
- ----------------------------------------- ----------------------- ---------------- --------------------------------
**MRM Investments, Inc. Ohio Owns and operates a
recreational ski facility
- ----------------------------------------- ----------------------- ---------------- --------------------------------
**National Casualty Company Wisconsin Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
National Casualty Company of America, Great Britain Insurance Company
Ltd.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
National Deferred Compensation, Inc. Ohio Administers deferred
compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
**National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Advisory Services, Inc. Ohio Investment Management and
Administrative Services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
**Nationwide Agency, Inc. Ohio Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Asset Allocation Trust Massachusetts Investment Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Cash Management Company Ohio Investment Securities Agent
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Community Urban Ohio Special purpose real estate
Redevelopment Corporation corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Corporation Ohio Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Financial Services (Bermuda) Bermuda Life Insurance Company
Ltd.
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust II
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Financial Services, Inc. Delaware Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide General Insurance Company Ohio Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Global Holdings, Inc. Ohio Holding Company for
International Operations
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
- ----------------------------------------- ----------------------- ---------------- --------------------------------
*Nationwide Indemnity Company Ohio Reinsurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Insurance Company of America California Underwriter
- ----------------------------------------- ----------------------- ---------------- --------------------------------
</TABLE>
90 of 103
<PAGE> 65
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
<S> <C> <C>
Nationwide Insurance Company of Florida Ohio Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Services Company, LCC Ohio Shared services functions
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit
Inc. Corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide International Underwriters California Underwriting Manager
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Investing Foundation Michigan Provide investors with
continuous source of investment
- ----------------------------------------- ----------------------- ---------------- --------------------------------
*Nationwide Investing Foundation II Massachusetts Common Law Trust
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Investment Services Oklahoma Registered Broker-Dealer in
Corporation deferred compensation market
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
- ----------------------------------------- ----------------------- ---------------- --------------------------------
**Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
**Nationwide Life Insurance Company Ohio Life Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Lloyds Texas Property Insurance
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Management Systems, Inc. Ohio Preferred provider
organization, products and
related services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Mutual Fire Insurance Company Ohio Mutual Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Mutual Funds Ohio Investment Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Properties, Ltd. Ohio Develop, own and operate real
estate and real estate
investments
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real
estate and real estate
investments
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Alabama Market and administer deferred
of Alabama compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
</TABLE>
91 of 103
<PAGE> 66
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
<S> <C> <C>
Nationwide Retirement Solutions, Inc. Arizona Market and administer deferred
of Arizona compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Arkansas Market and administer deferred
of Arkansas compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Montana Market and administer deferred
of Montana compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Nevada Market and administer deferred
of Nevada compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. New Mexico Market and administer deferred
of New Mexico compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Ohio Market variable annuity
of Ohio contracts to members of the
National Education Association
in the state of Ohio
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity
of Oklahoma contracts to members of the
National Education Association
in the state of Oklahoma
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. South Dakota Market and administer deferred
of South Dakota compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Texas Market and administer deferred
of Texas compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions, Inc. Wyoming Market variable annuity
of Wyoming contracts to members of the
National Education Association
in the state of Wyoming
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public
employees
- ----------------------------------------- ----------------------- ---------------- --------------------------------
*Nationwide Separate Account Trust Massachusetts Investment Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nationwide Trust Company, FSB United States of Federal Savings Bank
America
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Neckura Holding Company Germany Administrative services for
Neckura Insurance Group
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Neckura Insurance Company Germany Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
</TABLE>
92 of 103
<PAGE> 67
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ----------------------------------------- ----------------------- ---------------- --------------------------------
<S> <C> <C>
Neckura Life Insurance Company Germany Life Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nevada Independent Nevada Workers' compensation
Companies-Construction administrative services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nevada Independent Companies-Health and Nevada Workers' compensation
Nonprofit administrative services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nevada Independent Companies- Nevada Workers' compensation
Hospitality and Entertainment administrative services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Nevada Independent Companies- Nevada Workers' compensation
Manufacturing administrative services
- ----------------------------------------- ----------------------- ---------------- --------------------------------
NFS Distributors, Inc. Delaware Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
NWE, Inc. Ohio Special Investments
- ----------------------------------------- ----------------------- ---------------- --------------------------------
PanEuroLife Luxembourg Life Insurance
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Pension Associates, Inc. Wisconsin Pension plan administration
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Portland Investment Services, Inc. Oregon NASD Registered Broker-Dealer
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Premier Agency, Inc. Iowa Insurance Agency
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Riverview Agency, Inc. Texas Stock Corporation
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Scottsdale Indemnity Company Ohio Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Scottsdale Insurance Company Ohio Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines
Company Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
SVM Sales GmbH, Neckura Insurance Group Germany Sales support for Neckura
Insurance Group
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Union Bond and Trust Company Oregon Oregon state bank with trust
powers
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Villanova Capital, Inc. Delaware Holding Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Villanova Mutual Fund Capital Trust Delaware Business Trust
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Villanova SA Capital Trust Delaware Business Trust
- ----------------------------------------- ----------------------- ---------------- --------------------------------
**Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
Western Heritage Insurance Company Arizona Excess and Surplus Lines
Insurance Company
- ----------------------------------------- ----------------------- ---------------- --------------------------------
</TABLE>
93 of 103
<PAGE> 68
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART) UNLESS
STATE OTHERWISE INDICATED
OF ORGANIZATION
COMPANY PRINCIPAL BUSINESS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide DCVA II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide Fidelity Advisor Ohio Nationwide Life Separate Issuer of Annuity Contracts
Variable Account Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide Variable Account -10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
94 of 103
<PAGE> 69
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART) UNLESS
STATE OTHERWISE INDICATED
OF ORGANIZATION
COMPANY PRINCIPAL BUSINESS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide VL SeparateAccount-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide VL SeparateAccount-C Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
95 of 103
<PAGE> 70
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ----------------------------
| ALLIED LIFE | | ALLIED | | AID FINANCE |
| FINANCIAL | | GROUP, INC. | | SERVICES, INC. |
| CORPORATION | | (AGI) | | (AID FINANCE) |
| (ALFC) | | | | |
|Common Stock: 850 | |Common Stock: 850 Shares | |Common Stock: 10,000 |
|------------ Shares | |------------ | |------------ Shares |
| |---| | |---| | |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
|Casualty- | | |Casualty- | | |Casualty- |
|100% $47,286,429 | | |100% $1,049,237,226| | |100% $19,545,634 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| ALLIED GROUP | | | AMCO | | | ALLIED |
| MERCHANT BANKING | | | INSURANCE COMPANY | | | GROUP INSURANCE |
| CORPORATION | | | (AMCO) | | | MARKETING COMPANY |
|Common Stock: 10,000 | | |Common Stock: 155,991 | | |Common Stock: 20,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| |----| |---| | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
| | | | | | | |Aid Finance- |
|AFLC-100% $100,000 | | | |AGI-100% $95,925,450| | |100% $16,059,469 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | WESTERN | | | DEPOSITORS |
| BROKERAGE | | | | HERITAGE INSURANCE | | | INSURANCE COMPANY |
| AGENCY, INC. | | | | COMPANY | | | (DEPOSITORS) |
|Common Stock: 500,000 | | | |Common Stock: 4,776,076 | | |Common Stock: 199,991 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|AFLC-100% $442,695 | | | |AMCO-100% $11,686,037| | |AGI-100% $15,251,842 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | ALLIED | | | ALLIED PROPERTY |
| INSURANCE | | | | GENERAL AGENCY | | | AND CASUALTY |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 250,000 | | | |Common Stock: 5,000 | | |Common Stock: 156,822 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AFLC-100% $41,732,343| |AMCO-100% $135,342 | | |AGI-100% $33,018,634 |
- --------------------------- --------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| PREMIER | | | ALLIED |
| AGENCY, | | | GROUP MORTGAGE |
| INC. | | | COMPANY |
|Common Stock: 100,000 | | |Common Stock: 9,500 |
|------------ Shares | | |------------ Shares |
| |---|---| |
| Cost | | | Cost |
| ---- | | | ---- |
|AGI-100% $100,000 | | |AGI-100% $213,976 |
--------------------------- | ----------------------------
|
| ----------------------------
| | MIDWEST |
| | PRINTING SERVICES |
| | LTD. |
| |Common Stock: 10,000 |
| |------------ Shares |
|---| |
| Cost |
| ---- |
|AFLC-100% $610,000 |
----------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |============================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
| || |--------------------------------------------------------------------| |--------------------------
- --| || |
|| |--------------------------------------------------------------|----------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| | NATIONWIDE LLOYDS | | | | | |
|| | | | |Common Stock: 20,000 | |Common Stock: 10,000 |
||==| | |---|------------ Shares | |--|------------ Shares |
|| | A TEXAS LLOYDS | | | | | | |
|| | | | | Cost | | | Cost |
|| | | | | ---- | | | ---- |
|| | | | |Casualty-100% $5,944,422 | | |Casualty-100% $87,943,140 |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE PROPERTY | | | NECKURA |
|| | INSURANCE COMPANY | | | AND CASUALTY | | | INSURANCE COMPANY |
|| |Guaranty Fund | | | INSURANCE COMPANY | | | |
|| |------------ | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
||==|Certificate |---| |---|------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WISCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |---- |---|------------ Shares | ---- |--|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares | | | Common Stock: 10,000 | | | |Common Stock: 1 Share |
| |--------| | ------------ Shares | ---| |--|------------ |
| Cost | | | | | | | |
|Casualty-99.9% ---- | | | Cost | | | | Cost |
|Other Capital: $26,714,335 | | | ---- | | | | ---- |
|------------- | | | SIC-100% $6,000,000 | | | |Neckura-100% DM 51,639 |
|Casualty-Ptd. $ 713,576 | | | | | | | |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |--------| |------------ Shares |----| |--|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
-------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1500 Shares |
| | |------------ |------------|------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- -----------------------------------------------------------------------|
|
- --------------- --------------------------------------------------
| |
- -----------------------------------------------------------------------------------------|----------------------- |
| | | | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | | CORPORATION |
| | | | | REDEVELOPMENT | | | |
| | | | | CORPORATION | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | Cost | | | Cost | | | Shares Cost |
| | ---- | | | ---- | | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $751,352,485|
| | | | | | | |Fire 649,510 24,007,936|
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | NATIONWIDE | | | INSURANCE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. | | |Common Stock: 10,330 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 | |--------| ---- |
| |------------ Shares | | |------------ Shares | | |Casualty-18.6% $88,320 |
| | Cost | | | Cost | | |Fire-18.6% $88,463 |
| | ---- | | | ---- | | |Preferred Stock 1466 Shares |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 | | |--------------- Cost |
| | | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | LONE STAR | | | NATIONWIDE CASH | | | PENSION ASSOCIATES |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY | | | OF WAUSAU, INC. |
| | | | |Common Stock: 100 Shares | | |Common Stock: 1,000 Shares |
------|Common Stock: 1,000 | |----|------------ | |--------|------------- |
| |------------ Shares | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-90% $9,000 | | | |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 | | |Casualty-100% $2,839,392 |
| -------------------------------- | -------------------------------- | ----------------------------------
| || | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | COLONIAL COUNTY MUTUAL | | | NATIONWIDE INSURANCE | | | AMERCIAN MARINE |
| | INSURANCE COMPANY | | | COMPANY OF FLORIDA | | | UNDERWRITERS, INC. |
| | | | |Common Stock: 10,000 | | |Common Stock: 20 Shares |
| |Surplus Debentures | | |------------- Shares | | |------------- |
| |------------------ | |----| | |--------| Cost |
| | Cost | | | Cost | | ---- |
| | ---- | | | ---- | | |
| |Colonial $500,000 | | |Casualty-100% $300,000,000 | |Casualty-100% $5,020 |
| |Lone Star 150,000 | | | | | |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | WAUSAU INTERNATIONAL |
| | INSURANCE COMPANY | | | UNDERWRITERS |
| |Common Stock 12,000 | | | |
| |------------ Shares | | |Common Stock: 1,000 Shares |
|-----| | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $10,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE |
| | ENTERPRISE SERVICES, LTD. | | | ARENA LLC |
| | | | | |
| |Single Member Limited | | | |
|.....|Liability Company | |....| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
</TABLE>
Page 1
<PAGE> 73
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-------------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
----------------|------------ ----------------------------- ---------------||------------
| ||
- ----------------------------- | ----------------------------- ----------------------------- || ----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |--|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| INVESTORS, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ |..| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
- ----------------------------- | ----------------------------- || ----------------------------- ----------------------------
| ||
- ----------------------------- | ----------------------------- || -----------------------------
| NATIONWIDE | | | NATIONWIDE | || | NATIONWIDE |
| PROPERTIES, LTD. | | | INVESTING | || | INVESTING |
| | | | FOUNDATION II | || | FOUNDATION III |
| Units: |..| | | || | |
| ------ | | |==||==| |
| | | | || | |
| | | | || | | ----------------------
| NW Life -97.6% | | | || | | | MORLEY RESEARCH |
| NW Mutual -2.4% | | COMMON LAW TRUST | || | OHIO BUSINESS TRUST | | ASSOCIATES, LTD. |
- ----------------------------- ----------------------------- || ----------------------------- | |
|| |Common Stock: 1,000 |
----------------------------- || ----------------------------- |------------- Shares|------
| NATIONWIDE | || | NATIONWIDE | | Cost |
| SEPARATE ACCOUNT | || | ASSET ALLOCATION TRUST | | ---- |
| TRUST | || | | |Morley-100% $1,000|
| | || | | ----------------------
| |==||==| |
| | | |
| | | |
| | | MASSACHUSETTS |
| COMMON LAW TRUST | | BUSINESS TRUST |
----------------------------- -----------------------------
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $751,352,485 |
|Fire 649,510 24,007,936 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------------|-------------------------------|-------------------|--------------------------------|-----------------------------
| | | |
-------------|--------------- --------------|-------------- | ---------------|-------------
| MORLEY FINANCIAL | | THE 401(k) COMPANIES, INC.| | | NATIONWIDE RETIREMENT |
| SERVICES, INC. (MORLEY) | | (401(k)) | | | SOLUTIONS, INC. |
|Common Stock: 82,343 | |Common Stock: Control: | | |Common Stock: 236,494 |
|---|------------- Shares | |------------- ------- |--| | |------------- Shares |
| | | |Class A Other-100% | | | | |
| |NFS-100% | |Class B NFS -100% | | | |NRS-100% |
| ----------------------------- ----------------------------- | | ---------------|-------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY & | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | ASSOCIATES, INC. | | SERVICES, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF NEW |
| | | | | | | | ALABAMA | | | MEXICO |
| |Common Stock: 3,500 | | Common Stock: 1,000,000 | | | | Common Stock: 10,000 | | | Common Stock: 1,000 |
|---|------------- Shares | | ------------- Shares |--| | | ------------- Shares |--|--| ------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $1,000 | |401(k)-100% $7,800 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY CAPITAL | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | MANAGEMENT | | ADVISORS, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARIZONA | | | SO. DAKOTA |
| |Common Stock: 500 | |Common Stock: 1,000 | | | |Common Stock: 1,000 | | |Common Stock: 1,000 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $5,000 | |401(k)-100% $1,000 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | UNION BOND | | 401(k) ICOMPANY | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | & TRUST COMPANY | | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARKANSAS | | | WYOMING |
| |Common Stock: 2,000 | |Common Stock: 855,000 | | | |Common Stock: 50,000 | | |Common Stock: 500 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | Cost | | | Cost |
| | ---- | | ---- | | | ---- | | | ---- |
| |Morley-100% $50,000 | |401(k)-100% $1,000 | | |NRS-100% $500 | | |NRS-100% $500 |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | PORTLAND INVESTMENT | | NATIONWIDE TRUST | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | SERVICES, INC. | | COMPANY, FSB | | | SOLUTIONS, INS. AGENCY, | | | SOLUTIONS, INC. OF |
| | | | | | | INC. | | | OHIO |
| |Common Stock: 1,000 | |Common Stock: 2,800,000 | | |Common Stock: 1,000 | | | |
|---|------------- Shares | |------------- Shares |-----| |------------- Shares |--|==| |
| | Cost | | Cost | | | Cost | | | |
| | ---- | | ---- | | | ---- | | | |
| |Morley-100% $25,000 | |NFS-100% $3,500,000 | | |NRS -100% $1,000 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ---------------------------- | ---------------------------
| | EXCALIBER FUNDING | | NATIONWIDE FINANCIAL | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | SERVICES CAPITAL TRUST II | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | MONTANA | | | OKLAHOMA |
| |Common Stock: 1,000 | | | | |Common Stock: 500 | | | |
|---|------------- Shares | | |-----| |------------- Shares |--|==| |
| | Cost | | | | | Cost | | | |
| | ---- | | | | | ---- | | | |
| |Morley-100% $1,000 | |NFS-100% | | |NRS-100% $500 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | CALIBER FUNDING | | NFS DISTRIBUTORS INC. | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | NEVADA | | | TEXAS |
| | | | | | | Common Stock: 1,000 | | | |
|---| | | |-----| | ------------- Shares |--|==| |
| | | | | Cost | | |
| | | | | ---- | | |
|Morley-100% | |NFS-100% | | NRS-100% $1,000 | | |
----------------------------- ----------------------------- ----------------------------- ---------------------------
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------|--------------------|---------------------------------------|
| | |
| ---------------|---------------- --------------|----------------
| | EMPLOYERS LIFE INSURANCE CO. | | GATES MCDONALD |
| | OF WAUSAU (ELIOW) | | & COMPANY (GATES) |
| | | | |
| |Common Stock: 250,000 | |Common Stock: 254 |
| |--|------------- Shares | |--|------------- Shares |
| | | | | | |
| | | Cost | | | Cost |
| | | ---- | | | ---- |
| | |NW CORP. -100% $126,509,480 | | |NW CORP. -100% $25,683,532 |
| | -------------------------------- | -------------------------------
- ------------ | | |
| -------------------------------- | | -------------------------------- | --------------------------------
| | NATIONWIDE TRUST | | | | WAUSAU PREFERRED | | | HEALTHCARE |
| | COMPANY | | | | HEALTH INSURANCE CO. | | | FIRST, INC. |
| | | | | | | | | |
| |Common Stock: 2,800,000 | | | |Common Stock: 200 | | | |
|--|------------- Shares | | |--|------------- Shares | |--| |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |ELIOW -100% $57,413,193 | | |Gates-100% $6,700,000 |
| -------------------------------- | -------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE FINANCIAL | | | NATIONWIDE GLOBAL | | | GATES MCDONALD & COMPANY |
| | SERVICES (BERMUDA) INC. | | | HOLDINGS, INC. (NGH) | | | OF NEW YORK, INC. |
| | | | | | | | |
| |Common Stock: 250,000 | | |Common Stock: 1 | | |Common Stock: 3 |
|--|------------- Shares | |-----|------------- Share | |--|------------- Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |NW CORP.-100% $7,000,000 | | |Gates-100% $106,947 |
| -------------------------------- | -------------------------------- | -------------------------------
| | | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE DEFERRED | | | NATIONWIDE GLOBAL HOLDINGS | | | GATES MCDONALD & COMPANY |
| | COMPENSATION, INC. | | | -HONG KONG, LIMITED | | | OF NEVADA |
| | | | | | | | |
| | | | |Common Stock: 2 | | |Common Stock: 40 |
|--| | | |------------- Shares | |--|------------- Shares |
| | | | | | | | |
| | | | | | | | Cost |
| | | | | | | | ---- |
| |NFS-100% | | |NGH-100% | | |Gates-100% $93,750 |
| -------------------------------- | -------------------------------- | -------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | IRVIN L. SCHWARTZ | | | NATIONWIDE | | | GATES McDONALD |
| | AND ASSOCIATES, INC. | | | HEALTH PLANS, INC. (NHP) | | | HEALTH PLUS, INC. |
| | | | | | | | |
| |Common Stock: Control | | |Common Stock: 100 | | |Common Stock: 200 |
|--|------------- ------- | |-----|------------- Shares |--| |--|------------- Shares |
| | | | | | | |
| | | | Cost | | | Cost |
|Class A Other-100% | | | ---- | | | ---- |
|Class B NFS -100% | | |NW CORP.-100% $14,603,732 | | |Gates-100% $2,000,000 |
-------------------------------- | -------------------------------- | -------------------------------
| |
-------------------------------- | -------------------------------- |
| MRM INVESTMENTS, INC. | | | NATIONWIDE MANAGEMENT | |
| | | | SYSTEMS, INC. | |
| | | | | |
|Common Stock: 1 | | |Common Stock: 100 | |
|------------- Share |--| |------------- Shares |--|
| | | | |
| Cost | | Cost | |
| ---- | | ---- | |
|NW CORP.-100% $7,000,000 | |NHP Inc.-100% $25,149 | |
-------------------------------- -------------------------------- |
|
-------------------------------- |
| NATIONWIDE | |
| AGENCY, INC. | |
| | |
|Common Stock: 100 | |
|------------ Shares |--|
| |
| Cost |
| ---- |
|NHP Inc.-99% $116,077 |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
Page 2
</TABLE>
<PAGE> 76
Item 27. NUMBER OF CONTRACT OWNERS
N/A.
Item 28. INDEMNIFICATION
Provision is made in Nationwide's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by Nationwide of any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of Nationwide, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling Nationwide pursuant to the
foregoing provisions, Nationwide has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide Variable Account-10,
Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VL Separate Account-B,
Nationwide VL Separate Account-C, Nationwide VL Separate
Account-D Nationwide VLI Separate Account-2, Nationwide VLI
Separate Account-3, Nationwide VLI Separate Account-4,
Nationwide VLI Separate Account-5 and Nationwide Variable
Account, all of which are separate investment accounts of
Nationwide or its affiliates.
NAS also acts as principal underwriter for Nationwide
Separate Account Trust, Nationwide Asset Allocation Trust
and Nationwide Mutual Funds which are open-end management
investment companies.
98 of 103
<PAGE> 77
<TABLE>
<CAPTION>
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
- ----------------------------------------------------------------------------------------------------------
NAME AND POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman and
One Nationwide Plaza Chief Executive Officer and Director
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Paul J. Hondros Director
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Edwin P. McCausland, Jr. Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Charles S. Bath Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
William G. Goslee Vice President
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Joseph P. Rath Vice President - Office of Product and
One Nationwide Plaza Market Compliance
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
- ----------------------------------------------------------------------------------------------------------
</TABLE>
99 of 103
<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 N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a postcard 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 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 risks
assumed by Nationwide.
100 of 103
<PAGE> 79
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
NATIONWIDE VARIABLE ACCOUNT - 8
DEFERRED VARIABLE ANNUITY CONTRACT
PROSPECTUS
October 1, 1999
101 of 103
<PAGE> 80
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG LLP
Columbus, Ohio
August 3, 1999
102 of 103
<PAGE> 81
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT-8, certifies that it meets the
requirements of Securities Act Rule 485 for effectiveness of this Post-Effective
Amendment and has caused this Post-Effective Amendment to be signed on its
behalf in the City of Columbus, and State of Ohio, on this 3rd day of August,
1999.
NATIONWIDE VARIABLE ACCOUNT-8
-----------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-----------------------------------------------
(Depositor)
By/s/Mark B. Koogler
-----------------------------------------------
Mark B. Koogler
Vice President- Associate General Counsel
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 3rd day
of August, 1999.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- ---------------
Lewis J. Alphin
A. I. BELL Director
- ----------
A. I. Bell
KENNETH D. DAVIS Director
- ----------------
Kenneth D. Davis
KEITH W. ECKEL Director
- --------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ----------------
Willard J. Engel
FRED C. FINNEY Director
- --------------
Fred C. Finney
JOSEPH J. GASPER President and Chief
- ---------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ----------------- and Director
Dimon R. McFerson
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-
- ---------------- Chief Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
- --------------
Ralph M. Paige
JAMES F. PATTERSON Director By/s/MARK B. KOOGLER
- ------------------ ---------------------
James F. Patterson Mark B. Koogler
Attorney-in-Fact
ARDEN L. SHISLER Director
- ----------------
Arden L. Shisler
ROBERT L. STEWART Director
- -----------------
Robert L. Stewart
NANCY C. THOMAS Director
- ---------------
Nancy C. Thomas
103 of 103
<PAGE> 1
Exhibit 4
NATIONWIDE LIFE INSURANCE COMPANY
(Hereinafter called the Company)
One Nationwide Plaza Columbus, Ohio 43215
P.O. BOX 182008
COLUMBUS, OHIO 43218-2008
1-800-321-9332 (for any inquiries)
NATIONWIDE LIFE INSURANCE COMPANY will make annuity payments to the Annuitant
starting on the Annuitization Date, as set forth in the Contract.
This Contract is provided in return for the Purchase Payments made as required
in the Contract.
TEN DAY FREE LOOK
To be sure that the Owner is satisfied with this Contract, the Owner has ten
days to examine the Contract and return it to the Home Office for any reason.
When the Contract is received in the Home Office, the Company, where permitted
by state law, will return the Contract Value to the Owner, without deduction for
any contingent deferred sales charges or administration charges as of the date
of cancellation.
FOR IRAS, IF THE OWNER RETURNS THE CONTRACT WITHIN THE "FREE LOOK" PERIOD, THE
COMPANY WILL RETURN THE PURCHASE PAYMENT.
Executed for the Company on the Date of Issue.
[ Dennis W. ????? Joseph J. ??????? ]
SECRETARY PRESIDENT
READ YOUR CONTRACT CAREFULLY
Individual Flexible Purchase Payment Deferred Variable Annuity,
Non-Participating
ANNUITY PAYMENTS, DEATH BENEFITS, SURRENDER VALUES, AND OTHER CONTRACT VALUES
PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE
ACCOUNT, OR WHEN SUBJECT TO A MARKET VALUE ADJUSTMENT, ARE VARIABLE, MAY
INCREASE OR DECREASE IN ACCORDANCE WITH THE FLUCTUATIONS IN THE NET INVESTMENT
FACTOR OR APPLICATION OF A MARKET VALUE ADJUSTMENT, AS APPLICABLE, AND ARE NOT
GUARANTEED AS TO FIXED-DOLLAR AMOUNT, UNLESS OTHERWISE SPECIFIED.
NOTICE - The details of the variable provisions in the
Contract may be found on Pages 8, 11, 12, and 23
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
DATA PAGE.................................................................................................INSERT
CONTENTS.......................................................................................................2
DEFINITIONS....................................................................................................4
GENERAL PROVISIONS.............................................................................................7
Entire Contract
Non-Participating
Incontestability
Contract Settlement
Evidence of Survival
Alteration or Modification
Assignment
Protection of Proceeds
Misstatement of Age or Sex
Reports
Number
DEDUCTIONS AND CHARGES.........................................................................................8
Administration Charge
Variable Account Charge
Deduction for Premium Taxes
OWNERSHIP PROVISIONS...........................................................................................8
Contract Ownership
Joint Ownership
Contingent Ownership
Annuitant
Contingent Annuitant
Beneficiary
Changes of Parties Named in the Contract
ACCUMULATION PROVISIONS.......................................................................................10
Purchase Payments
Allocation of Purchase Payments
Fixed Account Provisions
Variable Account Provisions
Accumulation Unit Value
Valuation of Underlying Mutual Fund Shares
Substitution of Underlying Mutual Fund Shares
Net Investment Factor
Guaranteed Term Options (GTOs)
Market Value Adjustment (MVA) Formula
TRANSFERS, SURRENDERS, AND WITHDRAWALS........................................................................14
Transfer Provisions
Surrenders
Restrictions on Surrenders for Certain Qualified Plans, TSAs, and IRAs
Surrender Value
Suspension or Delay of Surrender
Contingent Deferred Sales Charge (CDSC)
Withdrawals Without Charge
Systematic Withdrawals
LOANS.........................................................................................................18
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
REQUIRED DISTRIBUTION PROVISIONS..............................................................................19
Required Distribution-Non-Qualified Contracts
Required Distribution-TSAs, IRAs, and Contracts Issued under
Qualified Plans
DEATH PROVISIONS..............................................................................................21
Death of Contract Owner
Death of Contract Owner/Annuitant
Death of Annuitant
Death Benefit Payment
ANNUITIZATION PROVISIONS......................................................................................22
Annuity Commencement Date
Change of Annuity Commencement Date and Annuity Payment Option
Annuitization
Fixed Payment Annuity-First and Subsequent Payments
Variable Payment Annuity-First Payment
Variable Payment Annuity-Subsequent Payments
Annuity Unit Value
Frequency and Amount of Payments
ANNUITY PAYMENT OPTIONS.......................................................................................24
Selection of Annuity Payment Option
Life Annuity
Joint and Survivor Annuity
Life Annuity With 120 or 240 Monthly Payments Guaranteed
Any Other Option
Supplementary Agreement
TABLES........................................................................................................25
</TABLE>
3
<PAGE> 4
DEFINITIONS
- -----------
ACCUMULATION UNIT - An accounting unit of measure used to calculate the Variable
Account value prior to the Annuitization Date.
ANNUITANT - The person upon whose continuation of life any annuity payments
involving life contingencies depends.
ANNUITIZATION - The period during which annuity payments are received by the
Annuitant.
ANNUITIZATION DATE - The date the annuity payments actually commence.
ANNUITY COMMENCEMENT DATE - The date on which annuity payments are scheduled to
commence.
ANNUITY PAYMENT OPTION - The chosen form of annuity payments. Several options
are available under the Contract.
ANNUITY UNIT - An accounting unit of measure used to calculate the value of
variable annuity payments.
BENEFICIARY - The person designated to receive certain benefits under the
Contract upon the death of the Annuitant, if there is no surviving Joint Owner,
prior to the Annuitization Date.
CHARITABLE REMAINDER TRUST (CRT) - A charitable remainder annuity trust or a
charitable remainder unitrust as those terms are defined in Section 664 of the
Code.
CODE - The Internal Revenue Code of 1986, as amended.
COMPANY - Nationwide Life Insurance Company.
CONSTANT MATURITY TREASURY RATE(S) OR CMT RATE(S) - Interest rate quotations for
1, 2, 3, 5, 7 and 10 years published by the Federal Reserve Board on a regular
basis. The Company uses CMT Rates in its Market Value Adjustment (MVA) Formula
because they represent a readily available and consistently reliable interest
rate benchmark in financial markets.
CONTINGENT ANNUITANT - The Contingent Annuitant may be the recipient of certain
rights or benefits under the Contract when the Annuitant dies before the
Annuitization Date.
CONTINGENT BENEFICIARY - The person or entity designated to be the Beneficiary
if the named Beneficiary is not living at the time of the death of the
Annuitant.
CONTINGENT OWNER - A Contingent Owner succeeds to the rights of a Contract Owner
upon the Contract Owner's death before Annuitization if there is no Joint Owner.
CONTRACT - The document which describes a Contract Owner's rights and benefits.
CONTRACT ANNIVERSARY - Each 12-month anniversary of the Date of Issue.
CONTRACT OWNER (OWNER)(S)) - The person who possesses all rights under the
Contract, including the right to designate and change parties named in the
Contract, Annuity Payment Option, and the Annuity Commencement Date.
CONTRACT VALUE - With respect to a Contract, the sum of the value of all
Accumulation Units, plus any amount attributable to the Fixed Account, plus any
amount held under a Guaranteed Term Option (GTO) which may be subject to a MVA.
CONTRACT YEAR - Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE - The date the first Purchase Payment is applied to the Contract.
DEATH BENEFIT - The benefit that is payable upon the death of the Annuitant,
unless a Contingent Annuitant has been named. If the Annuitant dies after the
Annuitization Date, any benefit that may be payable shall be as specified in the
Annuity Payment Option elected.
DISTRIBUTION - Any payment of part or all of a Contract Owner's Contract Value.
ERISA - The Employee Retirement Income Security Act of 1974, as amended.
4
<PAGE> 5
FIXED ACCOUNT - The portion of the Contract which is held under the general
account of the Company.
FIXED PAYMENT ANNUITY - An annuity providing for payments, which are guaranteed
by the Company as to dollar amount during Annuitization.
GUARANTEED TERM - The 3, 5, 7 or 10 year period corresponding respectively to a
3, 5, 7 or 10 year Guaranteed Term Option (GTO). Because every Guaranteed Term
will end on the last day of a calendar quarter, the Guaranteed Term may last for
up to 3 months beyond the 3, 5, 7 or 10 year anniversary of the allocation to
the Guaranteed Term Option (GTO).
GUARANTEED TERM OPTION (GTO) - A funding option offered under the Contract which
provides a guaranteed interest rate (the Specified Interest Rate), paid over
certain maturity duration's (the Guaranteed Term), so long as certain conditions
are met.
HOME OFFICE - The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA) - An annuity which qualifies for tax
treatment under Section 408 of the Internal Revenue Code which is established
for the exclusive benefit of the Owner or the Owner's beneficiaries.
INTEREST RATE GUARANTEE PERIOD - The interval of time during which an interest
rate credited to the Fixed Account is guaranteed to remain the same.
INVESTMENT PERIOD - The period of time beginning with a declaration by the
Company of new GTO interest rates (the different Specified Interest Rates for
each of the GTOs) and ending with the subsequent declaration of new Specified
Interest Rates by the Company.
JOINT OWNER - The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Contract Owner. If a Joint Owner is
named references to Contract Owner, and Joint Owner will apply to both the Owner
and the Joint Owner, or either of them, unless the context requires otherwise.
MARKET VALUE ADJUSTMENT (MVA) - The upward or downward adjustment in value of
amounts allocated to a GTO which prior to the Maturity Period for the GTO are:
1) distributed pursuant to a surrender; 2) reallocated to another investment
option available under this Contract; 3) distributed pursuant to the death of
the Contract Owner or Annuitant; or 4) annuitized under this Contract at any
time other than the Maturity Period.
MVA FACTOR - The value multiplied by the Specified Value or that portion of the
Specified Value being distributed from a GTO, in order to effect an MVA.
MVA FORMULA - The MVA Formula is utilized when a distribution is made from a GTO
during the Guaranteed Term which is subject to an MVA.
MATURITY DATE - The date on which a particular GTO matures. Such date will be
the last day of a calendar quarter in which the third, fifth, seventh or tenth
anniversary of the date on which amounts are allocated to a 3, 5, 7 or 10 year
GTO, respectively.
MATURITY PERIOD - The period of time during which the value of amounts allocated
under a GTO may be distributed without any MVA. The Maturity Period shall begin
on the day following the Maturity Date and will end on the thirtieth day
thereafter.
MINIMUM DISTRIBUTION -The amount that is required to be withdrawn from Qualified
Plans, Tax Sheltered Annuities (TSAs) and IRAs to meet distribution requirements
established by the Code.
MULTIPLE MATURITY ACCOUNT - A separate account of the Company established for
the purpose of facilitating accounting and investment processes associated with
the offering of GTOs under the Contracts.
NON-QUALIFIED CONTRACT - A Contract which does not qualify for tax treatment
under the provisions of Sections 403(a) (Qualified Plans), 408 (IRAs), 403(b)
(TSAs) or 408A (Roth IRAs) of the Code.
PURCHASE PAYMENT(S) - A deposit of new value into the Contract. The term
Purchase Payment does not include transfers between the Variable Account and
Fixed Account, among the Sub-Accounts or to or from a GTO.
PURCHASE PAYMENT YEAR - Each 12-month period starting from the date each
Purchase Payment is made.
QUALIFIED PLAN(S) - A retirement plan that receives tax treatment under the
provisions of Section 403(a) of the Code.
5
<PAGE> 6
ROTH IRA - An individual retirement annuity meeting the requirements of Section
408A of the Code.
SPECIFIED INTEREST RATE - The interest rate guaranteed to be credited to amounts
allocated under a selected GTO so long as such allocations are not distributed
for any reason from the GTO prior to the GTO Maturity Period or Maturity Date.
SPECIFIED VALUE - The amount of a GTO allocation minus withdrawals and transfers
out of the GTO, plus interest accrued at the Specified Interest Rate. The
Specified Value is subject to an MVA at all times other than during the Maturity
Period.
SUB-ACCOUNTS - Separate and distinct divisions of the Variable Account to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITIES (TSA) - An annuity which qualifies for tax treatment
under Section 403(b) of the Code.
UNDERLYING MUTUAL FUND(S) - The registered management investment companies in
which the assets of the Sub-Accounts of the Variable Account will be invested.
VALUATION DATE - Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a sufficient
degree of trading of the Variable Account's Underlying Mutual Fund shares such
that the current net asset value of its Accumulation Units might be materially
affected.
VALUATION PERIOD - The period of time commencing at the close of a Valuation
Date and ending at the close of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate investment account of the Company into which
Variable Account Purchase Payments are allocated.
VARIABLE PAYMENT ANNUITY - An annuity providing payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
6
<PAGE> 7
GENERAL PROVISIONS
- ------------------
ENTIRE CONTRACT
The Contract, riders, and endorsements, if any, make up the entire agreement
between the Company and the Contract Owner. The Contract is established for the
exclusive benefit of the Contract Owner or the Contract Owner's beneficiaries.
NON-PARTICIPATING
The Contract is non-participating. It will not share in the surplus of the
Company.
INCONTESTABILITY
The Contract, endorsements, riders, and attachments will not be contested.
CONTRACT SETTLEMENT
The Company may require that the Contract be returned to the Home Office prior
to making any payments. All sums payable to or by the Company under this
Contract are payable at the Home Office.
EVIDENCE OF SURVIVAL
Where any payments under this Contract depend on the recipient being alive on a
given date, the Company may require proof that such person is living. Such proof
may be required prior to making the payments.
ALTERATION OR MODIFICATION
All changes in or to the terms of the Contract must be made in writing and
signed by the President or Secretary of the Company. No other person can alter
or change any of the terms or conditions of the Contract.
Provisions of the Contract may be modified or superseded as required by the
terms of the Qualified Plan or applicable law. Where required, other changes to
the Contract will be made only with mutual agreement of the Company and the
Contract Owner. As required, a copy of the amendment will be furnished to the
Contract Owner.
The Company reserves the right as of a specified date to: (1) discontinue the
Fixed Account option for any new Contract Owner; and (2) not accept future
deposits into the Fixed Account from existing Contract Owners.
ASSIGNMENT
If permitted, a Contract Owner may assign some or all rights under the Contract.
Such assignment must be made in writing and executed by the Contract Owner
during the lifetime of the Annuitant and prior to the Annuitization Date. The
assignment will take effect on the date it is recorded by the Company at its
Home Office. The assignment will not be recorded until the Company has received
sufficient direction from the Contract Owner and assignee as to the proper
allocation of Contract rights under the assignment.
The Company is not responsible for the validity of tax consequences of any
assignment or for any payment or other settlement made prior to the Company's
recording of the assignment.
Contracts issued to fund a retirement plan pursuant to Sections 403, 408 or 408A
of the Code, may not be sold, discounted, assigned, pledged or transferred for
the performance of any obligation to any person other than the Contract Owner or
other person exercising ownership rights under the terms of the plan, or as
otherwise allowed by applicable law.
PROTECTION OF PROCEEDS
Proceeds under this Contract are not assignable by any Beneficiary prior to the
time such proceeds become payable. To the extent permitted by applicable law,
proceeds are not subject to the claims of creditors or to legal process.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, all payments and benefits
under the Contract will be adjusted. Payments and benefits will be made, based
on the correct age or sex. Proof of age of an Annuitant may be required at any
time, in a form satisfactory to the Company. When the age or sex of an Annuitant
has been misstated, the dollar amount of any overpayment will be deducted from
the next payment or payments due under the Contract. The
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<PAGE> 8
dollar amount of any underpayment made by the Company as a result of any such
misstatement will be paid in full with the next payment due under the Contract.
REPORTS
Prior to the Annuitization Date, a report showing the Contract Value will be
provided to the Contract Owner at least once each year.
NUMBER
Unless otherwise provided, all references in this Contract which are in the
singular form will include the plural; all references in the plural form will
include the singular.
DEDUCTIONS AND CHARGES
- ----------------------
ADMINISTRATION CHARGE
The Company will deduct a [$30] administration charge on each Contract
Anniversary and at the time the Contract is surrendered. This charge compensates
the Company for administrative expenses incurred relating to the issuance and
maintenance of the Contracts.
VARIABLE ACCOUNT CHARGE
The variable account charge applies to allocations made to the Sub-Accounts. The
Company deducts charges from the Variable Account equal to an annual rate of
[1.40%] of the daily net asset value of the Variable Account. This fee
compensates the Company for the expense and mortality risks assumed in
connection with the Death Benefit and annuity features of the Contracts.
DEDUCTION FOR PREMIUM TAXES
The Company will charge against the Contract Value the amount of any premium
taxes levied by a state or any other government entity upon Purchase Payments
received by the Company. The Company at its sole discretion and in compliance
with applicable state law will determine the method used to recoup premium
taxes. The Company currently deducts such charges from a Contract Value either
(1) at the time the Contract is surrendered, (2) at the Annuitization Date, or
(3) at such earlier date as the Company may be subject to such taxes.
OWNERSHIP PROVISIONS
- --------------------
CONTRACT OWNERSHIP
Unless otherwise provided, the Contract Owner has all rights under the Contract.
IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF AS CONTRACT OWNER, THE
PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT.
Unless the Contract Owner is a CRT, the Annuitant shall become the Contract
Owner on the Annuitization Date.
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<PAGE> 9
JOINT OWNERSHIP
Joint Owners must be spouses at the time joint ownership is requested. If a
Joint Owner is named, the Joint Owner will possess an undivided interest in the
Contract. Unless otherwise provided, the exercise of any ownership right in the
Contract (including the right to surrender or partially surrender the Contract;
or to change the parties to the Contract, the Payment Option, or the
Annuitization Date) shall require written request signed by both Contract
Owners.
If a Contract Owner who is not also the Annuitant dies before the Annuitization
Date and there is a surviving Joint Owner, the Joint Owner shall become the
Contract Owner.
If a Contract Owner who is also the Annuitant dies before the Annuitization Date
and there is a surviving Joint Owner, all benefits under the Contract are
payable to the Joint Owner.
Joint Owners may be selected only for a Contract issued as a Non-Qualified
Contract and may not be selected when the Contract Owner is a CRT.
CONTINGENT OWNERSHIP
The Contingent Owner is the person who may receive certain benefits under the
Contract, if the Contract Owner, who is not the Annuitant, dies prior to the
Annuitization Date and there is no surviving Joint Owner. If more than one
Contingent Owner survives the Contract Owner, each will share equally unless
otherwise specified in the Contingent Owner designation. If no Contingent Owner
survives a Contract Owner and there is no surviving Joint Owner, all rights, and
interest of the Contract will vest with the last surviving Contract Owner's
estate.
If a Contract Owner, who is also the Annuitant, dies before the Annuitization
Date, then the Contingent Owner does not have any rights in the Contract.
However, a surviving Contingent Owner who is also the Beneficiary will have all
the rights of a Beneficiary.
Contingent Owners may be selected only for a Contract issued as a Non-Qualified
Contract and may not be selected when the Contract Owner is a CRT.
ANNUITANT
The Annuitant is the person who will receive annuity payments upon
Annuitization. The Annuitant must be age [85] or younger at the time of Contract
issuance unless the Company has approved a request for an Annuitant of greater
age. The Annuitant may be changed prior to the Annuitization Date with the
consent of the Company.
If the Contract is owned by a CRT, the payments made during Annuitization will
be paid to the CRT. For Contracts that are issued as IRAs, TSAs, or under
Qualified Plans, the Contract Owner must be the Annuitant and the entire
interest of the Annuitant in the Contract is nonforfeitable.
CONTINGENT ANNUITANT
If the Annuitant dies before the Annuitization Date, the Contingent Annuitant
becomes the Annuitant. All provisions of the Contract which are based on the
death of the Annuitant prior to the Annuitization Date will be based on the
death of the last survivor of the Annuitant and Contingent Annuitant.
A Contingent Annuitant may be selected only for a Contract issued as a
Non-Qualified Contract and may not be selected when the Contract Owner is a CRT.
BENEFICIARY
If there is no surviving Joint Owner, or if the Annuitant is someone other than
a Contract Owner, the Beneficiary is the person who will receive benefits under
the Contract if the Annuitant dies prior to the Annuitization Date. If a
Contract Owner who is also the Annuitant dies before the Annuitization Date and
there is a surviving Joint Owner, all benefits under the Contract are payable to
the surviving Joint Owner. If more than one Beneficiary survives the Annuitant,
each will share equally unless otherwise specified in the beneficiary
designation. If there is no surviving Joint Owner and no Beneficiary survives
the Annuitant, all rights and interest of such parties will vest in the
Contingent Beneficiary, and if more than one Contingent Beneficiary survives,
each will share equally unless otherwise specified in the Contingent Beneficiary
designation. If no Contingent Beneficiary survives the Annuitant, all rights and
interest of the Contract will vest with the last surviving Contract Owner's
estate.
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<PAGE> 10
If the Contract Owner is a CRT, upon the death of the Annuitant, all interest in
the Death Benefit proceeds will accrue to the CRT. Any designation which creates
a conflict with the CRT's right to such interest shall be void and of no effect.
CHANGES OF PARTIES NAMED IN THE CONTRACT
Notwithstanding any other provisions in the Contract, prior to the Annuitization
Date, and subject to any existing assignments, the Contract Owner may request a
change in the Contract Owner, Contingent Owner, Joint Owner, Annuitant,
Contingent Annuitant, Beneficiary, or Contingent Beneficiary. Such change, upon
receipt and recording by the Company at its Home Office, will take effect as of
the time the written notice was signed, whether or not the Contract Owner or
Annuitant are living at the time of record, but without further liability as to
any payment or settlement made by the Company before receipt of such change is
recorded at the Home Office.
Any request for change of Contract Owner must be recorded at the Home Office,
may require a signature guarantee, and must be signed by the Contract Owner and
the person designated as the new Contract Owner.
Any change to the Annuitant or Contingent Annuitant is subject to underwriting
and approval by the Company. Notwithstanding any provisions in this Contract,
for Non-Qualified Contracts, if any Contract Owner is not a natural person, the
change of the Annuitant will be treated as the death of the Contract Owner and
will result in a distribution, regardless of whether a Contingent Annuitant is
also named. Distributions will be made as if the Contract Owner died at the date
of such change.
For contracts issued as IRAs, TSAs, or under Qualified Plans, the Contract Owner
cannot transfer ownership or name someone other than him or herself as
Annuitant.
ACCUMULATION PROVISIONS
- -----------------------
PURCHASE PAYMENTS
The Contract is provided in return for any Purchase Payments made. The
cumulative total of all Purchase Payments under this and any other annuity
contract(s) issued by the Company having the same Annuitant may not exceed
$1,000,000 without the prior written consent of the Company.
The initial Purchase Payment is due on the Date of Issue and may not be less
than [$5,000] for all Contract types other than investment only. Purchase
Payments, if any, after the initial Purchase Payment must be at least [$1,000]
and may be made at any time. In addition, if subsequent Purchase Payments are
made via automated clearinghouse, the minimum payment amount will be reduced to
[$150]. For contracts issued as IRAs, no Purchase Payments are required after
the first Purchase Payment. This Contract will not lapse for failure to pay
subsequent Purchase Payments.
When this contract is issued, for investment purposes only, to Qualified
Pension, Profit-sharing, or Stock Bonus Plans as defined by Section 401(a) of
the Code, or to Optional Retirement Plans/Alternative Retirement Plans the
initial Purchase Payment must be at least [$100,000], and subsequent Purchase
Payments, if any, at least [$15,000].
If no Purchase Payments have been received in the Contract for a period of two
full years and the paid-up annuity benefit at maturity would be less than [$50]
a month, the Company may, at its option, terminate the Contract by payment of
the accumulated value and will by such payment, be relieved of any obligation
under the Contract.
Except in the case of a rollover contribution (as permitted by Section 402(c),
403(a)(4), 403(b)(8), or 408 (d)(3)) of the Code or a contribution made in
accordance with the terms of a Simplified Employee Pension (SEP) as described in
Section 408(k) of the Code, no contributions will be accepted unless they are in
cash, and the total of such contributions shall not exceed [$2,000] for any
taxable year. Any refund of Purchase Payments (other than those attributable to
excess contributions) will be applied, before the close of the calendar year
following the year of the refund, toward the payment of future Purchase Payments
or the purchase of additional benefits.
For contracts issued to TSAs, Purchase Payments, exclusive of rollovers, made
during any taxable year shall not exceed the Section 402(g) of the Code limit
for the calendar year in which such taxable year begins. Section 402(g) of the
Code limit applies to Purchase Payments that are elective deferrals within the
meaning of Section 402(g)(3) of the Code and made under this Contract and all
other contracts, plans or arrangements of the Contract Owner's employer.
However, the maximum amount of Purchase Payments that may be made by the
Contract Owner may be increased or decreased under the provisions of Sections
403(b) or 415 of the Code.
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<PAGE> 11
ALLOCATION OF PURCHASE PAYMENTS
The Contract Owner elects to have the Purchase Payments allocated among the
Fixed Account, the Sub-Accounts of the Variable Account, and the GTOs under the
Multiple Maturity Account. The Contract Owner may change the allocation of
future Purchase Payments by a proper submission that is received and recorded by
the Company.
FIXED ACCOUNT PROVISIONS
The Fixed Account value at any time will be: the sum of all amounts credited to
the Fixed Account under this Contract less any amounts canceled or withdrawn for
charges, deductions, or surrenders. Any paid up annuity cash surrender or death
benefit that may become payable from the Fixed Account will not be less than the
minimum benefits as required by the statute of any state in which the Contract
is issued.
The Company will credit interest to the Fixed Account value. Such interest will
be credited at such rate or rates as the Company prospectively declares from
time to time, at the sole discretion of the Company. The interest rate declared
will be stated as an annual effective yield. Such rates will be declared to the
Contract Owner in writing on quarterly statements. Any such rate or rates so
determined, for which deposits are received, will remain in effect for a period
of not less than 12 months. However, the Company guarantees that it will credit
interest at not less than [3.0%] per year or any lesser amount as permitted by
state law.
At the end of an Interest Rate Guarantee Period, a new interest rate is declared
with an Interest Rate Guarantee Period starting at the end of the prior period
and ending at the end of the calendar quarter one-year later. For new Purchase
Payments allocated to the Fixed Account or transfers from the Variable Account
or the GTOs, this period begins upon the date of deposit or transfer and ends at
the end of the calendar quarter at least one year (but not more than 15 months)
from deposit or transfer.
VARIABLE ACCOUNT PROVISIONS
The Variable Account value is the sum of the value of all Accumulation Units
under this Contract.
The Company has allocated a part of its assets for the Contract and other
contracts to the Variable Account. Such assets of the Variable Account remain
the property of the Company. However, they may not be charged with the
liabilities from any other business in which the Company may take part.
The Variable Account is divided into Sub-Accounts which invest in shares of the
Underlying Mutual Funds. Purchase Payments are allocated among one or more of
these Sub-Accounts, as designated by the Contract Owner, and are subject to the
terms and conditions of the Underlying Mutual Funds.
ACCUMULATION UNIT VALUE
The number of Accumulation Units for each Sub-Account of the Variable Account is
found by dividing: (1) the net amount allocated to the Sub-Account; by (2) the
Accumulation Unit value for the Sub-Account for the Valuation Period during
which the Company received the Purchase Payment.
When the Underlying Mutual Fund shares were first established the value of an
Accumulation Unit for each Sub-Account of the Variable Account was arbitrarily
set at $10. The value for any later Valuation Period is found as follows:
The Accumulation Unit value for each Sub-Account for the last prior Valuation
Period is multiplied by the net investment factor for the Sub-Account for the
next following Valuation Period. The result is the Accumulation Unit value. The
value of an Accumulation Unit may increase or decrease from one Valuation Period
to the next. The number of Accumulation Units will not change as a result of
investment experience.
VALUATION OF UNDERLYING MUTUAL FUND SHARES
Underlying Mutual Fund shares in the Variable Account will be valued at their
net asset value.
SUBSTITUTION OF UNDERLYING MUTUAL FUND SHARES
If the shares of the Underlying Mutual Funds should no longer be available for
investment by the separate account or if in the judgment of the Company's
management further investment in such Underlying Mutual Fund's shares should be
inappropriate in view of the purposes of the Contract, the Company may
substitute shares of another Underlying Mutual Fund for Underlying Mutual Fund
shares already purchased or to be purchased in the future by purchase payments
under the Contract.
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In the event of such substitution or change, the Company may, by appropriate
endorsement, make such changes to this and other contracts of this class as may
be necessary to reflect such substitution or change. Nothing contained herein
shall prevent the separate account from purchasing other securities for other
series or classes of contracts or from effecting a conversion between series or
classes of contracts on the basis of requests made individually by owners of
such contracts.
NET INVESTMENT FACTOR
The net investment factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The net
investment factor may be greater or less than one; therefore, the value of an
Accumulation Unit may increase or decrease.
The net investment factor for any Sub-Account for any Valuation Period is
determined by: dividing (1) by (2) and subtracting (3) from the result, where:
1. is the net of:
a. the net asset value per share of the Underlying Mutual Fund
held in the Sub-Account, determined at the end of the
current Valuation Period; plus
b. the per share amount of any dividend or capital gain
Distributions made by the Underlying Mutual Fund held in the
Sub-Account, if the "ex-dividend" date occurs during the
current Valuation Period.
2. is the net result of:
a. the net asset value per share of the Underlying Mutual Fund
held in the Sub-Account, determined at the end of the last
prior Valuation Period.
b. the per share credit or charge for any taxes reserved for the
last prior Valuation Period, plus or minus
c. a per share credit or charge for any taxes reserved for, which
is determined by the Company to have resulted from the
investment operations of the Sub-Account.
3. is a factor representing the variable account charge plus additional
charges for any riders or options which become a part of the Contract.
For funds that credit dividends on a daily basis and pay such dividends once a
month, the net investment factor allows for the monthly reinvestment of these
daily dividends.
GUARANTEED TERM OPTIONS (GTOS)
At any particular time under this Contract, four GTOs will be available: a three
year GTO, a five year GTO, a seven year GTO and a ten year GTO. Amounts
allocated to a three year GTO will have a Guaranteed Term of three years, a five
year GTO will have a Guaranteed Term of five years, and so on. Regardless of the
source from which a GTO allocation is made, the minimum for each allocation is
[$1,000].
GTOs are not available as funding options if the Contract is annuitized. All
investment amounts allocated to a GTO must be transferred to other investment
options at the time of Annuitization. If a variable annuity Contract is
annuitized while a GTO is in effect, and prior to the Maturity Date of the GTO,
a Market Value Adjustment (MVA) will apply to amounts transferred to other
investment options under the Contract which may be used during Annuitization.
For the duration of the Guaranteed Term of a GTO, the Company will credit a
Specified Interest Rate on amounts remaining allocated under the GTO. The
interest rates in effect during any particular Investment Period will be
guaranteed for GTO allocations (made during the Investment Period) for the
duration of the Guaranteed Term associated with the GTO. Each GTO in the same
Investment Period has its own Specified Interest Rate for the Guaranteed Term
relating to the selected GTO. The Company, however, reserves the right to change
the Specified Interest Rate at any time for prospective allocations to GTOs.
A MVA will apply against all amounts which are transferred or surrendered from
allocations under a GTO prior to the Maturity Period for the particular GTO.
During the Maturity Period, allocations under a GTO may be transferred,
surrendered, or distributed for any other reason without any MVA (a CDSC may
apply on amounts surrendered). At all times other than during a Maturity Period,
a MVA will apply to amounts distributed from allocations under a GTO.
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At least 15 days and at most 30 days prior to the end of each calendar quarter,
variable annuity Contract Owners having GTOs with Maturity Dates coinciding with
the end of the calendar quarter will be notified of the impending expiration of
the GTO. Contract Owners will then have the option of directing the withdrawal
or transfer of the GTO without application of any MVA during the Maturity
Period. Withdrawals or transfers during the Maturity Period, beginning the day
after the Maturity Date and ending thirty days after the Maturity Date, will not
be subject to an MVA. For the period commencing with the first day after the
Maturity Date and ending on the thirtieth day following the Maturity Date, the
GTO will be credited with the same Specified Interest Rate in effect before the
Maturity Date.
If no such direction is received by the thirtieth day following the Maturity
Date, amounts in the GTO will be automatically transferred to a money market
sub-account of the variable annuity. The Company reserves the right to restrict
transfers into and out of the Multiple Maturity Account to one per calendar year
at all times other than during a Maturity Period.
MARKET VALUE ADJUSTMENT (MVA) FORMULA
The MVA Formula is a calculation expressing the relationship between three
factors: (1) the CMT Rate for a period equivalent to the Guaranteed Term at the
time of deposit in the GTO; (2) the CMT Rate at the time of distribution for a
period of time equivalent to the time remaining in the GTO; and (3) the number
of days remaining until the Maturity Date of the GTO. A MVA generally reflects
the relationship between the prevailing interest rates at the time of
investment, prevailing interest rates at the time of distribution, and the
amount of time remaining in the Guaranteed Term of the GTO selected. Generally,
if the Specified Interest Rate is lower than prevailing interest rates,
application of the MVA will result in a downward adjustment of amounts allocated
to a GTO. If the Specified Interest Rate is higher than prevailing interest
rates, application of the MVA will result in an upward adjustment of amounts
allocated to a GTO. The MVA is applied only when amounts allocated to a GTO are
distributed from the GTO prior to a Maturity Period. The result of the MVA
Formula is the MVA Factor.
The formula for determining the MVA Factor is:
1 + a t
---------------------
1 + b + 0.0025
Where:
a = the CMT Rate for a period equivalent to the Guaranteed Term at
the time of deposit in the GTO;
b = the CMT Rate at the time of distribution for a period of time
with maturity equal to the time remaining in the Guaranteed Term.
In determining the number of years to maturity, any partial year
will be counted as a full year, unless this would cause the
number of years to exceed the Guaranteed Term.
t = the number of days until the Maturity Date, divided by 365.25.
In the case of a above, the CMT Rate utilized will be the rate published by the
Federal Reserve Board, the Friday preceding the Wednesday before the Investment
Period during which the allocation to the GTO was made.
In the case of b above, the CMT Rate utilized will be the rate published the
Friday preceding the Wednesday preceding withdrawal, transfer or other
distribution giving rise to the MVA.
For periods which do not coincide with the available CMT periods, rates used in
a and b will be linearly interpolated (where the difference in rates is
proportional to the difference in years).
The MVA Factor will be equal to 1 during the Investment Period. That is, for the
period of time following a GTO allocation during which the Specified Interest
Rate for GTOs of the same duration is not changed, the MVA Factor will be equal
to 1.
The MVA Formula shown above also accounts for some of the administrative and
processing expenses incurred when fixed-interest investments are liquidated.
This is represented in the addition of 0.0025 in the MVA Formula. The result of
the MVA Formula shown above is the MVA Factor. The MVA Factor will either be
greater, less than, or equal to 1 and will be multiplied by the Specified Value
or that portion of the Specified Value being withdrawn,
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transferred, or distributed for any other reason. If the result is greater than
1, a gain will be realized by the Contract Owner; if less than 1, a loss will be
realized. If the MVA Factor is exactly 1, no gain or loss will be realized.
If the Federal Reserve Board halts publication of CMT Rates, or if, for any
other reason, CMT Rates are not available to be relied upon, the Company will
use appropriate rates based on treasury bond yields.
TRANSFERS, SURRENDERS, AND WITHDRAWALS
- --------------------------------------
TRANSFER PROVISIONS
Transfers among the Fixed Account, Variable Account, and the GTOs must be made
prior to the Annuitization Date. Transfers among the Sub-Accounts may occur once
daily without charges and penalties. The Company reserves the right to restrict
transfers into and out of the Multiple Maturity Account to one per calendar year
at all times other than during the Maturity Period. The Company also reserves
the right to refuse any transfer requests submitted by individuals or firms
performing market timing services on behalf of multiple Contract Owners or when
disposal or the purchase of the Underlying Mutual Funds is not possible due to
actions taken, or limitations imposed, independently by the Underlying Mutual
Funds.
A Contract Owner may transfer annually, at the end of an Interest Rate Guarantee
Period, funds from the Fixed Account to the Variable Account or to a GTO without
incurring a penalty or adjustment. The maximum allowable transfer amount from
the Fixed Account to the Variable Account or to a GTO will be determined by the
Company at its sole discretion, but will not be less than [10%] of the total
value of the portion of the Fixed Account at the end of an Interest Rate
Guaranteed Period. Transfers to a GTO must be at least [$1,000]. All transfers
from the Fixed Account must be made within 45 days after the expiration date of
the Interest Rate Guarantee Period.
A Contract Owner may annually transfer a portion of the Variable Account or the
GTO to the Fixed Account. The Company reserves the right to limit the maximum
amount transferable to the Fixed Account. This maximum will never be less than
[10%] of the combined value of the Variable Account and the amount allocated to
the GTO for any 12-month period. The Company also reserves the right to refuse
transfers or Purchase Payments into the Fixed Account if the Fixed Account value
is greater than or equal to [30%] of the total Contract Value at the time such
transfer is requested.
SURRENDERS
Prior to the earlier of the Annuitization Date or the death of the Annuitant and
any Contingent Annuitant, the Contract Owner may surrender part or all of the
Contract Value. A surrender request must be in writing or in a form otherwise
acceptable to the Company. The Company reserves the right to require that the
signature(s) be guaranteed by a member firm of a major stock exchange or other
depository institution qualified to give such a guaranty.
When written application and proof of interest are received, the Company will
surrender the number of Variable Account Accumulation Units, any amount from the
Fixed Account; any amount from any GTO under the Multiple Maturity Account and
any amount from any other options under this Contract needed to equal: (a) the
dollar amount requested minus (b) any CDSC which applies plus (c) any
administration charge plus (d) any premium tax plus (e) any outstanding loan
balance.
If a partial surrender is requested, unless the Contract Owner has instructed
otherwise, amounts will be surrendered as follows: (a) from the Variable Account
(b) from the Fixed Account and (c) from the GTOs under the Multiple Maturity
Account. The amounts surrendered from each of these accounts will be in the same
proportion that the Contract Owner's interest in each account bears to the total
Contract Value. Additionally, the amount that is surrendered from each
underlying Sub-Account will be in the same proportion that each Sub-Account
bears to the total Variable Account.
The surrender value will be paid to the Contract Owner within seven days of
receipt of proper request and proof of interest satisfactory to the Company are
received at the Home Office.
RESTRICTIONS ON SURRENDERS FOR CERTAIN QUALIFIED PLANS, TSAS AND IRAS
The surrender of Contract Value attributable to contributions made pursuant to a
salary reduction agreement (within the meaning of Section 402(g)(3)(C) of the
Code), or transfers from a Custodial Account described in Section 403(b)(7) of
the Code, may be executed only when the Contract Owner attains age 59 1/2,
separates from service, dies, or becomes disabled (within the meaning of Section
72(m)(7) of the Code).
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These surrender limitations apply to the following portions of the Contract
Value:
(1) salary reduction contributions to TSAs 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 custodial accounts described in
Section 403(b)(7) of the Code (except that employer contributions and
earnings in such accounts as of December 31, 1988, may be withdrawn in
the case of hardship).
Payments pursuant to a Qualified Domestic Relations Order will not violate any
surrender limitations included herein, but may be subject to restrictions found
in the employer's plan or the Code.
Any distribution other than the above, including exercise of a contractual free
look provision may result in the immediate application of taxes and penalties
under Section 72 of the Code. A premature distribution may not be eligible for
rollover treatment. To assist in preventing disqualification in the event of a
surrender during the free look period, the Company will agree to transfer the
proceeds to another contract which meets the requirements of Section 408 of the
Code, upon proper direction by the Contract Owner.
SURRENDER VALUE
The surrender value is the amount that will be paid if the full Contract is
surrendered. The surrender value at any time will be:
The Contract Value less the sum of any applicable;
1. Contingent deferred sales charge (CDSC),
2. Premium taxes,
3. Any outstanding loan balance, and
4. Administration charge.
SUSPENSION OR DELAY OF SURRENDER
The Company has the right to suspend or delay the date of any surrender from the
Variable Account for any period:
1. When the New York Stock Exchange is closed;
2. When trading on the New York Stock Exchange is restricted;
3. When an emergency exists as a result of which: disposal of securities
held in the Variable Account is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the net assets
of the Variable Account; or
4. During any other period when the Securities and Exchange Commission, by
order, so permits for the protection of security holders.
Rules and regulations of the Securities and Exchange Commission may govern as to
whether certain conditions set forth above exist.
Payment of funds from the Variable Account and Multiple Maturity Accounts will
be made within seven days of receipt of both proper written application and
proof of interest satisfactory to the Company. The Company reserves the right to
delay payment of a total surrender of Contract Owner's Fixed Account Value for
up to six months in those states where applicable law requires the Company to
reserve such right.
CONTINGENT DEFERRED SALES CHARGE (CDSC)
If part or all of the Contract Value is withdrawn, a CDSC may be assessed by the
Company. The CDSC is designed to cover expenses relating to the sale of the
Contract.
The CDSC is calculated by multiplying the applicable CDSC percentages noted
below by the Purchase Payments that are withdrawn. For purposes of calculating
the amount of the CDSC, withdrawals are considered to come first from the oldest
Purchase Payment made to the Contract, then from the next oldest Purchase
Payment and so forth, with any earnings attributable to such Purchase Payments
considered only after all Purchase Payments made to the
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<PAGE> 16
Contract have been considered. (For federal income tax purposes, a full or
partial withdrawal is treated as a withdrawal of earnings first.)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Years Measured From Date of Payment: *1 2 3 4 5 6 7 Thereafter
- ---------------------------------------------------------------------------------------------------------
CDSC %: 7% 7% 6% 5% 4% 3% 2% 0%
</TABLE>
* The CDSC percentage will change to the next year's CDSC percentage on the last
day of the Purchase Payment Year.
CDSC, if applicable, will be assessed against full or partial surrenders from
GTOs. If any such surrender occurs prior to the Maturity Date for any particular
GTO, the amount surrendered will be subject to a MVA in addition to CDSC.
WITHDRAWALS WITHOUT CHARGE
During each Contract Year, the Contract Owner may withdraw without CDSC a total
amount equal to the lesser of (1) or (2) where (1) is 15% of the sum of all
Purchase Payments (less any Purchase Payments previously withdrawn) and (2) is
15% of the Contract value. This CDSC-free withdrawal privilege is
non-cumulative; that is, free amounts not taken during any given Contract Year
cannot be taken as free amounts in subsequent Contract Years.
A CDSC will not be assessed against the withdrawal of any: (1) Purchase Payments
which have been held under this Contract for at least [84] months; (2) earnings
attributable to Purchase Payments made to this Contract; (3) Death Benefit
payments made upon the death of the Annuitant prior to the Annuitization Date;
(4) amounts applied to an Annuity Payment Option after two years from the Date
of Issue; (5) amounts required to meet Minimum Distribution requirements or (6)
as otherwise noted in the Contract.
In addition, when this Contract is exchanged for another contract issued by the
Company or any of its affiliate insurance companies, of the type and class,
which the Company determines, is eligible for such waiver, the Company will
waive the CDSC on the first contract. A CDSC may apply to the contract received
in the exchange.
When a Contract is held by a CRT, the amount which may be withdrawn from this
Contract without application of a CDSC, shall be the larger of (a) or (b) where
(a) is the amount which would otherwise be available for withdrawal without
application of a CDSC; and where (b) is the excess of the Contract Value at the
close of the day prior to the date of the withdrawal, over total Purchase
Payments (reduced by previous withdrawals) attributed to the Contract as of the
date of the withdrawal.
The amount of CDSC on the Contract may be reduced when sales of the Contract are
made to a trustee, employer or similar entity pursuant to a retirement plan or
when sales are made in a similar arrangement where offering the contract to a
group of individuals results in savings of sales expenses. The entitlement of
such a reduction in CDSC will be determined by the Company.
SYSTEMATIC WITHDRAWALS
The Contract Owner may elect in writing on a form provided by the Company to
take systematic withdrawals of a specified dollar amount (of at least [$100]) on
a monthly, quarterly, semi-annual or annual basis. The Company will process the
withdrawals as directed by surrendering on a pro-rata basis Accumulation Units
from all of the Sub-Accounts in which the Contract Owner has an interest, the
Fixed Account, and the Multiple Maturity Account. A CDSC may apply to systematic
withdrawals in accordance with the considerations set forth in the "Contingent
Deferred Sales Charge" and "Withdrawals Without Charge" provisions of the
Contract. Unless otherwise directed by the Contract Owner, the Company will
withhold federal income taxes from each systematic withdrawal.
An age-based systematic withdrawal program (see following paragraph) will
terminate automatically at the end of each Contract Year and may be reinstated
only on or after the next Contract Anniversary pursuant to a new request. Unless
the Contract Owner has made an irrevocable election of distributions of
substantially equal periodic payments, the systematic withdrawals may be
discontinued at any time by notification to the Company in writing. The Company
reserves the right to discontinue prospective systematic withdrawals.
If the Contract Owner withdraws amounts pursuant to a systematic withdrawal
program, then the Contract Owner may withdraw each Contract Year without a CDSC
an amount up to the greater of (1) free withdrawal privilege
16
<PAGE> 17
described in "Withdrawals Without Charge" section of the Contract, (2) the
amount required to meet Minimum Distribution requirements for this Contract, or
(3) the specified percentage of the Contract Value based on the Contract Owner's
age, as shown in the following table:
Contract Owner's Age Percentage of Contract Value
-------------------- ----------------------------
Under 59-1/2 5%
59-1/2 thru 61 7%
62 thru 64 8%
65 thru 74 10%
75 and over 13%
If the total amounts withdrawn in any Contract Year exceed the CDSC-free amount
as calculated under the systematic withdrawal method described above, then such
total withdrawn amounts will be eligible only for CDSC-free withdrawal privilege
described in the "Withdrawals Without Charge" section of the Contract, and the
total amount of CDSC charged during the Contract Year will be determined in
accordance with those sections.
The Contract Value and the Contract Owner's age for purposes of applying the
CDSC-free withdrawal percentage described above are determined as of the date
the request for a systematic withdrawal program is received and recorded by the
Company at its Home Office. (In the case of Joint Owners, the older Contract
Owner's age will be used). Furthermore, this CDSC-free withdrawal privilege for
systematic withdrawals is non-cumulative, that is, free amounts not taken during
any given Contract Year cannot be taken as free amounts in a subsequent Contract
Year.
Systematic withdrawals are not available prior to the expiration of the free
look provision of the Contract. The Company reserves the right to assess a
processing fee for this service.
LOANS
- -----
Loans, secured by the Contract Value, are available 30 days after the Date of
Issue for Contracts that are issued as TSAs. The Company will charge a
loan-processing fee of [$25] for each loan. Specific loan terms are disclosed at
the time of loan application or loan issuance.
For each loan, the minimum amount that may be borrowed is [$1,000]. For
non-ERISA TSAs which have Contract Values up to $20,000, the maximum loan
balance that may be outstanding at any time is 80% of the Contract Value, but
not more than $10,000. For non-ERISA TSAs which have Contract Values of $20,000
or more and all ERISA TSAs, the maximum loan balance which may be outstanding at
any time is 50% of the Contract Value, but not more than $50,000. The highest
loan balance owed during the prior one-year period will reduce the $50,000
limit. For ERISA TSAs the Company reserves the right to limit a loan to 50% of
the Contract Value. The aggregate of all loans may not exceed the maximum loan
limitations stated above.
An amount equal to the principal amount of the loan will be transferred to a
collateral fixed account from the Variable Account, the Fixed Account, or the
GTO pursuant to agreement between the Contract Owner and the Company. Amounts
transferred from the GTO may be subject to a MVA. No withdrawal charges are
deducted at the time of the loan or on the transfers to the collateral account.
Loan repayments will be allocated among the Variable Account, the Fixed Account,
the GTO or any other investment option that may be available under the Contract
pursuant to agreement between the Contract Owner and the Company. Loan
repayments allocated to the GTO must be at least [$1,000].
The amount that is payable upon surrender of the Contract, the death of the
Contract Owner, death of the Annuitant, or Annuitization of the Contract will be
reduced by the amount of the loan outstanding, plus accrued interest. Until the
loan is repaid, the Company reserves the right to restrict any transfer of the
Contract which would otherwise qualify as a transfer as permitted in the Code.
Loans may also be subject to additional limitations or restrictions under the
terms of the employer's plan. Loans permitted under this Contract may be taxable
in whole or in part as required by the Code. The Company will calculate the
maximum nontaxable loan based on the information provided by the Owner/Annuitant
or the employer. Loan amounts and accrued interest amounts, which are in
default, will be treated as deemed Distributions for federal income tax
purposes, to the extent required by law.
17
<PAGE> 18
REQUIRED DISTRIBUTION PROVISIONS
- --------------------------------
This Contract is intended to be treated as an "annuity contract" for federal
income tax purposes. Accordingly, all provisions of this Contract shall be
interpreted and administered in accordance with the requirements of Section
72(s) of the Code. In no event shall any payment be deferred beyond the time
limits permitted by Section 72(s) of the Code. The Company reserves the right to
amend this Contract to comply with requirements set out in the Code and
regulations and rulings thereunder, as they may exist from time to time.
Payments will be calculated by use of the expected return multiples specified in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations and calculated
in accordance with the calculation methods made available by the Company,
prescribed by the regulations and elected by the Contract Owner.
REQUIRED DISTRIBUTION-NON-QUALIFIED CONTRACTS
Upon the death of any Owner, Contract Owner or Joint Owner (including an
Annuitant who becomes the Contract Owner of the Contract on the Annuitization
Date) (each of the foregoing "a deceased Contract Owner"), certain distributions
for Non-Qualified Contracts are required by Section 72(s) of the Code.
Notwithstanding any provision of the Contract to the contrary, the following
distributions shall be made in accordance with such requirements.
1. If any deceased Contract Owner dies on or after the Annuitization
Date and before the entire interest under the Contract has been
distributed, then the remaining portion of such interest shall be
distributed at least as rapidly as under the method of distribution in
effect as of the date of such deceased Contract Owner's death.
2. If any deceased Contract Owner dies prior to the Annuitization Date,
then the entire interest in the Contract (consisting of either the
Death Benefit or the Contract Value reduced by certain charges as set
forth elsewhere in the Contract) shall be distributed within 5 years of
the death of the deceased Contract Owner, provided however:
(a) If any portion of such interest is payable to or for the benefit of
a natural person who is a surviving Contract Owner, Contingent Owner,
Joint Owner, Annuitant, Contingent Annuitant, Beneficiary, or
Contingent Beneficiary as the case may be (each a "designated
beneficiary"), such portion may, at the election of the designated
Beneficiary, be distributed over the life of such designated
beneficiary, or over a period not extending beyond the life expectancy
of such designated beneficiary, provided that payments begin within one
year of the date of the deceased Contract Owner's death (or such longer
period as may be permitted by federal income tax regulations). Life
expectancy and the amount of each payment will be determined as
prescribed by federal income tax regulations.
(b) If the designated beneficiary is the surviving spouse of the
deceased Contract Owner, such spouse may elect, in lieu of receiving
the Death Benefit as a lump sum, to become the Contract Owner of this
Contract, and the distributions required under these Required
Distribution Provisions will be made upon the death of such spouse. If
the spouse elects to become the Contract Owner and the Death Benefit
that would have been payable exceeds the Contract Value, then the
Contract Value will be increased to be equal to the amount that would
have been paid as the Death Benefit.
In the event that the Contract Owner is a person that is not a natural person
(e.g., a trust or corporation), then, for purposes of these distribution
provisions, (i) the death of the Annuitant shall be treated as the death of any
Contract Owner, (ii) any change of the Annuitant shall be treated as the death
of any Contract Owner, and (iii) in either case the appropriate distribution
required under these distribution rules shall be made upon such death or change,
as the case may be. The Annuitant is the primary annuitant as defined in Section
72(s)(6)(B) of the Code.
These distribution provisions shall not be applicable to any Contract that is
not required to be subject to the provisions of Section 72(s) of the Code by
reason of Section 72(s)(5) or any other law or rule. Such contracts include, but
are not limited to, any Contract (i) which is provided under a plan described in
Section 401(a) of the Code which includes a trust exempt from tax under Section
501 of the Code; (ii) which is provided under a plan described in Section 403(a)
of the Code; (iii) which is described in Section 403(b) of the Code; (iv) which
is an individual retirement annuity or provided under an individual retirement
account or annuity as described in Section 408 of the Code; or (v) which is
qualified funding asset (as defined in Section 130 (d) of the Code, but without
regard to whether there is a qualified assignment).
18
<PAGE> 19
REQUIRED DISTRIBUTION-TSAS, IRAS, AND CONTRACTS ISSUED UNDER QUALIFIED PLANS
The entire interest of an Annuitant under a TSA, Qualified Plan, or IRA is
required to be distributed in a manner consistent with the provisions of Section
401(a)(9) of the Code, and regulations thereunder, and will be paid, as
requested by the Contract Owner, notwithstanding anything else contained herein,
to the Contract Owner over a period not exceeding:
A. the life of the Contract Owner or the lives of the Contract Owner and
the Contract Owner's designated beneficiary; or
B. a period not extending beyond the life expectancy of the Contract Owner
or the life expectancy of the Contract Owner and the Contract Owner's
designated beneficiary.
If the Contract Owner's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, then (1) for an
IRA, payments are required to commence not later than the first day of April
following the calendar year in which the Contract Owner attains age 70 1/2, and
(2) if the Contract is issued as a TSA or under a Qualified Plan, payments are
required to commence not later than the first day of April following the later
of the calendar year in which the Contract Owner attains the age of 70 1/2 or
the Contract Owner retires.
If the Annuitant dies on or after the date Minimum Distributions have begun, the
remaining Contract interest will continue to be distributed at least as rapidly
as under the method of distribution being used prior to the Contract Owner's
death, unless otherwise permitted by the Code.
If the Annuitant dies prior to the commencement of required Minimum
Distributions, the interest in the Contract must be distributed by December 31
of the calendar year in which the fifth anniversary of the death occurs unless:
the Annuitant names the surviving spouse as the Beneficiary and such
spouse elects to receive the Distribution in substantially equal
payments over the surviving spouse's life (or a period not exceeding
the surviving spouse's life expectancy) and commencing not later than
December 31 of the year in which the deceased Annuitant would have
attained 70 1/2. If such surviving spouse dies before distributions
begin under this provision, this section shall be applied as if the
surviving spouse were the Annuitant.
the Annuitant names a Beneficiary other than the surviving spouse and
such Beneficiary elects to receive a Distribution in substantially
equal payments over the Beneficiary's life (or a period not exceeding
the Beneficiary's life expectancy) commencing not later than December
31 of the year following the year in which the deceased Annuitant died.
For purposes of this requirement, any amount paid to a child of the Annuitant
will be treated as if it has been paid to the surviving spouse if the remainder
of the interest becomes payable to the surviving spouse when the child reaches
the age of majority.
If the Beneficiary under an IRA is the surviving spouse of the Annuitant, the
surviving spouse may elect to treat the Contract as his or her own, whether or
not distributions had commenced prior to the death of the Contract Owner. If the
spouse elects to become the Contract Owner and the Death Benefit that would have
been payable exceeds the Contract Value, then the Contract Value will be
increased to be equal to the amount that would have been paid as the death
benefit. This election will be deemed to have been made if such surviving spouse
makes a regular IRA contribution to the Contract, makes a rollover to or from
the Contract, or fails to elect any of the above provisions. The result of such
an election is that the surviving spouse will be considered the individual for
whose benefit the IRA is maintained.
For TSAs these provisions apply only to the portion of the Contract Value in a
403(b) TSA which accrued after December 31, 1986. Amounts accruing prior to
January 1, 1987, will be distributed in accordance with the rules in effect
prior to the Tax Reform Act of 1986.
DEATH PROVISIONS
- ----------------
DEATH OF CONTRACT OWNER
If any Contract Owner and the Annuitant are not the same person and such
Contract Owner dies prior to the Annuitization Date, the Death Benefit
provisions do not apply. The surviving Joint Owner, if any, becomes the new
Contract Owner. If there is no surviving Joint Owner, the Contingent Owner
becomes the new Contract Owner. If there is no surviving Joint Owner or
Contingent Owner, the last surviving Contract Owner's estate becomes the new
Contract
19
<PAGE> 20
Owner. The entire interest in the Contract must be distributed in accordance
with the "Required Distribution Provisions".
DEATH OF CONTRACT OWNER/ANNUITANT
If any Contract Owner and the Annuitant are the same person, and such person
dies prior to the Annuitization Date, the Death Benefit shall be payable to the
surviving Joint Owner, the Beneficiary, the Contingent Beneficiary or the last
surviving Contract Owner's estate, as specified in the "Beneficiary" section and
distributed in accordance with the "Required Distribution Provisions".
DEATH OF ANNUITANT
If the Contract Owner and the Annuitant are not the same person and the
Annuitant dies prior to the Annuitization Date, a Death Benefit will be payable
to the Beneficiary, the Contingent Beneficiary, or the estate of the last
surviving Contract Owner, as specified in the "Beneficiary" section, unless
there is surviving Contingent Annuitant. In such case, the Contingent Annuitant
becomes the Annuitant.
DEATH BENEFIT PAYMENT
The value of the Death Benefit will be determined as of the Valuation Date
coincident with, or next following the date the Company receives in writing at
the Home Office the following three items: (1) proper proof of the Annuitant's
death; (2) an election specifying distribution method; and (3) any applicable
state required form(s).
Proof of death is either:
(1) a copy of a certified death certificate;
(2) a copy of a certified decree of a court of competent jurisdiction as to the
finding of death;
(3) a written statement by a medical doctor who attended the deceased; or
(4) any other proof satisfactory to the Company.
The Beneficiary must elect a method of distribution, which complies, with the
"Distribution Provisions" of this Contract. The Beneficiary may elect to receive
such Death Benefits in the form of: (1) a lump sum distribution; (2) an annuity
payout; or (3) any distribution that is permitted under state and federal
regulations and is acceptable by the Company. If such election is not received
by the Company within 60 days of the Annuitant's death, the Beneficiary will be
deemed to have elected a cash payment as of the last day of the 60 day period.
Payment of the Death Benefit will be made or will commence within 30 days after
receipt of proof of death and notification of the election.
DEATH BENEFIT
If the Annuitant dies at any time prior to the Annuitization Date, the dollar
amount of the Death Benefit will be the greatest of: (1) the Contract Value; (2)
the sum of all Purchase Payments, less an adjustment for each amount
surrendered; or (3) the greatest Contract Value on any Contract Anniversary
prior to the Annuitant's [86th] birthday, less an adjustment for amounts
subsequently surrendered, plus Purchase Payments received after that 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 of the
partial surrender.
20
<PAGE> 21
ANNUITIZATION PROVISIONS
- ------------------------
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is a date chosen by the Contract Owner and is
generally the first day of a calendar month. The date must be at least two years
after the Date of Issue. If the Contract Owner does not choose an Annuity
Commencement Date, a date will be established for the Contract. The Contract
Owner may change the Annuity Commencement Date prior to the Annuitization Date
at any time via a written request as outlined in the "Change in Annuity
Commencement Date and Annuity Payment Option" section.
For those Contracts issued under Qualified Plans, TSAs, or IRAs, if the Annuity
Commencement Date is not chosen by the Contract Owner, the Annuity Commencement
Date established on the Date of Issue of the Contract will be the date on which
the Contract Owner reaches 70 1/2. For Non-Qualified Contracts, the Annuity
Commencement Date established on the Date of Issue of the Contract will be the
date on which the Contract Owner reaches age 90.
The Annuity Commencement Date may be changed but may not be later than the first
day of the first calendar month after the Annuitant's 90th birthday unless
otherwise agreed upon by the Contract Owner and Company.
CHANGE OF ANNUITY COMMENCEMENT DATE AND ANNUITY PAYMENT OPTION
The Contract Owner may change the Annuity Commencement Date and the Annuity
Payment Option prior to the Annuitization Date. Such changes must be in writing
and approved by the Company, and must comply with the "Annuity Commencement
Date" section above. A change will become effective as of the date requested,
but will not apply to any payment made or action taken by the Company before it
is recorded at Home Office.
ANNUITIZATION
Annuitization is irrevocable once payments have begun. To annuitize the
Contract, the Contract Owner shall notify the Company in writing of election of:
(1) an Annuity Payment Option; and
(2) either a Fixed Payment Annuity, Variable Payment Annuity, or any other
combination that may be available on the Annuitization Date.
Any amounts in the Fixed Account which the Contract Owner elects to annuitize as
a Variable Payment Annuity must be moved to a variable Sub-Account prior to the
Annuitization Date.
FIXED PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment of a Fixed Payment Annuity will be determined by applying the
portion of the total Contract Value specified by the Contract Owner, less
applicable premium tax, to the fixed annuity table in effect on the
Annuitization Date for the Annuity Payment Option elected. The purchase rates
for any options guaranteed to be available will be determined on a basis not
less favorable than the applicable 1983 "Table a" with ages set back six years,
with minimum interest at 3.0%. The determination of the applicable "Table a"
will be based upon the type of Contract issued: Non-Qualified, TSAs, or IRAs.
The rates shown in the fixed annuity tables are calculated on this guaranteed
basis.
Subsequent fixed annuity payments will remain level unless the Annuity Payment
Option elected dictates otherwise.
VARIABLE PAYMENT ANNUITY - FIRST PAYMENT
A Variable Payment Annuity is a series of payments which are not predetermined
or guaranteed as to dollar amount and which vary in amount with the investment
experience of the underlying variable Sub-Accounts selected by the Contract
Owner.
The first payment of a Variable Payment Annuity will be determined by applying
the portion of the total Contract Value specified by the Contract Owner, less
applicable premium taxes, to the variable annuity table in effect on the
Annuitization Date for the Annuity Payment Option elected. The purchase rates
for any options guaranteed to be available will be determined on a basis not
less favorable than the applicable 1983 "Table a" with ages set back six years,
with minimum interest at [3.5%]. The determination of the applicable "Table a"
will be based upon the type of Contract issued: Non-Qualified, TSA, or IRA.
21
<PAGE> 22
VARIABLE PAYMENT ANNUITY - SUBSEQUENT PAYMENTS
Variable annuity payments after the first payment vary in amount. The payment
amount changes with the investment performance of the Sub-Accounts selected by
the Contract Owner within the Variable Account. The dollar amount of such
payments is determined as follows:
1. The dollar amount of the first annuity payment is divided by the
annuity unit value as of the Annuitization Date. This result
establishes the fixed number of Annuity Units for each monthly annuity
payment after the first. The number of Annuity Units remains fixed
during the annuity payment period.
2. The fixed number of Annuity Units is multiplied by the annuity unit
value for the Valuation Date for which the payment is due. This result
establishes the dollar amount of the payment.
The Company guarantees that the dollar amount of each payment after the first
will not be affected by variations in the Company's expenses or mortality
experience.
ANNUITY UNIT VALUE
An Annuity Unit is used to calculate the value of annuity payments. When the
Underlying Mutual Fund shares were first established the value of an
Accumulation Unit for each Sub-Account of the Variable Account was arbitrarily
set at $10. The value for any later Valuation Period is found as follows:
1. The Annuity Unit value for each Sub-Account for the immediately
preceding Valuation Period is multiplied by the net investment factor
for the Sub-Account for the Valuation Period for which the Annuity Unit
value is being calculated.
2. The result is multiplied by an interest factor because the assumed
investment rate of [3.5%] per year is built into the purchase rate
basis for Variable Payment Annuities.
FREQUENCY AND AMOUNT OF PAYMENTS
All annuity payments will be mailed within 10 working days of the first of the
month in which they are scheduled. Payments will be made based on the Annuity
Payment Option selected and frequency selected. However, if the net amount to be
applied to any Annuity Payment Option at the Annuitization Date is less than
[$5,000], the Company has the right to pay such amount in one lump sum in lieu
of periodic annuity payments.
If any payment would be or becomes less than [$50], the Company has the right to
change the frequency of payments to an interval that will result in payments of
at least [$50]. In no event will the Company make payments under an annuity
option less frequently than annually.
ANNUITY PAYMENT OPTIONS
- -----------------------
SELECTION OF ANNUITY PAYMENT OPTION
The Contract Owner may select an Annuity Payment Option prior to Annuitization.
If an Annuity Payment Option is not selected, a life annuity with a guarantee
period of 240 months will be the automatic form of payment.
Options available for Contracts issued to IRAs or TSAs may be limited based on
the age of the Annuitant and Distribution requirements under the Code.
The following are the annuity payment options, which are guaranteed to be
available by the Company.
LIFE ANNUITY
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. Payments will cease with the last payment due prior to the death of
the Annuitant.
JOINT AND SURVIVOR ANNUITY
The amount to be paid under this option will be paid during the joint lifetimes
of the Annuitant and a designated second person. Payments will continue as long
as either is living.
22
<PAGE> 23
LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be selected. If the
Annuitant dies prior to the end of this guaranteed period, the recipient chosen
by the Owner will receive the remaining guaranteed payments.
ANY OTHER OPTION
The amount and period under any other option will be determined by the Company.
Payment options not set forth in the Contract are available only if they are
approved by both the Company and the Annuitant.
SUPPLEMENTARY AGREEMENT
A supplementary agreement will be issued within 30 days following the
Annuitization Date. The supplementary agreement will set forth the terms of the
Annuity Payment Option selected.
23
<PAGE> 24
GUARANTEED ANNUITY TABLES FOR NON-QUALIFIED AND IRA CONTRACTS
FIXED MONTHLY BENEFITS PER $1000 APPLIED
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS
<TABLE>
<CAPTION>
ANNUITANT'S AGE LAST BIRTHDAY
FEMALE AGE
----------
50 55 60 65 70
-- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
MALE AGE 50 3.36 3.46 3.56 3.64 3.71
-------- 55 3.42 3.56 3.69 3.82 3.93
60 3.47 3.64 3.82 3.99 4.16
65 3.70 3.92 4.15 4.39
70 4.00 4.30 4.61
</TABLE>
<TABLE>
<CAPTION>
LIFE ANNUITY: MONTHLY ANNUITY PAYMENTS
MALE GUARANTEED PERIOD FEMALE GUARANTEED PERIOD
ANNUITANT'S ATTAINED ANNUITANT'S ATTAINED
AGE LAST BIRTHDAY NONE 120 MONTHS 240 MONTHS AGE LAST BIRTHDAY NONE 120 MONTHS 240 MONTHS
-------------------- ---- ---------- --------- -------------------- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
50 3.87 3.85 3.77 50 3.59 3.58 3.55
51 3.93 3.90 3.82 51 3.64 3.63 3.59
52 3.99 3.96 3.87 52 3.68 3.67 3.63
53 4.05 4.02 3.92 53 3.74 3.72 3.68
54 4.12 4.09 3.97 54 3.79 3.78 3.72
55 4.19 4.15 4.03 55 3.85 3.83 3.77
56 4.27 4.22 4.08 56 3.90 3.89 3.82
57 4.34 4.30 4.14 57 3.97 3.95 3.88
58 4.43 4.37 4.20 58 4.03 4.01 3.93
59 4.51 4.45 4.26 59 4.10 4.08 3.99
60 4.60 4.54 4.32 60 4.18 4.15 4.04
61 4.70 4.62 4.39 61 4.25 4.22 4.11
62 4.80 4.72 4.45 62 4.34 4.30 4.17
63 4.91 4.82 4.51 63 4.42 4.38 4.23
64 5.03 4.92 4.58 64 4.52 4.47 4.30
65 5.15 5.03 4.65 65 4.61 4.56 4.37
66 5.28 5.14 4.71 66 4.72 4.66 4.44
67 5.43 5.27 4.78 67 4.83 4.76 4.51
68 5.58 5.39 4.84 68 4.95 4.87 4.58
69 5.74 5.53 4.90 69 5.08 4.98 4.65
70 5.91 5.66 4.96 70 5.21 5.10 4.72
71 6.10 5.81 5.02 71 5.36 5.22 4.79
72 6.30 5.96 5.08 72 5.51 5.36 4.86
73 6.51 6.12 5.13 73 5.67 5.50 4.93
74 6.73 6.28 5.18 74 5.85 5.65 5.00
75 6.97 6.44 5.23 75 6.04 5.80 5.06
76 7.23 6.61 5.27 76 6.25 5.97 5.12
77 7.51 6.79 5.31 77 6.47 6.14 5.18
78 7.80 6.96 5.34 78 6.71 6.32 5.23
79 8.12 7.14 5.37 79 6.98 6.50 5.28
80 8.46 7.32 5.40 80 7.26 6.69 5.32
</TABLE>
24
<PAGE> 25
GUARANTEED ANNUITY TABLES FOR QUALIFIED PLANS
FIXED MONTHLY BENEFITS PER $1000 APPLIED
ANNUITY TABLES
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS
<TABLE>
<CAPTION>
ANNUITANT AGE
<S> <C> <C> <C> <C> <C> <C>
50 55 60 65 70
SURVIVOR AGE 50 3.29 3.37 3.43 3.48 3.52
55 3.48 3.57 3.65 3.72
60 3.71 3.84 3.94
65 4.02 4.19
70 4.44
</TABLE>
LIFE ANNUITY: MONTHLY ANNUITY PAYMENTS
<TABLE>
<CAPTION>
GUARANTEED PERIOD
ANNUITANT'S
ATTAINED AGE
LAST BIRTHDAY NONE 120 MONTHS 240 MONTHS
<S> <C> <C> <C>
50 3.59 3.58 3.55
51 3.63 3.63 3.59
52 3.68 3.67 3.63
53 3.73 3.72 3.68
54 3.79 3.77 3.72
55 3.84 3.83 3.77
56 3.90 3.89 3.82
57 3.97 3.95 3.88
58 4.03 4.01 3.93
59 4.10 4.08 3.99
60 4.18 4.15 4.04
61 4.25 4.22 4.11
62 4.34 4.30 4.17
63 4.42 4.38 4.23
64 4.52 4.47 4.30
65 4.61 4.56 4.37
66 4.72 4.66 4.44
67 4.83 4.76 4.51
68 4.95 4.86 4.58
69 5.07 4.98 4.65
70 5.21 5.10 4.72
71 5.35 5.22 4.79
72 5.51 5.36 4.86
73 5.67 5.50 4.93
74 5.85 5.65 5.00
75 6.04 5.80 5.06
76 6.25 5.97 5.12
77 6.47 6.14 5.18
78 6.71 6.32
79 6.98 6.50
80 7.26 6.69
</TABLE>
25
<PAGE> 1
(Exhibit 5)
[BEST OF AMERICA LOGO]
FI SERVICE CENTER
BOA AMERICA'S VISION PLUS ANNUITY
APPLICATION
$5,000 MINIMUM INITIAL PAYMENT
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PLAN TYPE - AN OPTION MUST BE SELECTED This contract is established as a:
/ / ROTH IRA CUSTODIAL FORM & STATEMENT OF UNDERSTANDING REQUIRED. / / 403(b) TRANSFER DISCLOSURE FORM REQUIRED.
/ / 401 (a) (Investment Only) DISCLOSURE FORM REQUIRED & $100,000 MINIMUM. / / NON-QUALIFIED
/ / CRT (Charitable Remainder Trust) TRANSMITTAL FORM REQUIRED. / / IRA
/ / ORP (Investment Only) / / ARP (Investment Only)
====================================================================================================================================
CONTRACT OWNER / / CONTINGENT OWNER / / JOINT OWNER
Last Name or Plan Name Last Name Spouse only unless prohibited by law
First Name or Plan Name (continued) MI First Name MI
Address ________________________________________ Address _________________________________________
________________________________________ _________________________________________
Sex / / M / / F Birthdate _____/_____/______ Sex / / M / / F Birthdate _____/_____/______
MM DD YYYY MM DD YYYY
Soc. Sec. No. or Tax ID ________________________ Soc. Sec. No. or Tax ID _________________________
====================================================================================================================================
ANNUITANT Complete only if different from / / CONTINGENT ANNUITANT Complete only if applicable.
Last Name primary contract owner. Last Name
First Name MI First Name MI
Address ________________________________________
________________________________________
MAXIMUM ISSUE AGE THROUGH AGE 85
Sex / / M / / F Birthdate _____/_____/______ Sex / / M / / F Birthdate _____/_____/______
MM DD YYYY MM DD YYYY
Soc. Sec. No. __________________________________ Soc. Sec. No. ___________________________________
====================================================================================================================================
BENEFICIARY WHOLE PERCENTAGES ONLY, MUST TOTAL 100%.
Relationship Birthdate
Primary Contingent Print Full Name (Last, First, MI) Allocation to Annuitant Soc. Sec. No. MM/DD/YYYY
/ / ___________________________________ _________% ____________ _____________ ___/___/____
/ / / / ___________________________________ _________% ____________ _____________ ___/___/____
/ / / / ___________________________________ _________% ____________ _____________ ___/___/____
/ / / / ___________________________________ _________% ____________ _____________ ___/___/____
====================================================================================================================================
ANNUITY PURCHASE PAYMENTS / / PAYMENT ENCLOSED / / TRANSFER/1035 (requires transfer form)
/ / ROLLOVER / / OTHER APPLY FOR TAX YEAR _________
First Purchase Payment $___________________ ($5,000 MINIMUM INITIAL PAYMENT; $100,000 MINIMUM INITIAL PAYMENT FOR 401(a) CONTRACTS)
submitted. A copy of this application properly signed by the producer will constitute receipt for such amount. If this application
is declined by the Company, there will be no liability on the part of the Company, and any payments submitted with this application
will be refunded.
</TABLE>
Product of Nationwide Life Insurance Co.
APO-4385 Financial Institutions AO (6/99)
<PAGE> 2
================================================================================
THE UNDERLYING MUTUAL FUND OPTIONS LISTED ON THIS APPLICATION ARE ONLY AVAILABLE
IN VARIABLE ANNUITY INSURANCE PRODUCTS ISSUED BY LIFE INSURANCE COMPANIES
OR, IN SOME CASES, THROUGH PARTICIPATION IN CERTAIN QUALIFIED PENSION
OR RETIREMENT PLANS. THEY ARE NOT OFFERED TO THE GENERAL PUBLIC DIRECTLY.
================================================================================
<TABLE>
<CAPTION>
PURCHASE PAYMENT ALLOCATION WHOLE PERCENTAGES ONLY, MUST TOTAL 100%.
A CONTRACT CANNOT BE ISSUED UNLESS THIS SECTION IS COMPLETE.
<S> <C> <C>
AMERICAN CENTURY VARIABLE NATIONWIDE SEPARATE OPPENHEIMER VARIABLE ACCOUNT FUNDS
PORTFOLIOS, INC. ACCOUNT TRUST ______% Aggressive Growth Fund / VA
______% VP Income & Growth ______% Capital Appreciation Fund
______% Capital Appreciation Fund / VA
______% VP International ______% Government Bond Fund
______% Main Street Growth & Income
______% VP Value ______% Money Market Fund Fund / VA
DREYFUS ______% Total Return Fund SALOMON BROTHERS/
______% Dreyfus Socially Responsible SMITH BARNEY
Growth Fund, Inc. NATIONWIDE SEPARATE ACCOUNT ______% Investors Fund
TRUST SUBADVISED FUNDS
DREYFUS VARIABLE INVESTMENT FUND FUND NAME (SUBADVISOR) ______% Mid-Cap Fund
______% Capital Appreciation Portfolio ______% Balanced Fund
(Salomon Brothers) ______% High Yield Fund
FEDERATED INSURANCE SERIES
______% Federated Quality Bond Fund II ______% Equity Income Fund (Federated) ______% Total Return Fund
FIDELITY VARIABLE INSURANCE ______% Global Equity Fund (JP Morgan)
PRODUCTS FUND VAN ECK WORLDWIDE
______% VIP Equity-Income Portfolio ______% High Income Bond Fund INSURANCE TRUST
(Service Class) (Federated) ______% Worldwide Emerging Markets
Fund
______% VIP Growth Portfolio ______% Multi Sector Bond Fund
(Service Class) (Salomon Brothers) ______% Worldwide Hard Assets Fund
______% VIP High Income Portfolio ______% Select Advisers Small Cap VAN KAMPEN LIFE
(Service Class) Growth Fund (multiple INVESTMENT TRUST
Managers) ______% Morgan Stanley Real Estate
______% VIP Overseas Portfolio Securities Portfolio
(Service Class) ______% Select Advisers Mid Cap Fund
(Multiple Managers) WARBURG PINCUS TRUST
FIDELITY VARIABLE INSURANCE ______% Growth & Income Portfolio
PRODUCTS FUND II ______% Small Cap Value Fund (Dreyfus)
______% VIP II Contrafund Portfolio ______% International Equity Portfolio
(Service Class) ______% Small Company Fund (Multiple
Managers) ______% Post-Venture Capital Portfolio
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND III ______% Strategic Growth Fund (Strong)
______% VIP III Growth Opportunities MVA/GUAR. TERM OPTION (GTO)
Portfolio (Service Class) ______% Strategic Value Fund ______% 3 Year
(Strong/Schafer)
MORGAN STANLEY DEAN WITTER UNIVERSAL ______% 5 Year $1,000 minimum
FUNDS, INC. NEUBERGER BERMAN ADVISERS for each
______% Emerging Markets Debt MANAGEMENT TRUST ______% 7 Year MVA/GTO option.
Portfolio ______% AMT Guardian Portfolio
______% 10 Year
______% AMT Mid-Cap Growth Portfolio
______% AMT Partners Portfolio NATIONWIDE LIFE INS. CO.
______% Fixed Account
</TABLE>
<PAGE> 3
================================================================================
REMARKS
================================================================================
CONTRACT OWNER SIGNATURES
I hereby represent my answers to the above questions to be accurate and complete
and acknowledge that I have received a copy of the current prospectus for this
variable annuity contract.
/ / Yes / / No Do you have any reason to believe the Contract applied for
is to replace existing annuities or insurance?
/ / Please send me a copy of the Statement of Additional Information to
the Prospectus.
STATE IN WHICH APPLICATION WAS SIGNED ____________________ DATE _______________
State
CONTRACT OWNER _________________________ JOINT OWNER ___________________________
Signature Signature
================================================================================
PRODUCER INFORMATION
/ / Yes / / No Do you have any reason to believe the Contract applied for
is to replace existing annuities or insurance?
PRODUCER SIGNATURE __________________________________
Signature
NAME ________________________________ PRODUCER SSN ____________________
FIRM NAME ___________________________ PHONE (_____)____________________
ADDRESS ___________________________
___________________________
___________________________
<TABLE>
<S> <C> <C>
REGULAR MAIL EXPRESS MAIL
- --------------------------------- ------------------------- -----------------------------------------
Nationwide Life Insurance Co. THE BEST OF AMERICA Nationwide Life Insurance Co.
P.O. Box 182008 Service Center Individual Annuity Products, 1-05-P1
Columbus, Ohio 43218-2008 1-800-321-9332 One Nationwide Plaza
Columbus, Ohio 43215-2220
- --------------------------------- ------------------------- -----------------------------------------
</TABLE>
