<PAGE> 1
As filed with the Securities and Exchange Commission.
`33 Act Registration No. 333-12369
---------
`40 Act Registration No. 811-07821
---------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 1
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
PRE-EFFECTIVE AMENDMENT NO. 1
NATIONWIDE DCVA-II
(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
GORDON E. MCCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
================================================================================
The Registrant elects to register an indefinite number of securities in
accordance with Rule 24f-2 under the Investment Company Act of 1940.
Approximate date of proposed public offering: (Upon the effective date of
this Registration Statement)
The Registrant hereby amends the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
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<PAGE> 2
NATIONWIDE DCVA-II
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page..................................................................... 3
Item 2. Definitions.................................................................... 4
Item 3. Synopsis or Highlights......................................................... 14
Item 4. Condensed Financial Information................................................ N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies.......... 15
Item 6. Deductions and Expenses........................................................ 16
Item 7. General Description of Variable Annuity Contracts.............................. 18
Item 8. Annuity Period................................................................. 21
Item 9. Death Benefit.................................................................. 22
Item 10. Purchases and Contract Value................................................... 21
Item 11. Redemptions.................................................................... 21
Item 12. Taxes.......................................................................... 27
Item 13. Legal Proceedings.............................................................. 28
Item 14. Table of Contents of the Statement of Additional Information................... 28
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page..................................................................... 35
Item 16. Table of Contents.............................................................. 35
Item 17. General Information and History................................................ 35
Item 18. Services....................................................................... 35
Item 19. Purchase of Securities Being Offered........................................... 35
Item 20. Underwriters................................................................... 36
Item 21. Calculation of Performance..................................................... 36
Item 22. Annuity Payments............................................................... 39
Item 23. Financial Statements........................................................... 40
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.............................................. 40
Item 25. Directors and Officers of the Depositor........................................ 41
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant..................................................................... 43
Item 27. Number of Contract Owners...................................................... 52
Item 28. Indemnification................................................................ 52
Item 29. Principal Underwriters......................................................... 52
Item 30. Location of Accounts and Records............................................... 54
Item 31. Management Services............................................................ 54
Item 32. Undertakings................................................................... 54
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P. O. Box 16766
One Nationwide Plaza
Columbus, Ohio 43216
1-800-545-4730 (TTY: 1-800-848-0833)
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
ISSUED BY THE NATIONWIDE DCVA-II OF
NATIONWIDE LIFE INSURANCE COMPANY
The Group Flexible Fund Retirement Contracts (the "Contract" or
"Contracts") described in this prospectus are designed for use in connection
with supplemental deferred compensation plans for employees of tax exempt
entities. Such Plans will generally qualify for favorable tax treatment under
Sections 401, 403(b) or 457 of the Internal Revenue Code ("Code"), but may also
include other nonqualified deferred compensation plans. Contracts will be issued
only to fund deferred compensation plans to employers who are exempt from
taxation. The employees generally are not subject to tax until Distributions are
received from the Plan. Purchase Payments made at any time by or on behalf of
any Participant must be at least $20 per month. The assets of Code Section 457
Plans are part of the general assets of the Owner, provided however that the
owner must hold all such plan assets for the exclusive benefit of the Owner and
beneficiaries. Rights and privileges under the Contracts may be exercised by the
Owner to the extent such rights are not specifically reserved in the Plan for
Participants as a group or as individuals. The Owner may not take any action
inconsistent with the rights of the Plan's Participants. The Participants in
such Plans have a contractual claim against the Owner for the benefits promised
by such Plans.
Purchase Payments are allocated to Nationwide DCVA-II (the "Variable
Account"). The Variable Account is a unit investment trust with 41 Sub-Accounts
of unit values, each reflecting investment results of a different management
investment company. Amounts equivalent to the obligations of Nationwide Life
Insurance Company (the "Company") under each Sub-Account will be invested in the
specified management investment company (see "Appendix of Participating
Underlying Mutual Funds").
This prospectus provides you with the basic information you should know
about the Group Flexible Fund Retirement Contracts issued by the Variable
Account before investing. You should read it and keep it for future reference. A
Statement of Additional Information dated _____________ containing further
information about the Contracts and the Variable Account has been filed with the
Securities and Exchange Commission. You can obtain a copy without charge from
the Company by calling the number listed above, or writing P. O. Box 16766, One
Nationwide Plaza, Columbus, Ohio 43216.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED __________________________, IS
INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION APPEARS ON PAGE 26 OF THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS ____________.
1
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<PAGE> 4
GLOSSARY OF TERMS
ACCUMULATION UNIT- A statistical index measuring the net investment results of
each Sub-Account of the Variable Account. It is the unit of measurement used to
determine Contract Value and each Participant Account Value.
ACTUARIAL RISK FEE- A charge made for mortality and expense risk and
administration of the Variable Account. It is computed on a daily basis and is
equal to a maximum annual rate of 1.50% of the average Variable Account Value.
BENEFICIARY- The person named in the application to receive certain benefits
under the Contract upon the death of the designated annuitant. The Beneficiary
can be changed by the Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT BENEFICIARY- The person named on the application to be the alternate
Beneficiary if the Beneficiary is not living at the time of the death of the
designated annuitant.
CONTRACT- The group flexible fund retirement contract issued by the Company to
the Owner under which the Company invests Purchase Payments made by the Owner
and assists the Owner in making Retirement Income Payments at specified dates.
CONTRACT ANNIVERSARY- An anniversary of the date of issue of the Contract.
CONTRACT DATE- The date shown as the Contract Date in the Contract.
CONTRACT MAINTENANCE CHARGE- The maximum Contract Maintenance Charge is $15 per
Participant per year to reimburse the Company for certain administrative
expenses relating to the maintenance of individual Participant records and the
mailing of periodic statements to Participants.
CONTRACT VALUE- The sum of the value of all Variable Account Accumulation Units
attributable to the Contract plus any amount held under the Contract in the
General Account.
CONTRACT YEAR- Each period starting with either (1) the Contract Date or (2) a
Contract Anniversary. The Contract Year ends immediately prior to the next
Contract Anniversary.
DISTRIBUTION- Any payment by the Company of part or all of the Contract Value
under the Contract.
DISTRIBUTION PERIOD- The period during which payments are distributed from a
Participant Account.
GENERAL ACCOUNT- This is an account comprised of all assets of the Company other
than those in any segregated asset account.
GROUP FIXED CONTRACT- The Company's Group Fixed Fund Retirement Contract or
Group Fixed Tax Deferred Annuity Contract.
HOME OFFICE-The main office of the Company located in Columbus, Ohio.
INITIAL TRANSFER AMOUNT- The initial amount transferred by the Owner from
another investment vehicle which is the initial Purchase Payment under the
Contract.
OPTIONAL RETIREMENT INCOME FORMS- The method for making annuity payments.
Several forms are available under the Contract.
OWNER- The employer or other entity to which the Contract is issued.
PARTICIPANT- An eligible employee, member, or other person who is entitled to
benefits under the Plan. Such persons are determined and reported to the Company
by the Owner.
PARTICIPANT ACCOUNT- An account established by the Company for each Participant
in which all financial transactions occurring with respect to a Participant,
under this Contract, other than the purchase and payment of an annuity made from
the Company's General Account, are recorded.
PARTICIPANT ACCOUNT YEAR- For each Participant, the Participant Account Year is
each one year period starting with either the Participant Effective Date or a
Participant Anniversary.
2
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<PAGE> 5
PARTICIPANT ANNIVERSARY- An anniversary of the Participant Effective Date.
PARTICIPANT EFFECTIVE DATE- For each Participant, the Participant Effective Date
is the first date Accumulation Units are credited to the Participant's Account
on behalf of such Participant under the Contract.
PLAN- A retirement plan which receives favorable tax treatment under the
provisions of the Code. The Plan document is referred to in the Contract as the
Plan.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers among the Sub-Accounts.
RETIREMENT COMMENCEMENT DATE- The date upon which Retirement Income Payments
commence.
RETIREMENT INCOME PAYMENTS- Periodic distributions from a Participant Account
made by the Company to the Owner during the Distribution Period.
RETIRED PARTICIPANT- A Participant for whom payments under an Optional
Retirement Income Form are being made.
SUB-ACCOUNT- A separate and distinct division of the Variable Account, to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units are separately maintained.
UNDERLYING MUTUAL FUND- The registered management investment company, specified
in the Contract application, in which the assets of a Sub-Account 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 that
the current net asset value of its Accumulation Units might be materially
affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- Nationwide DCVA-II, a segregated investment account
established by the Company in which amounts equivalent to the Company's
obligations under the Contract are held for all Participants, and for those
Participants during retirement who have annuitized.
3
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GLOSSARY OF TERMS.....................................................................................................2
SUMMARY OF CONTRACT EXPENSES..........................................................................................5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES................................................................................5
SYNOPSIS.............................................................................................................12
CONDENSED FINANCIAL INFORMATION.....................................................................................N/A
NATIONWIDE LIFE INSURANCE COMPANY....................................................................................13
NATIONWIDE DCVA-II...................................................................................................13
Voting Rights...............................................................................................13
PERIODIC REPORTS.....................................................................................................13
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS........................................................................14
Contingent Deferred Sales Charge............................................................................14
Contract Maintenance Charge.................................................................................14
Mortality Risk Charge, Expense Risk And Administration Charge...............................................15
Premium Taxes and Other Expenses............................................................................15
Experience Credits..........................................................................................15
DESCRIPTION OF THE CONTRACTS.........................................................................................16
A. General................................................................................................16
Purpose of the Contracts...............................................................................16
Modification of the Contract...........................................................................16
Contract Rights and Privileges and Assignments.........................................................16
Exchange Privilege.....................................................................................16
Suspension and Termination.............................................................................17
B. Participant Account Values.............................................................................17
Application of Purchase Payments.......................................................................17
Variable Account Accumulation Units....................................................................18
Crediting Accumulation Units...........................................................................18
Allocation of Purchase Payments........................................................................18
Valuation of an Account................................................................................18
C. Redemption of Participant Accounts (Termination).......................................................19
D. Distribution of Participant Accounts (Retirement Period)...............................................19
Retirement Income Payments.............................................................................19
Election of Income Form and Date.......................................................................20
Allocation of Retirement Income........................................................................20
Fixed Dollar Annuity...................................................................................20
Minimum Payment........................................................................................20
Death Benefit Before Retirement........................................................................20
Optional Retirement Income Forms.......................................................................20
Death of Retired Participant...........................................................................21
Withdrawal.............................................................................................21
Frequency of Payment...................................................................................21
Determinations of Payouts Under Options A1 and A2......................................................21
Determinations of Payouts Under Options B1 and B2......................................................22
Determination of Amount of Variable Monthly Payments for the First Year................................22
Determination of Amount of Variable Monthly Payments for the Second
and Subsequent Years...............................................................................22
Alternate Assumed Investment Rate......................................................................22
GENERAL INFORMATION..................................................................................................23
Substitution of Securities..................................................................................23
Performance Advertising.....................................................................................23
Contract Owner Inquiries....................................................................................24
Net Investment Factor.......................................................................................24
Valuation of Assets.........................................................................................25
Federal Tax Status..........................................................................................25
Contracts Issued Under the New York Model Plan..............................................................25
LEGAL PROCEEDINGS....................................................................................................26
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.............................................................26
APPENDIX.............................................................................................................27
</TABLE>
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<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<CAPTION>
PARTICIPANT TRANSACTION EXPENSES
<S> <C>
Maximum Deferred Sales Charge(1) ........................................................... 9%
(as a percentage of Purchase Payments)
CONTRACT MAINTENANCE CHARGE(2) ...................................................................... $15
(per Participant per Participant Anniversary)
MAXIMUM VARIABLE ACCOUNT ANNUAL EXPENSES(3)
(as a percentage of average account value)
Mortality and Expense Risk Fees ............................................................ 0.50%
Administration Charge....................................................................... 1.00%
Total Variable Account Annual Expenses (Actuarial Risk Fee)................................. 1.50%
- -------------
<FN>
1 Imposed only when it is applicable (see "Contingent Deferred Sales Charge").
2 The Contract Maintenance Charge also will be assessed on the date that amounts
held with respect to a Participant are fully withdrawn from the Contract on a
prorated monthly basis (see "Contract Maintenance Charge").
3 The administration and expense risk portion of the Actuarial Risk Fee is
subject to negotiation (see "Mortality Risk Charge, Expense Risk Charge and
Administration Charge").
</TABLE>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AFTER EXPENSE REIMBURSEMENT)
(As a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
---------------- ------------- ---------------- ---------------
Management Fees Other 12B-1 Total Fund
Expenses FEES Annual
Expenses
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 0.62% 0.04% 0.00% 0.66%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
AIM Weingarten Fund - Institutional Class 0.61% 0.09% 0.00% 0.70%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
American Century: Twentieth Century Growth 1.00% 0.00% 0.00% 1.00%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
American Century: Twentieth Century Select 1.00% 0.00% 0.00% 1.00%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
American Century: Twentieth Century Ultra 1.00% 0.00% 0.00% 1.00%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Davis New York Venture Fund, Inc. 0.63% 0.15% 0.14% 0.92%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Dreyfus Cash Management - CLASS A 0.20% 0.00% 0.00% 0.20%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
The Dreyfus Third Century Fund, Inc. 0.75% 0.37% 0.00% 1.12%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
The Evergreen Total Return Fund 0.98% 0.21% 0.00% 1.19%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Federated GNMA Trust-Institutional Shares 0.40% 0.18% 0.00% 0.58%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Federated U.S. Government Securities: 2-5 Years - 0.40% 0.18% 0.00% 0.58%
Institutional Shares
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Fidelity Asset Manager(TM) 0.72% 0.25% 0.00% 0.97%
- ----------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Fidelity Contrafund 0.71% 0.27% 0.00% 0.98%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Fidelity Equity-Income Fund 0.44% 0.24% 0.00% 0.68%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Fidelity Growth & Income Portfolio 0.52% 0.25% 0.00% 0.77%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Fidelity Magellan(R)Fund 0.75% 0.22% 0.00% 0.97%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Fidelity OTC Portfolio 0.51% 0.30% 0.00% 0.81%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Fidelity Puritan Fund 0.52% 0.25% 0.00% 0.77%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
INVESCO Industrial Income Fund, Inc. 0.45% 0.25% 0.25% 0.94%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Janus Fund 0.65% 0.22% 0.00% 0.87%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Janus Twenty Fund 0.67% 0.33% 0.00% 1.00%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
MAS Funds Fixed Income Portfolio 0.38% 0.11% 0.00% 0.49%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
Massachusetts Investors Growth Stock Fund - Class A 0.31% 0.23% 0.29% 0.83%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
MFS(R)Growth Opportunities Fund - Class A 0.43% 0.29% 0.25% 0.97%
-------------------------------------------------------- ---------------- ------------- ---------------- ---------------
MFS(R)High Income Fund - Class A 0.45% 0.34% 0.31% 1.10%
-------------------------------------------------------- --------------- ------------- ---------------- ---------------
</TABLE>
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<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
AFTER EXPENSE REIMBURSEMENT
(CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Management Fees Other 12B-1 Total Fund
Expenses FEES Annual
Expenses
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Nationwide(R) Bond Fund 0.50% 0.21% 0.00% 0.71%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Nationwide(R) Fund 0.50% 0.13% 0.00% 0.63%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Nationwide(R) Growth Fund 0.50% 0.16% 0.00% 0.66%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Nationwide(R) Money Market Fund 0.45% 0.17% 0.00% 0.62%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Neuberger&Berman - Guardian Fund 0.72% 0.12% 0.00% 0.84%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Neuberger&Berman - Manhattan Fund 0.80% 0.22% 0.00% 1.02%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Neuberger&Berman - Partners Fund 0.76% 0.11% 0.00% 0.87%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Putnam Investors Fund - Class A 0.61% 0.13% 0.25% 0.99%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Putnam Voyager Fund - Class A 0.53% 0.29% 0.25% 1.07%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
SEI Index Funds -S&P 500 Index Portfolio 0.19% 0.06% 0.00% 0.25%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Seligman Growth Fund, Inc. - Class A 0.70% 0.25% 0.21% 1.16%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Short-Term Investments Trust-Treasury Portfolio - 0.06% 0.03% 0.00% 0.09%
Institutional Class
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Strong Common Stock Fund, Inc. 1.00% 0.25% 0.00% 1.25%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
T. Rowe Price International Stock Fund(R) 0.69% 0.22% 0.00% 0.91%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Templeton Foreign Fund- Class I 0.63% 0.27% 0.25% 1.15%
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
Templeton Smaller Companies Growth Fund, Inc. - 0.75% 0.36% 0.25% 1.36%
CLASS I
----------------------------------------------------- ------------------ -------------- ---------------- ---------------
</TABLE>
The Mutual Fund expenses shown above are assessed at the Underlying
Mutual Fund level and are not direct charges against Variable Account assets
or reductions from Contract Values. These Underlying Mutual Fund expenses are
taken into consideration in computing each Underlying Mutual Fund's net asset
value, which is the share price used to calculate the Variable Account's unit
value. There are no front-end load fees (sales charges) at the Underlying
Mutual Fund level. The following funds are subject to fee waiver or expense
reimbursement arrangements:
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------
FUND EXPENSES WITHOUT
REIMBURSEMENT OR WAIVER
- ------------------------------------------------------ -----------------------------------------------------
<S> <C>
AIM Constellation Fund - Institutional Class The Fund is currently waiving a portion of its
fees. Had there been no fee waivers during the
year, management fees would have been 0.63% of
average net assets.
- ------------------------------------------------------ -----------------------------------------------------
AIM Weingarten Fund - Institutional Class The Fund is currently waiving a portion of its
fees. Had there been no fee waivers during the
year, management fees would have been 0.63% of
average net assets.
- ------------------------------------------------------ -----------------------------------------------------
Federated GNMA Trust - Institutional Shares The total operating expenses would have been 0.80%
absent the voluntary waiver of a portion of the
shareholder service fee.
- ------------------------------------------------------ -----------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years The total operating expenses would have been 0.79%
- - Institutional Shares absent the voluntary waiver of a portion of the
Shareholder service fee.
- ------------------------------------------------------ -----------------------------------------------------
Fidelity Equity-income Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
including these reductions, the total operating
expenses presented in the table would have been
0.68%.
- ------------------------------------------------------ -----------------------------------------------------
Fidelity Growth & Income Portfolio The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.75%.
- ------------------------------------------------------ -----------------------------------------------------
Fidelity Magellan(R) Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.95%.
- ------------------------------------------------------ -----------------------------------------------------
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
- ------------------------------------------------------ -----------------------------------------------------
<S> <C>
Fidelity OTC Portfolio The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.83%.
- ------------------------------------------------------ -----------------------------------------------------
Fidelity Puritan Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been
0.69%.
- ------------------------------------------------------ -----------------------------------------------------
INVESCO Industrial Income Fund, Inc. The management fee paid by the fund has been
reduced to an annual rate of 0.45% on daily net
assets over $2 billion, and to an annual rate of
0.40% on daily net assets over $4 billion. In the
absence of the voluntary expense limitation, the
fund's "management fee" and "total fund operating
expenses" would have been 0.48% and 0.97% respectively.
- ------------------------------------------------------ -----------------------------------------------------
SEI Index Funds - S&P 500 Index Portfolio The Fund's manager has waived, on a voluntary
basis, a portion of its fee, and the
management/advisory fees shown above reflect said
waiver. Absent such waiver, the
management/advisory fees would be .25%. The
distributor has waived, on a voluntary basis, all
or a portion of its shareholder servicing fee.
Absent such waiver, the shareholder servicing fee
would be .25%. Absent these fee waivers, total
operating expenses would be .56%.
- ------------------------------------------------------ -----------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - The Fund's advisor has currently agreed to
institutional class voluntarily waive a portion of its advisory fee
and/or assume certain expenses of the portfolio.
Absent such waiver, total operating fees would have
been 0.14%.
- ------------------------------------------------------ -----------------------------------------------------
</TABLE>
The information relating to the Underlying Mutual Fund expenses was
provided by the Underlying Mutual Fund and was not independently verified
by the Company.
7
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<PAGE> 10
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
------------------------------------------------
If you surrender your Contract
at the end of the applicable time period
------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------ --------- ---------- ------------------ --------
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 57 93 131 238
- ------------------------------------------------------------ --------- ---------- ------------------ --------
AIM Weingarten Fund - Institutional Class 57 94 133 242
- ------------------------------------------------------------ --------- ---------- ------------------ --------
American Century: Twentieth Century Growth 61 104 149 275
- ------------------------------------------------------------ --------- ---------- ------------------ --------
American Century: Twentieth Century Select 61 104 149 275
- ------------------------------------------------------------ --------- ---------- ------------------ --------
American Century: Twentieth Century Ultra 61 104 149 275
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Davis New York Venture Fund, Inc. 60 100 144 264
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Dreyfus Cash Management - CLASS A 52 78 106 185
- ------------------------------------------------------------ --------- ---------- ------------------ --------
The Dreyfus Third Century Fund, Inc. 62 107 156 288
- ------------------------------------------------------------ --------- ---------- ------------------ --------
The Evergreen Total Return Fund 63 110 159 296
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Federated GNMA Trust-Institutional Shares 56 90 127 229
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Federated U.S. Government Securities Fund: 2-5 Years - 56 89 124 223
Institutional Shares
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Fidelity Asset Manager(TM) 60 103 148 272
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Fidelity Contrafund 60 103 148 272
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Fidelity Equity-Income Fund 57 93 132 240
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Fidelity Growth & Income Portfolio 58 96 137 250
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Fidelity Magellan(R) Fund 60 103 148 272
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Fidelity OTC Portfolio 59 98 139 254
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Fidelity Puritan Fund 64 113 165 306
- ------------------------------------------------------------ --------- ---------- ------------------ --------
INVESCO Industrial Income Fund, Inc. 60 102 146 269
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Janus Fund 60 101 144 265
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Janus Twenty Fund 61 104 150 277
- ------------------------------------------------------------ --------- ---------- ------------------ --------
MAS Funds Fixed Income Portfolio 55 87 122 218
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Massachusetts Investors Growth Stock Fund - Class A 59 98 140 257
- ------------------------------------------------------------ --------- ---------- ------------------ --------
MFS(R) Growth Opportunities Fund - Class A 60 103 148 272
- ------------------------------------------------------------ --------- ---------- ------------------ --------
MFS(R) High Income Fund - Class A 62 107 154 286
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Nationwide(R) Bond Fund 58 94 134 243
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Nationwide(R) Fund 57 92 129 234
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Nationwide(R) Growth Fund 57 93 131 238
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Nationwide(R) Money Market Fund 57 91 129 233
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Neuberger&Berman - Guardian Fund 59 99 141 259
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Neuberger&Berman - Manhattan Fund 61 104 150 277
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Neuberger&Berman - Partners Fund 59 99 142 261
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Putnam Investors Fund - Class A 60 103 149 274
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Putnam Voyager Fund - Class A 61 106 153 283
- ------------------------------------------------------------ --------- ---------- ------------------ --------
SEI Index Funds-S&P 500 Index Portfolio 53 80 108 191
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Seligman Growth Fund, Inc. - Class A 61 104 149 275
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Short-Term Investments Trust - Treasury Portfolio - 59 100 143 262
Institutional Class
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Strong Common Stock Fund, Inc. 63 111 162 301
- ------------------------------------------------------------ --------- ---------- ------------------ --------
T. Rowe Price International Stock Fund(R) 60 101 144 265
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Templeton Foreign Fund - Class I 62 108 157 291
- ------------------------------------------------------------ --------- ---------- ------------------ --------
Templeton Smaller Companies Growth Fund, Inc. - CLASS I 64 115 168 314
- ------------------------------------------------------------ --------- ---------- ------------------ --------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
10 of 88
<PAGE> 11
EXAMPLE CONTINUED
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
--------------------------------------------------
If you do not surrender your Contract
at the end of the applicable time period
--------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- --------------------------------------------------------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 17 53 91 198
- --------------------------------------------------------- ------------ ------------ ---------- -------------
AIM Weingarten Fund - Institutional Class 17 54 93 202
- --------------------------------------------------------- ------------ ------------ ---------- -------------
American Century: Twentieth Century Growth 21 64 109 235
- --------------------------------------------------------- ------------ ------------ ---------- -------------
American Century: Twentieth Century Select 21 64 109 235
- --------------------------------------------------------- ------------ ------------ ---------- -------------
American Century: Twentieth Century Ultra 21 64 109 235
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Davis New York Venture Fund, Inc. 20 60 104 224
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Dreyfus Cash Management - CLASS A 12 38 66 145
- --------------------------------------------------------- ------------ ------------ ---------- -------------
The Dreyfus Third Century Fund, Inc. 22 67 116 248
- --------------------------------------------------------- ------------ ------------ ---------- -------------
The Evergreen Total Return Fund 23 70 119 256
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Federated GNMA Trust-Institutional Shares 16 50 87 189
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Federated U.S. Government Securities Fund: 2-5 Years - 16 49 84 183
Institutional Shares
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Fidelity Asset Manager(TM) 20 63 108 232
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Fidelity Contrafund 20 63 108 232
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Fidelity Equity-Income Fund 17 53 92 200
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Fidelity Growth & Income Portfolio 18 56 97 210
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Fidelity Magellan(R)Fund 20 63 108 232
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Fidelity OTC Portfolio 19 58 99 214
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Fidelity Puritan Fund 24 73 125 266
- --------------------------------------------------------- ------------ ------------ ---------- -------------
INVESCO Industrial Income Fund, Inc. 20 62 106 229
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Janus Fund 20 61 104 225
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Janus Twenty Fund 21 64 110 237
- --------------------------------------------------------- ------------ ------------ ---------- -------------
MAS Funds Fixed Income Portfolio 15 47 82 178
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Massachusetts Investors Growth Stock Fund - Class A 18 58 100 217
- --------------------------------------------------------- ------------ ------------ ---------- -------------
MFS(R)Growth Opportunities Fund - Class A 20 63 108 232
- --------------------------------------------------------- ------------ ------------ ---------- -------------
MFS(R)High Income Fund - Class A 22 67 114 246
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Nationwide(R)Bond Fund 18 54 94 203
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Nationwide(R)Fund 17 52 89 194
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Nationwide(R)Growth Fund 17 53 91 198
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Nationwide(R)Money Market Fund 17 51 89 193
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Neuberger&Berman - Guardian Fund 19 59 101 219
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Neuberger&Berman - Manhattan Fund 21 64 110 237
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Neuberger&Berman - Partners Fund 19 59 102 221
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Putnam Investors Fund - Class A 20 63 109 234
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Putnam Voyager Fund - Class A 21 66 113 243
- --------------------------------------------------------- ------------ ------------ ---------- -------------
SEI Index Funds-S&P 500 Index Portfolio 13 40 68 151
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Seligman Growth Fund, Inc. - Class A 21 64 109 235
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Short-Term Investments Trust - Treasury Portfolio - 19 60 103 222
Institutional Class
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Strong Common Stock Fund, Inc. 23 71 122 261
- --------------------------------------------------------- ------------ ------------ ---------- -------------
T. Rowe Price International Stock Fund(R) 20 61 104 225
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Templeton Foreign Fund - Class I 22 68 117 251
- --------------------------------------------------------- ------------ ------------ ---------- -------------
Templeton Smaller Companies Growth Fund, Inc. - CLASS I 24 75 128 274
- --------------------------------------------------------- ------------ ------------ ---------- -------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
9
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<PAGE> 12
EXAMPLE CONTINUED
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
-------------------------------------------------
If you annuitize your Contract
at the end of the applicable time period
-------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 17 53 91 198
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
AIM Weingarten Fund - Institutional Class 17 54 93 202
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
American Century: Twentieth Century Growth 21 64 109 235
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
American Century: Twentieth Century Select 21 64 109 235
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
American Century: Twentieth Century Ultra 21 64 109 235
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Davis New York Venture Fund, Inc. 20 60 104 224
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Dreyfus Cash Management - CLASS A 17 53 91 198
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
The Dreyfus Third Century Fund, Inc. 17 54 93 202
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
The Evergreen Total Return Fund 20 60 104 224
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Federated GNMA Trust-Institutional Shares 12 38 66 145
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Federated U.S. Government Securities Fund: 2-5 Years - 22 67 116 248
Institutional Shares
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Fidelity Asset Manager(TM) 23 70 119 256
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Fidelity Contrafund 16 50 87 189
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Fidelity Equity-Income Fund 16 49 84 183
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Fidelity Growth & Income Fund 20 63 108 232
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Fidelity Magellan(R)Fund 20 63 108 232
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Fidelity OTC Portfolio 17 53 92 200
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Fidelity Puritan Fund 18 56 97 210
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
INVESCO Industrial Income Fund, Inc. 20 63 108 232
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Janus Fund 19 58 99 214
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Janus Twenty Fund 24 73 125 266
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
MAS Funds Fixed Income Portfolio 20 62 106 229
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Massachusetts Investors Growth Stock Fund - Class A 20 61 104 225
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
MFS(R) Growth Opportunities Fund - Class A 21 64 110 237
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
MFS(R) High Income Fund - Class A 15 47 82 178
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Nationwide(R) Bond Fund 19 58 100 217
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Nationwide(R) Fund 20 63 108 232
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Nationwide(R) Growth Fund 22 67 114 246
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Nationwide(R) Money Market Fund 18 54 94 203
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Neuberger&Berman - Guardian Fund 17 52 89 194
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Neuberger&Berman - Manhattan Fund 17 53 91 198
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Neuberger&Berman - Partner's Fund, Inc. 17 51 89 193
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Putnam Investors Fund - Class A 19 59 101 219
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Putnam Voyager Fund - Class A 21 64 110 237
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
SEI Index Funds-S&P 500 Index Portfolio 19 59 102 221
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Seligman Growth Fund, Inc. - Class A 20 63 109 234
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Short-Term Investments Trust - Treasury Portfolio - 21 66 113 243
Institutional Class
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Strong Common Stock Fund, Inc. 13 40 68 151
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
T. Rowe Price International Stock Fund(R) 21 64 109 235
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Templeton Foreign Fund - Class I 19 60 103 222
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
Templeton Smaller Companies Growth Fund, Inc. - CLASS I 23 71 122 261
- ----------------------------------------------------------- ---------- ------------ ---------- --------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
10
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<PAGE> 13
The purpose of the Summary of Contract Expenses and Example is to
assist the Participant in understanding the various costs and expenses that a
Participant will bear directly or indirectly when investing in the Contract. The
Example reflects expenses of the Variable Account as well as the Underlying
Mutual Fund investment options. For a more detailed explanation of these
expenses, see "Charges and Other Deductions." For more and complete information
regarding expenses paid out of the assets of a particular Underlying Mutual
Fund, see the Underlying Mutual Fund's prospectus. In addition to the expenses
shown above, deductions for premium taxes also may be applicable, depending upon
the jurisdiction in which the Contract is sold (see "Premium Taxes").
11
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<PAGE> 14
SYNOPSIS
The Contracts described in this prospectus are designed for use in
connection with supplemental deferred compensation plans for employees of tax
exempt entities. Such Plans generally will qualify for favorable tax treatment
under Section 401, 403(b), or 457 of the Code, but may also include other
nonqualified deferred compensation plans. Contracts will be issued only to
employers who are exempt from taxation to fund deferred compensation plans. The
employees are generally not subject to federal income tax on amounts deferred
under such plans until Distributions are received from the Plan. Purchase
Payments made at any time by or on behalf of any Participant must be at least
$20 per month.
Purchase Payments under the Contracts are placed in the Variable Account.
The Variable Account is a unit investment trust with 41 Sub-Accounts of unit
values, each reflecting investment results of a different management investment
company. Amounts equivalent to the obligations of the Company under each
Sub-Account will be invested in the specified management investment company (see
"Appendix of Participating Underlying Mutual Funds").
The Company does not deduct a sales charge from Purchase Payments made to
these Contracts. However, if any part of such Contracts is withdrawn, the
Company will, with certain exceptions, deduct from the Contract Value a
Contingent Deferred Sales Charge equal to not more than 9% of the lesser of the
total of all Purchase Payments made prior to the date of the request for
surrender, or the amount surrendered. This charge, when applicable, is imposed
to permit the Company to recover sales expenses which have been advanced by the
Company (see "Contingent Deferred Sales Charge").
A Contract Maintenance Charge may be deducted each year from a Participant
Account (see "Contract Maintenance Charge"). Any applicable premium taxes can be
deducted and will be charged against the Contracts. If any such premium taxes
are payable at the time Purchase Payments are made, the premium tax deduction
will be made from the Contract prior to allocation to any Underlying Mutual Fund
option (see "Premium Taxes".)
A daily deduction is made from the Variable Account in an amount equivalent
to a maximum of 1.50% per year for the Company's contractual promises to accept
the mortality and expense risks and for administration of the Variable Account
(see "Expense Risk Charge, Mortality Risk Charge and Administration Charge"). In
addition, the investment companies whose shares are purchased by the Variable
Account make certain deductions from their assets.
The Contracts provide that the mortality basis, minimum death benefits and
the deductions made from Purchase Payments, Participants' Accounts, the
Contingent Deferred Sales Charges, Contract Maintenance Charges, Expense Risk
Charges, Mortality Risk Charges, and Administration Charges may be decreased by
the Company upon notice to the owner (see "Modification of the Contract").
12
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<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of
the State of Ohio in March, 1929. The Company is a member of the Nationwide
Insurance Enterprise, with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215. The Company offers a complete line of life insurance, including
annuities and accident and health insurance. It is admitted to do business in
all states, the District of Columbia, the Virgin Islands, and Puerto Rico.
THE NATIONWIDE DCVA-II
Nationwide DCVA-II (the "Variable Account") was established by the Company
on November 1, 1995, pursuant to the provisions of Ohio law. The Variable
Account is also registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act of
1940. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
The net Purchase Payments applied to the Variable Account are invested in
shares of the Underlying Mutual Funds available pursuant to the terms of the
Contract. The Variable Account is divided into 41 Sub-Accounts, each of which
represents a separate Underlying Mutual Fund (see "Participating Underlying
Mutual Funds in the Appendix" for a description of the investment objective of
each Underlying Mutual Fund).
Each Sub-Account in the Variable Account is administered and accounted for
as a part of the separate account, but the income, capital gains or losses of
each Sub-Account are credited to or charged against the assets held for that
Sub-Account in accordance with the terms of each Contract, without regard to
other income, capital gains or losses of any other Sub-Account, or arising out
of any other business the Company may conduct. The assets within each
Sub-Account are not chargeable with liabilities arising out of the business
conducted by any other Sub-Account, nor will the Variable Account as a whole be
chargeable with liabilities arising out of any other business the Company may
conduct.
VOTING RIGHTS
The Variable Account will be owner of record of all Underlying Mutual Fund
shares purchased by the respective account until such Underlying Mutual Fund
shares are sold, but all securities will be held for the benefit of the Owners
of the Contracts. In accordance with its view of present applicable law, the
Company will vote the shares of the Underlying Mutual Funds held in the Variable
Account at regular and special meetings of the shareholders of Underlying Mutual
Funds in accordance with instructions received from the Owners. The Company will
mail to each Owner at its last known address all periodic reports and proxy
material of the applicable Underlying Mutual Fund(s), and a form with which to
give voting instructions. Any Underlying Mutual Fund shares as to which no
timely instructions are received will be voted by the Company in the same
proportion as the instructions received from all persons furnishing timely
instructions. An Owner's voting rights may decrease with the cancellation of
Accumulation Units to make annuity payments.
PERIODIC REPORTS
The Company will, semi-annually, provide to each person covered by a
Contract, a Statement of Assets, Liabilities and Contract Owners' Equity and a
Statement of Operations and Changes in Contract Owners' Equity of the Variable
Account. Each Participant and Retired Participant will also be informed,
periodically, of the number of Accumulation Units credited to his or her account
as well as the total account value.
The current prospectus of the Variable Account will be made available to
Participants through the Owner. In addition, the Owner may, under the terms of
the Plan, have an obligation to furnish additional information to Participants,
such as a notice of any changes in the Plan, or tax status of the Plan and the
financial condition of the Owner as it relates to obligations under the Plan.
13
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<PAGE> 16
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, the Contingent Deferred Sales Charge, when it is
applicable, will be used to cover expenses relating to the sale of the
Contracts, including commissions paid to sales personnel, the costs of
preparation of sales literature and other promotional activity. Gross
commissions paid on the sale of these Contracts vary depending upon the Contract
of the general agent performing the marketing and enrollment function in
connection with a particular Contract.
If part or all of the Contract Value representing Participant Accounts that
have been established under the Contract and held in the Variable Account for
less than 16 years is surrendered, a Contingent Deferred Sales Charge will, when
it is applicable, be made by the Company. This charge will not exceed 9% of the
lesser of: (1) the total of all Purchase Payments received on behalf of the
surrendering Participant or the withdrawing Owner prior to the date of the
request for surrender; or (2) the amount surrendered. The cumulative sum of all
such charges, per Participant, will never exceed 9% (or such lesser percentage,
if applicable) of the total Purchase Payments made on behalf of such Participant
during the period of up to 16 years prior to the date on which the surrender is
requested.
When a Contingent Deferred Sales Charge of less than 9% is negotiated and
assessed, the reduced charge will reflect actual variations in expenses, usually
resulting from reduced agent's commissions.
No Contingent Deferred Sales Charge will be imposed on Contract Value that
is paid under:
- any life income payment option;
- Designated Period payment options of 5 or more years for a
Participant who has a minimum of 5 Participant Account Years prior
to the time the benefit payments are to commence;
- a one-sum or periodic payment payable because of a Participant's
death.
CONTRACT MAINTENANCE CHARGE
The Company will assess each Participant Account a maximum of $15 at the
beginning of each Participant Account year for the preceding Participant Account
Year, during both the accumulation and annuity periods, as reimbursement for
certain administrative expenses relating to the maintenance of individual
Participant records and the mailing of periodic statements to Participants. The
Contract Maintenance Charges are designed only to help the Company offset such
administrative expenses, and such charges will not exceed the Company's actual
administration expenses under the Contracts.
The Contract Maintenance Charge is made by canceling a number of
Accumulation Units at the beginning of each Participant Account Year during both
the accumulation and annuity periods, equal in value to the applicable Contract
Maintenance Charge. If a Participant Account includes more than one Sub-Account,
the deduction will be allocated among Sub-Accounts on the basis of relative
values at the time the deduction is made. For those Contracts where the Owner
has so elected, there will be no charge for the transfers among Sub-Accounts.
The Company will assess a Contract Maintenance Charge on the date (other
than a Participant Anniversary) that amounts held in respect of a Participant
are fully withdrawn from the Variable Account. In such case, the amount of the
Contract Maintenance Charge will be 1/12 of the applicable Contract Maintenance
Charge, multiplied by the number of whole or partial calendar months which have
elapsed between the Participant Anniversary (or the Participant Effective Date
during the first Participant Account Year) and the date of full withdrawal.
For those Plans which provide this Contract and certain other investment
options (such as the Company's Group Fixed Fund Retirement Contract), the
Contract Maintenance Charge under this Contract may be reduced so that the total
of the Contract Maintenance Charges and any similar administrative charges
imposed under other investment options available under the Plan shall not exceed
the Contract Maintenance Charge assessed under this Contract. In this event,
such charge will be allocated among Sub-Accounts of the Variable Account and
amounts held in such other investment options available under the Plan on the
basis of the relative values of the Participant's Accounts at the time the
deduction is made. When a Contract Maintenance Charge of less than $15 is
otherwise negotiated and assessed, the reduced charge will reflect actual
variations in administrative expenses incurred by the Company, usually resulting
from an Owner or Plan administrator assuming certain administrative functions
otherwise required to be performed by the Company.
14
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<PAGE> 17
MORTALITY RISK CHARGE, EXPENSE RISK AND ADMINISTRATION CHARGE
The Contracts contain purchase rates applicable at and after retirement.
These purchase rates may be used to determine the Retirement Income Payments to
be made by the Owner, to Participants, in accordance with the terms of the Plan.
However, the Owners have contracted with the Company to provide Retirement
Income Payments.
Under the terms of the Contracts, the Company assumes the risk that: (i)
the actuarial estimate of mortality rates among Retired Participants may prove
erroneous and amounts set aside for retirement income benefits on the basis of
such estimate may prove inadequate; and (ii) deductions for sales and
Administrative Charges may be insufficient to cover the actual cost of these
items.
For charges of the Variable Account, and for the Company's contractual
promise to accept these risks, the Contracts provide for the daily deduction of
an Actuarial Risk Fee during the accumulation and annuity periods (see "Glossary
of Terms"). This charge is calculated on a percentage of assets and is deducted
on each Valuation Date from amounts held in the Variable Account. On an annual
basis, this charge is equivalent to a maximum of 1.50% of the average Variable
Account value (1.00% for the Administration Charge, 0.10% for the Mortality Risk
Charge, and 0.40% for the Expense Risk Charge). There is no necessary
relationship between the amount of Administrative charge iimposed on a given
Contract and the amount of expenses that may be attributable to that Contract.
The Mortality Risk portion of said Actuarial Risk Fee is to compensate
the Company for its guarantee to provide Retirement Income Payments pursuant to
the terms of the Contract, regardless of the duration of the Participant's life,
as well as for the Company's guarantee to provide the death benefit in the event
a Participant should die prior to the Retirement Commencement Date. Because
charges cannot be increased during the duration of the Contract, the purpose of
the Expense Risk portion of the Actuarial Risk Fee is to compensate the Company
in the event such charges are insufficient to cover the actual costs. If the
Actuarial Risk Fee is insufficient to cover the actual cost of the mortality
risk, expense risk, the administration or Contract maintenance, the loss will be
borne by the Company. Conversely, if the Actuarial Risk Fee proves more than
sufficient to cover such expenses, the excess will be a profit to the Company.
The Administration and the Expense Risk portions of the Actuarial Risk
Fee are subject to negotiation and as such, the Actuarial Risk Fee may vary from
one plan to the next reflecting the unique characteristics of different plans
when considered as a whole. In determining the level of such charge, the Company
may consider factors which may reduce expenses of the Plan and which might
include, but are not limited to, the size of the Plan, the number of eligible
employees, the number of Plan Participants, demographics of Plan Participants,
general economic conditions, and any other factors which the Company deems
relevant. This Contract design allows the Company maximum flexibility, within
the limitations imposed by law, to "custom design" a charge structure for an
Owner.
PREMIUM TAXES AND OTHER EXPENSES
The Company may charge against Purchase Payments or the Contract Value the
amount of any premium taxes levied by a state or any other governmental entity
upon annuity considerations received by the Company. Premium tax rates currently
in effect in certain states range from 0% to 3.5%. The Company is currently not
deducting such taxes but reserves the right to do so when such taxes are
incurred. Purchase Payments may be reduced or Accumulation Units canceled to
provide for premium taxes assessed.
There are deductions and expenses paid out of the assets of the Underlying
Mutual Funds (see "Underlying Mutual Fund Annual Expenses") that are more fully
described in the Prospectus for the Underlying Mutual Funds.
EXPERIENCE CREDITS
The Contracts described herein may be participating or non-participating,
except for Contracts issued in New York. A participating Contract provides the
right to participate in the distribution of surplus of the Company. In the event
that Contract Maintenance Charges and Actuarial Risk Fees collected under this
Contract accrue to the Company in excess of an amount deemed necessary at the
sole discretion of the Company's Board of Directors, such excess may be
allocated to the Contract by purchasing additional Accumulation Units and
crediting such additional units of the Participant Accounts. There have not been
any Experience Credits to date. The Company cannot offer any assurance that
there will be Experience Credits in the future.
15
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<PAGE> 18
DESCRIPTION OF THE CONTRACTS
A. GENERAL
PURPOSE OF THE CONTRACTS
The Contracts described in this prospectus are Group Flexible Fund
Retirement Contracts designed to fund certain deferred compensation plans
generally established under either Section 401, 403(b) or 457, of the Code
(although they may include certain other nonqualified deferred compensation
plans) for employees of states and their political subdivisions thereof and
certain other organizations exempt from taxation. A single group Contract
is issued to the Owner, covering all present and future participating
employees. The Company will issue a certificate to the Owner for delivery
to each Retired Participant or other person for whom an Optional Retirement
Income Form is purchased, setting forth in substance the benefits to which
such person is entitled. In addition, if any applicable law requires, the
Company will issue a descriptive Certificate to the Owner for delivery to
any such person required by law to receive such Certificate, setting forth
in substance the benefits to which such person is entitled. For purposes of
determining benefits payable under the Plan, an individual accumulation
account is established for each Participant. The frequency of Purchase
Payments is normally monthly but can be adjusted to fit the payroll
practices of the Owner. Purchase Payments made at any time by or on behalf
of any Participant must be at least $20 per month.
The basic objectives of the Contracts are to provide each Participant
with an initial Retirement Income Payment, which will tend to reflect the
changes which have occurred in the cost of living during pre-retirement
years (without the necessity of increased Purchase Payments to keep pace
with any increase in the cost of living which might occur during those
years), and to provide subsequent Retirement Income Payments which will
tend to vary with the cost of living changes during his retired lifetime.
The Company seeks to accomplish these objectives by applying purchase rates
contained in the Contract to the amounts accumulated through investment in
Underlying Mutual Funds. Notwithstanding the foregoing, there is no
assurance that these objectives will be attained. Historically, the value
of a diversified portfolio of common stocks held for an extended period of
time has tended to rise during periods of inflation. There has, however,
been no exact correlation, and for some periods, the prices of securities
have declined while the cost of living was rising.
MODIFICATION OF THE CONTRACT
Contract provisions with respect to the mortality basis, minimum death
benefits, and the deductions made from Purchase Payments, Participant
Accounts, Contingent Deferred Sales Charges, if applicable, Contract
Maintenance Charges and Actuarial Risk Fees may be decreased upon notice to
the owner.
Other than as set forth above, the Company may modify the Contract at
any time without consent of the Owner or Participants. No such modification
shall be retroactive or affect Retired Participants in any manner without
their written consent, unless such modification is considered necessary to
obtain the benefit of federal or state statutes or regulations or to
maintain qualification of the Plan.
CONTRACT RIGHTS AND PRIVILEGES AND ASSIGNMENTS
The Contract belongs to the Owner, provided however that under Code
Section 457 Plans, the Owner must hold the Contract for the exclusive
benefit of the Plan's Participants and Beneficiaries. All contractual
rights and privileges may be exercised by the Owner, subject to any rights
specifically reserved in the Plan for Participants as a group or as
individuals. With respect to 457 Plans, the Owner may not take any action
inconsistent with the rights of such 457 Plan's Participants. The Contract
may not be assigned.
EXCHANGE PRIVILEGE
The Company will permit the Owner or the Participant, if the Plan so
provides, to exchange amounts among the Sub-Accounts as frequently as
permitted by the Plan, subject to the limits and rules set by each
Underlying Mutual Fund. For those Contracts where the Owner has elected an
exchange privilege, there will be no charge for exchanges among the
Sub-Accounts.
The Company will also permit the Participant to utilize the Telephone
Exchange Privilege, for exchanging amounts among Sub-Accounts, if forms are
executed by the Owner and Participant agreeing with certain restrictions
applicable to such privilege. Telephone exchange requests must be received
by the Company prior to the close of the New York Stock Exchange in order
to receive that day's closing Sub-
16
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<PAGE> 19
Account price. A telephone exchange request may not be revoked once
instructions have been recorded and accepted. The Company will employ
reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include any or all of the
following, or such other procedures as the Company may, from time to time,
deem reasonable: requesting identifying information, such as name, contract
number, Social Security Number, and/or personal identification number; tape
recording all telephone transactions; and providing written confirmation
thereof to the Owner or Participant and any agent of record, at the last
address of record. Failure to follow reasonable procedures may result in
the Company's liability for any losses due to unauthorized or fraudulent
telephone transfers. However, any losses incurred pursuant to actions taken
by the Company in reliance on telephone instructions reasonably believed to
be genuine shall be borne by the Participant. If the Participant is unable
to execute an exchange request by telephone (for example, during times of
unusual market activity), the Participant might consider placing the
exchange order by mail. The Company may determine to withdraw the Telephone
Exchange Privilege, upon 30 days written notice to Owners and Participants.
On the date the Company receives an exchange request in good order,
which includes all of the information necessary for processing the request,
the Company will transfer the amount to be converted. Such transfers will
be based on the Accumulation Unit Values of the affected Sub-Accounts if
received at the Company's Home Office prior to the close of the New York
Stock Exchange on a day on which the New York Stock Exchange is open for
business. If the exchange request is received after the close of the New
York Stock Exchange on any day, or on a day the New York Stock Exchange is
closed for business, the transfer will be based on the next business day on
which the New York Stock Exchange is open.
For those Plans which provide this Contract and the Company's Group
Fixed Fund Retirement Contract, the Owner, or the Participant if the Plan
so provides, may exchange Accumulation Units between any Sub-Account of the
Variable Account and the Group Fixed Fund Retirement Contract. Exchanges
from the deposit fund to any Sub-Account of the Variable Account will be
subject to the limitations of the Group Fixed Fund Retirement Contract.
Exchanges will be effected when received in good order by the Company at
its home office.
SUSPENSION AND TERMINATION
The Contract may be suspended at the option of the Company on written
notice to the Owner if: (a) the Owner has failed to remit to the Company
any Purchase Payment specified in the Plan; or (b) if the Company does not
accept an amendment to the Plan, filed with the Company by the Owner, which
in the Company's opinion would adversely affect its administrative
procedures or financial experience, or both, with respect to the Contract.
The Owner may suspend the Contract upon 90 days written notice to the
Company. Suspension of the Contract will become effective as of the
ninety-first (91st) day following receipt of written notice by the Company.
Suspension of the Contract shall mean that no further Purchase Payments
will be accepted by the Company except by mutual consent, and all other
terms of the Contract shall continue to apply. After suspension of the
Contract has become effective, the Owner may, upon 30 days written notice,
terminate the Contract. Upon termination of the Contract, the Company will
pay to the Owner the value of the Contract, subject to applicable charges,
in accordance with the terms of the Contract (see "Redemption of
Participant Accounts (Termination)").
B. PARTICIPANT ACCOUNT VALUES
APPLICATION OF PURCHASE PAYMENTS
The Company shall receive Purchase Payments from the Owner in
accordance with the requirements of the Plan. Net Purchase Payments
received on behalf of Participants will be applied by the Company to
purchase Accumulation Units of Sub-Accounts in the Variable Account in
accordance with the instructions of the Owner. Purchase Payments made at
any time by or on behalf of each Participant must be at least $20 per
month. Purchase Payments must be no less than monthly, unless agreed to by
the Company.
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An initial Purchase Payment will be priced not later than 2 business
days after receipt of an order to purchase, if the application of the
Participant and all information necessary for processing the purchase order
are complete upon receipt by the Company. The Company may retain the
Purchase Payment for up to 5 business days while attempting to complete an
incomplete application. If the application cannot be made complete within 5
business days, the Owner will be informed of the reasons for the delay and
the Purchase Payment will be returned immediately unless the Owner consents
to the Company retaining the Purchase Payment until the application of the
Participant is made complete. Upon completion of such incomplete
application, the Purchase Payment will be priced within 2 business days.
Purchase Payments will not be priced on days when the New York Stock
Exchange is not open for business.
Under specific conditions, when authorized by state insurance law, the
Company may credit up to 8% of the Initial Transfer Amount into this
Contract. This credit will reimburse for any exit penalty associated with
the other investment vehicle provider. The Company will recover said credit
by reducing servicing agent or broker compensation and through increased
Administration Charges.
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account was established
at $1.00 as of the date Underlying Mutual Fund shares were available for
purchase for that Sub-Account. The value of Accumulation Units for any
Sub-Account for any subsequent business day is determined by multiplying
the value for the preceding business day by the Net Investment Factor for
that Sub-Account for the period since that day (See the section entitled
"Net Investment Factor"). A business day is any day on which the New York
Stock Exchange is open for trading or any other day during which there is a
sufficient degree of trading of the Underlying Mutual Fund shares that the
current net asset value of their Accumulation Units might be materially
affected. Accumulation Units are calculated on a daily basis.
CREDITING ACCUMULATION UNITS
When a Purchase Payment is received by the Company, the net Purchase
Payment for each Sub-Account is applied separately to provide Accumulation
Units (calculated daily) which are credited to a Participant Account in
accordance with the instructions of the Owner. The number of Accumulation
Units credited to each Participant Account for each Sub-Account is
determined by dividing the net Purchase Payment allocated to that
Sub-Account for that Participant by the value of the Accumulation Unit for
that Sub-Account next computed following receipt of the Purchase Payment by
the Company. The net Purchase Payment for each Participant is the total
Purchase Payment for that Participant less any taxes then payable.
ALLOCATION OF PURCHASE PAYMENTS
The Owner or Participant must specify the proportion of the Purchase
Payments to be applied to provide benefits under any Sub-Account of the
Variable Account. The Company will permit the Owner, or the Participant if
the Plan so permits, to change the allocation percentages among
Sub-Accounts for subsequent Purchase Payments, provided that no change may
be made which would result in an amount less than 1% of the payment being
allocated to any Sub-Account for any Participant. The Company will permit
such allocation changes as frequently as permitted by the Plan. A change in
allocation percentages will not affect Accumulation Units of any
Sub-Account resulting from Purchase Payments made before the change.
VALUATION OF AN ACCOUNT
The sum of the value of all Accumulation Units credited to the
Participant Account in respect of the Participant is the Participant
Account Value. Purchase Payments are allocated among the Sub-Accounts of
the Variable Account in accordance with the instructions of the Owner.
The value of a Participant's Account on any day can be determined by
multiplying the total number of Accumulation Units credited to the account
for each Sub-Account by the current Accumulation Unit Value for that
Sub-Account in respect of the Participant. Each Participant (or the Owner)
will be advised periodically of the number of Accumulation Units credited
to his or her account for each Sub-Account, the current Accumulation Unit
Values, and the total value of his or her account. Such reports to
Participants are
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for informational purposes only and should not be interpreted to mean that
a Participant has any rights with respect to his or her account beyond that
provided by the Owner in accordance with the terms of the Plan.
The Participant and Owner should review the information in these
reports carefully. All errors or corrections must be reported to the
Company immediately to assure proper crediting to the Contract and
appropriate Sub-Account. The Company will assume all transactions are
accurate unless the Participant or the Owner notifies the Company otherwise
within 30 days after receipt of the report.
The principal underwriter and distributor of the Contracts is
Nationwide Advisory Services, Inc. ("NAS"), One Nationwide Plaza,
Columbus, Ohio 43215.
C. REDEMPTION OF PARTICIPANT ACCOUNTS (TERMINATION)
The Owner's right to redeem (terminate) Participant Accounts, either
fully or partially, will be governed by the terms of the Plan which the
Contract is issued to fund. It should be recognized that the value of the
investment on redemption can be more or less than its cost. All such
payments will be made by the Company to the Owner, after the assessment of
any applicable Contingent Deferred Sales Charge. It is the Owner's
obligation to distribute such payments to a Participant. The Company may
undertake the obligation on behalf of the Owner to distribute such
payments, less the Contingent Deferred Sales Charge, if any, directly to a
Participant by agreement with the Owner. To the extent permitted by the
Plan, a Participant Account may be redeemed fully or partially at any time
prior to the date Retirement Income Payments commence for the Participant
under either Option B1 or B2, subject to the Contingent Deferred Sales
Charge. No partial redemption will directly affect future requirements to
make Purchase Payments. If the Contract is terminated by the Owner, all
Participant Accounts in the Variable Account will be redeemed to the extent
permitted by the Plan.
A request for a partial redemption of a Participant Account containing
more than one Sub-Account of Accumulation Units must specify the allocation
of the partial redemption among the Sub-Accounts of Accumulation Units.
However, if no such direction is contained in the request for a redemption,
the Company may pro-rate the redemption among the applicable Sub-Accounts
of Accumulation Units. Upon receipt at the Company's home office of a
written request for a full or partial redemption of a Participant Account,
the Company will determine the value of the number of Accumulation Units
redeemed, less any applicable Contingent Deferred Sales Charge, at the
Accumulation Unit Value next computed following receipt of such written
request by the Company. Payment of any such amount will be made to the
Owner within 7 days of the date the request is received by the Company.
Payment of redemption values may be suspended when redemption of the
Underlying Mutual Fund shares is suspended (i) during any period in which
the New York Stock Exchange is closed, or (ii) in the event that the
Securities and Exchange Commission may by order direct for the protection
of Owners or Participants. Instead of a lump sum Distribution of a full or
partial redemption, the Owner, or Participant if permitted by the Plan, may
elect to have that amount paid out in installments under Option A1 or A2,
subject to the minimums applicable to these options.
D. DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT PERIOD)
RETIREMENT INCOME PAYMENTS
The period during which a Participant Account is paid out in periodic
installments is known as the Distribution Period. Because periodic
Distributions will normally be made after the Participant retires, the
Distribution Period is also called the retirement period. All such periodic
Distributions will be made by the Company to the Owner. It is the Owner's
obligation to pay such amounts to a Participant. The Company may undertake
the obligation on behalf of the Owner to pay such amounts directly to a
Participant by agreement with the Owner. Retirement Income Payments under
Options B1 and B2 are determined on the basis of: (i) the mortality tables
specified in the Contract; (ii) the adjusted age of the Retired
Participants; (iii) the type of Retirement Income Payment option(s)
selected; and (iv) in the case of variable payments, the investment
performance of the specific Sub-Accounts elected. While the Company may be
obligated to make variable Retirement Income Payments under the Contract,
the amount of each such payment is not guaranteed. The dollar amount of
variable payments will reflect investment gains and losses, and investment
income of the Sub-Accounts on which they are based, but they will not be
affected by adverse mortality experience or by an increase in the Company's
expenses above the amount provided for in the Contracts.
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ELECTION OF INCOME FORM AND DATE
The Contracts provide for Retirement Income Payments to begin on the
date and under the retirement options elected in accordance with the Plan.
At least one month prior to a Participant's Retirement Commencement Date
(see "Glossary of Terms"), the Contract Owner may by written election to
the Company at its home office, elect any one of the retirement income
options described in the "Optional Retirement Income Forms" section. The
Plan may restrict changes in election of retirement income options.
ALLOCATION OF RETIREMENT INCOME
At retirement, Accumulation Units in a Participant's Account may be
used to purchase a Fixed Dollar Annuity for the Participant. For
Participants electing Options A1 or A2 as described in the "Optional
Retirement Income Forms" section, Accumulation Units in a Participant's
Account of any Sub-Account in the Variable Account will be used to provide
variable Retirement Income Payments as described further in this
prospectus.
FIXED DOLLAR ANNUITY
A Fixed Dollar Annuity is an annuity with payments which are guaranteed
as to dollar amount during the retirement period. The first fixed dollar
payment will be determined by applying the General Account Contract Value
to the applicable Annuity Table in accordance with the Optional Retirement
Income Form elected. This will be done at the retirement date. Fixed Dollar
Annuity payments after the first will not be less than the First Fixed
Dollar Annuity payment. The availability of Fixed Dollar Annuity Contracts
under a particular Plan is subject to the election of the Owner.
MINIMUM PAYMENT
If the present value of the Participant's accrued benefit at the time
of retirement is less than $3,500, the Company shall have the right to make
a lump sum Distribution to such Retired Participant.
DEATH BENEFIT BEFORE RETIREMENT
In the event a Participant dies before his or her retirement income
commences, a death benefit equal to the value of such Participant Account,
on the date due proof of death is received in writing by the Company, will
be paid as provided by the Plan. If the Plan so provides, a Beneficiary may
elect either to receive the value in a lump sum or to apply it under any of
the Optional Retirement Income Forms contained in this Contract, (subject
to the minimums applicable to such optional forms). Monthly payments due
under such options may be fixed, variable, or a combination of fixed and
variable.
OPTIONAL RETIREMENT INCOME FORMS
The availability of the following Optional Retirement Income Forms is
subject to the election of the Owner.
OPTION A1-Payments for a Designated Period. Payments will be
made monthly for any specified number of years not to exceed
30. The amount of each variable payment will be determined by
multiplying (a) by (b) where (a) is the Accumulation Unit
Value for the date the payment is made and (b) is the number
of Accumulation Units applied under this option, divided by
the number of payments selected. Exchanges between the
investment options are permitted subject to limitations
outlined in the Company's Group Fixed Fund Retirement
Contract. A period certain payment period of less than 5 years
for a Participant who has less than a minimum of 5 Participant
Account Years would result in imposition of the applicable
Contingent Deferred Sales Charge.
OPTION A2-Payments of a Designated Amount. Payments will be
made monthly in equal installments until the amount applied,
adjusted each Valuation Date for investment results, is
exhausted. The final installment will be the sum remaining
with the Company. Payments under this option which result in a
payment period of less than 5 years for a Participant who has
less
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than 5 Participant Account Years would result in imposition of
the applicable Contingent Deferred Sales Charge.
OPTION B1-Life Income with Payment Certain. Payments will be
made monthly during the lifetime of an individual. A period
certain of 60, 120, 180, 240, 300 or 360 months may be chosen.
If the participant dies prior to the end of such period
certain, payments will continue to the designated Beneficiary
for the remainder of the selected period certain.
OPTION B2-Joint and Survivor Life Income. Payments will be
made monthly during the joint lifetime of a Participant and a
designated Beneficiary. Upon the Participant's death, periodic
payments will be made in percentages of 50%, 66 2/3%, 75% or
100% (as elected by the Participant) of the periodic payments
payable to the Participant, and will be continued to the
designated Beneficiary, if living. Payments will continue to
be made as long as either is living. Payments will stop with
the last payment made prior to the death of the designated
Beneficiary. In the event that any payments are made
thereafter, such payments must be reimbursed to nationwide. If
the designated Beneficiary predeceases the Participant, the
payments will continue at 100% to the Participant. These
payments will stop with the last payment made prior to the
death of the Participant. In the event that any payments are
made thereafter, such payments must be reimbursed to
nationwide.
OTHER FORMS AND BENEFIT PAYMENTS- With the consent of the
Company, the amount due on Distribution may be applied on any
other mutually agreeable basis.
Exchanges processed while Participants are receiving payments under
Option A1 may change the number of Accumulation Units remaining. In this
event, the payment amount must be recalculated.
DEATH OF RETIRED PARTICIPANT
If any Retired Participant dies while receiving payments, any death
benefit payable will be determined in accordance with the retirement income
form elected. Calculation of the present value of any remaining payments
certain for purposes of making a lump sum payment will be based on the same
assumed investment rate used by the Company in determining the payments
certain prior to the death of the Retired Participant.
WITHDRAWAL
If permitted by the Plan, any amount remaining under Option A1 or A2
may be withdrawn, or if that amount is at least $5,000, it may be applied
under either Option B1 or B2, subject to the minimum payment requirements
described previously. Unless prohibited by the Plan, a Beneficiary
receiving payments certain under Option B1 after the death of a Retired
Participant may elect at any time to receive the present value at the
current dollar amount of the remaining number of payments certain in a
single payment, calculated on the basis of the assumed investment rate used
in computing the amount of the previous payments.
FREQUENCY OF PAYMENT
At the election of the Retired Participant, and with the consent of the
Owner, payments made under any option may be made annually, semi-annually,
or quarterly rather than monthly. Any change in frequency of payments must
be on the anniversary of the commencement of Retirement Income Payments.
DETERMINATION OF PAYMENTS UNDER OPTIONS A1 AND A2
Monthly payments under Options A1 and A2 will be determined in the
manner set forth in the description of the options. As each payment is made
under either of these options, a number of Accumulation Units equal in
value to the payment will be canceled.
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DETERMINATION OF PAYMENTS UNDER OPTIONS B1 AND B2
Variable monthly payments under Options B1 and B2 will be determined
annually and will remain level throughout the year. Each year, as of the
anniversary of the commencement of Retirement Income Payments, a new
variable monthly payment will be determined and that new payment will
remain level for that year. An adjusted age is used to determine the amount
of monthly payment for each year. Such adjusted age may not be the same as
the actual age of the Retired Participant.
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR THE FIRST YEAR
In determining the amount of Retirement Income Payments under Options
B1 and B2, the value held on behalf of a Participant is determined by
multiplying the number of Accumulation Units in each Sub-Account for that
account by the Accumulation Unit value for that Sub-Account on the last
business day of the second calendar week immediately preceding the date on
which the first payment is due.
The first year variable monthly payment for each Sub-Account is
determined by dividing the value of the Accumulation Units of that
Sub-Account in the Participant Account by the amount required to provide $1
per month (the purchase rate).
Once the first year's variable monthly payment amount has been
determined for a Participant, the Company will deduct the annual premium
from the Participant Account. This deduction is made by canceling a number
of Accumulation Units in the Participant Account equal in value to the
annual premium. The allocation of the annual premium between Sub-Accounts
will be in such relationship as the monthly payments from each Sub-Accounts
have to each other.
The annual premium is calculated so that if there are no partial
redemption's (and therefore no Underlying Mutual Fund dividends have been
taken in cash) the payee will receive level annual payments if the net
investment factor, on an annual basis, is equal to the Assumed Investment
Rate plus an amount equal to the annual Contract Maintenance Charge.
Payments for subsequent years will be smaller than, equal to or greater
than the payments received during the initial year, depending on whether
the actual net investment result on an annual basis of a Sub-Account is
smaller than, equal to or greater than the Assumed Investment Rate.
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR THE SECOND AND
SUBSEQUENT YEARS
As of the first anniversary of the commencement of Retirement Income
Payments, the second year variable monthly payments will be determined in
exactly the same manner as for the first year, using the purchase rates in
the Contract for the Retired Participant's age as then determined under the
terms of the Contract. As in the first year, an annual premium will be
deducted and transferred to the General Account from which Account the
Company will make the Retirement Income Payments. Subsequent annual
determinations will be made in the same manner.
Upon the death of any Retired Participant, the Participant Account will
be reduced by the number of Accumulation Units not required to provide
further payments during the remainder of a period certain, if any, or to a
contingent Retired Participant. Any Accumulation Units so canceled will
either remain in the Variable Account or be transferred to the Company's
General Account, depending on the Company's obligation.
ALTERNATE ASSUMED INVESTMENT RATE
The Contracts include purchase rates based on a 3.5% rate per annum. If
not prohibited by the laws and regulations of the states in which this
Contract is issued, an Owner may elect on the Contract Date to have all
variable benefits payable for all Participants determined on an Assumed
Investment Rate of 5% per annum. The Assumed Investment Rate basis in the
Contract is used merely to determine each year's monthly payment from
investment experience of any of the Sub-Accounts. The choice of the Assumed
Investment Rate affects the pattern of Retirement Income Payments. A higher
Assumed Investment Rate will produce a higher initial payment, but a more
slowly rising Sub-Account of subsequent payments (or a more rapidly falling
Sub-Account of subsequent payments) than a lower Assumed Investment Rate.
Although a higher initial payment would be received under a higher Assumed
Investment Rate, there is a point in time after which payments under a
lower Assumed Investment Rate would be greater, assuming payment continues
after that point in time.
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The objective of a variable retirement contract is to provide level
payments during periods when the economy is relatively stable and to
reflect as increased payments only the excess of investment results flowing
from inflation or an increase in productivity. The achievement of this
objective will depend in part upon the validity of the assumption that the
net investment result, on an annual basis, of a Sub-Account equals the
Assumed Investment Rate during periods of stable prices.
GENERAL INFORMATION
SUBSTITUTION OF SECURITIES
If the shares of any Underlying Mutual Fund should no longer be
available for investment by the Variable Account or, if in the judgment of
the Company's management, further investment in such Underlying Mutual Fund
shares should become 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. No substitution of
securities in any Sub-Accounts may take place without prior approval of the
Securities and Exchange Commission, and under such requirements as it may
impose.
PERFORMANCE ADVERTISING
The Company may from time to time advertise several types of historical
performance for the Sub-Accounts of the Variable Account. A "yield" and
"effective yield" may be advertised for the Nationwide Money Market Fund
Sub-Account, the Dreyfus Cash Management - Class A Fund Sub-Account and the
Nationwide Separate Account Trust Money Market Fund Sub-Account. "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 Sub-Account units.
Yield is an annualized figure, which means that it is assumed that the
Sub-Account generates the same level of net income each week over a 52-week
period. The "effective yield" is calculated similarly but includes the
effect of assumed compounding calculated under rules prescribed by the
Securities and Exchange Commission. The effective yield will be slightly
higher than yield due to this compounding effect.
The Company may also advertise for the Sub-Account's standardized
"average annual total return", calculated in a manner prescribed by the
Securities and Exchange Commission, and non-standardized "total return."
"Average annual total return" will show the percentage rate of return of a
hypothetical initial investment of $1,000 for rolling calendar quarters and
will cover, at least, the most recent one, five and ten year periods, or
for a period from inception to date if the Underlying Mutual Fund held in
the Sub-Account has not been in existence for one of the prescribed
periods. This calculation reflects the deduction of all applicable charges
made to the Contracts except for premium taxes, which may be imposed by
certain states. Non-standardized "total return" will be calculated in a
similar manner as will average annual total return except total return will
not reflect the deduction of any applicable Contract Maintenance Charge or
Contingent Deferred Sales Charge, which, if reflected, would decrease the
level of performance shown.
The Company may also from time to time advertise the performance of the
Sub-Accounts of the Variable Account relative to the performance of other
variable annuity sub-accounts or mutual funds with similar or different
objectives, or the investment industry as a whole.
The Sub-Accounts of the Variable Account may also be compared to
certain market indexes, which may include, but are not limited to: S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index;
Shearson/Lehman Long-Term Government/Corporate Bond Index; Donoghue Money
Fund Average; U.S. Treasury Note Index; and Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent
tracking services and publications of general interest including, but not
limited to: Lipper Analytical Services, Inc., CDA/Wiesenberger,
Morningstar, Donoghue's, magazines such as MONEY, FORBES, KIPLINGER'S
PERSONAL FINANCE MAGAZINE, FINANCIAL WORLD, CONSUMER Reports, BUSINESS
WEEK, TIME, NEWSWEEK, U.S. NEWS AND WORLD REPORT, NATIONAL UNDERWRITER;
rating services such as LIMRA, Value, Best's Agent Guide, Western Annuity
Guide, Comparative Annuity Reports; and other publications such as the WALL
STREET JOURNAL, BARRON'S, INVESTOR'S DAILY, and Standard & Poor's OUTLOOK.
In addition, Variable Annuity Research & Data Service (The VARDS
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Report) is an independent rating service that ranks over 500 variable
annuity funds based upon total return performance. These rating services
and publications rank the performance of the Underlying Mutual Funds
against all mutual funds over specified periods and against mutual funds in
specified categories. The rankings may or may not include the effects of
sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company.
The purpose of these ratings is to reflect the financial strength or
claims-paying ability of the Company. The ratings are not intended to
reflect the investment experience or financial strength of the Variable
Account. The Company may advertise these ratings from time to time. In
addition, the Company may include in certain advertisements, endorsements
in the form of a list of organizations, individuals or other parties which
recommend the Company or the Contract. Furthermore, the Company may
occasionally include in advertisements comparisons of currently taxable and
tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic
conditions.
ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE
COMPANY IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR
GUARANTEE FUTURE RESULTS. THE OWNER'S OR PARTICIPANT'S ACCOUNT VALUE AT
REDEMPTION MAY BE MORE OR LESS THAN ORIGINAL COST.
The Statement of Additional Information contains more detailed
information about the performance calculations, including actual examples
for each type of performance advertised.
CONTRACT OWNER INQUIRIES
Owner and Participant inquiries may be directed to Nationwide Life
Insurance Company by writing P.O. Box 16766, One Nationwide Plaza,
Columbus, Ohio 43216, or calling 1-800-545-4730 (TTY: 1-800-848-0833).
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) 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
(2) 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,
plus or minus
(3) a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the investment
operations of the Sub-Account.
(b) is the net of:
(1) the net asset value per share of the Underlying Mutual Fund held
in the Sub-Account determined as of the end of the immediately
preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved for
in the immediately preceding Valuation Period.
(c)is a factor representing the daily Actuarial Risk Fee deducted from the
Variable Account. Such factor is equal to a maximum annual rate of
1.50% of the daily net asset value of the Variable Account.
For Underlying Mutual Funds that credit dividends on a daily basis and
pay such dividends once each month or quarter, (such as money market funds
and certain bond funds), the Net Investment Factor allows for the monthly
or quarterly reinvestment of said daily dividends.
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The Net Investment Factor may be greater or less than one; therefore,
the value of an Accumulation Unit may increase or decrease. It should be
noted that changes in the Net Investment Factor may not be directly
proportional to changes in the net asset value of Underlying Mutual Fund
shares, because of the deduction for the Actuarial Risk Fee and the effect
of the various purchase and sale transactions on any particular day.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be
purchased and valued at their net asset value (daily bid price exclusive of
any sales charges). An Underlying Mutual Fund's net asset value per share
is determined by dividing the value of the total assets of the Underlying
Mutual Fund, less liabilities, by the number of shares outstanding, with no
charge for sales expense.
FEDERAL TAX STATUS
The following description of the federal tax status of these Contracts
is not exhaustive, and special rules are provided with respect to
situations not discussed herein. For complete information, consult a
qualified tax advisor. The Company does not make any guarantee regarding
the tax status of any Contract or any transaction involving the Contracts.
The Contracts are treated as a trust for purposes of the Code under rules
similar to the rules under Section 401(f) of the Code.
For federal income tax purposes, the operations of the Variable Account
form a part of the Company's operations. Under existing federal income tax
law, no taxes are payable by the Company on the investment income of the
Variable Account to the extent it is credited to the Owners under the
Contracts. The Company is taxed as a life insurance company under Part One,
Subchapter L of the Code.
Income and capital gains of the Variable Account would normally be
taxable to Owners whether or not taken by the Owners in cash. However, the
Contracts are issued only to organizations exempt from federal income tax.
The amounts received by the Participant under the Plan normally
represent the accumulation of Purchase Payments which were not previously
included in the Participant's gross income, and therefore any such amounts
should be included in gross income of a Participant or Beneficiary when
such amounts are received.
It is the responsibility of each Owner to determine that its Plan is
established and administered in accordance with the applicable provisions
of the Code.
CONTRACTS ISSUED UNDER THE NEW YORK MODEL PLAN
The following contract amendments are required by the Rules and
Regulations of the New York State Deferred Compensation Board in order to
market the Contracts to governmental employers for use in funding public
employee deferred compensation plans in the State of New York.
Throughout the prospectus, references to "annuity" payments are
modified to "benefit" payments.
The "Suspension and Termination" provisions are amended to permit a
Participant to "freeze" his or her account and maintain the account on
deposit with the Company notwithstanding the Owner's termination of its
contractual relationship with the Company. These accounts shall remain the
exclusive property of the Owner, subject to the claims of its general
creditors.
All references throughout the prospectus to Optional Retirement Income
Forms A1, A2, B1 and B2 shall mean Option 1, Option 2, Option 3 and Option
4, respectively. All references to "Contingent Deferred Sales Charge" are
deleted.
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LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company, or the Variable
Account, are parties or to which any of their property is the subject.
The General Distributor, Nationwide Advisory Services, Inc., is not
engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History........................................................................................1
Services...............................................................................................................1
Purchase of Securities Being Offered...................................................................................1
Underwriters...........................................................................................................2
Calculation of Performance.............................................................................................2
Annuity Payments.......................................................................................................3
Financial Statements...................................................................................................4
</TABLE>
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APPENDIX
PARTICIPATING UNDERLYING MUTUAL FUNDS
(THE COMPANY MAY LIMIT THE NUMBER OF UNDERLYING MUTUAL FUNDS SELECTED BY THE
OWNER, AND ALL UNDERLYING MUTUAL FUNDS MAY NOT BE AVAILABLE UNDER YOUR PLAN.)
A SUMMARY OF INVESTMENT OBJECTIVES IS CONTAINED IN THE DESCRIPTIONS OF EACH
UNDERLYING MUTUAL FUND BELOW. MORE DETAILED INFORMATION MAY BE FOUND IN THE
CURRENT PROSPECTUS FOR EACH UNDERLYING MUTUAL FUND. SUCH A PROSPECTUS FOR THE
UNDERLYING MUTUAL FUNDS BEING CONSIDERED SHOULD ACCOMPANY THE PROSPECTUS AND
SHOULD BE READ IN CONJUNCTION HEREWITH. A COPY OF EACH PROSPECTUS MAY BE
OBTAINED WITHOUT CHARGE FROM NATIONWIDE LIFE INSURANCE COMPANY.
AIM WEINGARTEN FUND - INSTITUTIONAL CLASS
The investment objective of the Fund is to provide growth of capital
through investments primarily in common stocks of leading U.S. companies
considered by management to have strong earnings momentum. Aim Advisors, Inc.
serves as the Fund's investment advisor.
AIM CONSTELLATION FUND - INSTITUTIONAL CLASS
The investment objective of the Fund is to provide capital appreciation
primarily through investments in common stocks with emphasis on medium-sized and
smaller emerging growth companies. Aim Advisors, Inc. serves as the Fund's
investment advisor.
AMERICAN CENTURY: TWENTIETH CENTURY GROWTH
The investment objective of the Fund is capital growth through investment
in securities which the management considers to have better-than-average
prospects for appreciation. It is management's intention that the portfolio will
generally consist of common stocks of large, established companies. American
Century Investment Management, Inc. serves as the Fund's investment advisor.
AMERICAN CENTURY: TWENTIETH CENTURY SELECT
The investment objective of the Fund is capital growth by investing
primarily in common stocks that are considered by management to have
better-than-average prospects for appreciation. Common stocks chosen must have a
record of paying or having committed themselves to the payment of regular cash
dividends, but growth is the primary consideration, and the dividends may not be
significant. American Century Investment Management, Inc. serves as the Fund's
investment advisor.
AMERICAN CENTURY: TWENTIETH CENTURY ULTRA
The investment objective of the Fund is capital growth by investing
primarily in common stocks that are considered by management to have
better-than-average prospects for appreciation. It is management's intention
that the portfolio will generally consist of common stocks of medium-sized and
large-size companies. American Century Investment Management, Inc. serves as
the Fund's investment advisor.
DAVIS NEW YORK VENTURE FUND, INC.
The investment objective of the Fund is growth of capital. It invests
primarily in common stocks, and securities convertible into common stocks. The
Fund invests in securities subject to the risk of price fluctuations reflecting
both market evaluations of the business involved and general changes in the
equity markets. It invests in securities of foreign issuers, which involve
special risk factors, and may hedge currency fluctuation risks related thereto.
Davis Selected Advisers, L.P., serves as the Fund's investment advisor.
DREYFUS CASH MANAGEMENT - CLASS A
The investment objective of the Fund is to provide investor with as high a
level of current income as is consistent with the preservation of capital and
the maintenance of liquidity. The Dreyfus Corporation serves as the Fund's
investment advisor.
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<PAGE> 30
THE DREYFUS THIRD CENTURY FUND, INC.
The Fund's primary goal is to provide capital growth through equity
investment in companies that, in the opinion of the Fund's management, 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. The
Dreyfus Corporation serves as the Fund's Investment advisor.
THE EVERGREEN TOTAL RETURN FUND
The investment objective of the Fund is current income and capital
appreciation. The Fund invests primarily in common and preferred stocks,
securities convertible into or exchangeable for common stocks, and fixed income
securities. The Fund's objective is to maximize the "total return" on its
portfolio of investments. Evergreen Asset Management Corp. serves as the Fund's
Investment advisor.
FEDERATED GNMA TRUST-INSTITUTIONAL SHARES
The investment objective of the Fund is current income. The Fund pursues
this investment objective by investing primarily in instruments issued or
guaranteed by the Government National Mortgage Association ("GNMA"). Federated
Management Serves as the Fund's Investment advisor.
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS - INSTITUTIONAL SHARES
The Investment objective of the Fund is current income. The Fund pursues
this investment objective by investing in U.S. government securities with
remaining maturities of five years or less. Federated Management Serves as the
Fund's Investment advisor.
FIDELITY ASSET MANAGERTM
The investment objective of the Fund is a high total return with reduced
risk over the long term by allocating its assets among domestic and foreign
stocks, bonds, and short-term instruments. Fidelity Management & Research
Company serves as the Fund's Investment advisor.
FIDELITY CONTRAFUND
The investment objective of the Fund is capital appreciation by investing
in securities that its manager believes are undervalued due to an overly
pessimistic appraisal by the public. Although the Fund will usually be invested
primarily in common stocks and securities convertible into common stock, the
percentage of its assets invested in other securities may vary. Fidelity
Management & Research Company serves as the Fund's Investment advisor.
FIDELITY EQUITY-INCOME FUND
The investment objective of the Fund is to obtain reasonable income from a
portfolio consisting primarily of income-producing equity securities. The Fund
seeks a yield which exceeds the composite yield on the securities comprising the
Standard & Poor's Composite Index of 500 Stocks. In pursuing this objective, the
Fund will also consider the potential for capital appreciation. Fidelity
Management & Research Company serves as the Fund's Investment advisor.
FIDELITY GROWTH & INCOME PORTFOLIO
The investment objective of the Fund is long term capital growth, current
income, and growth of income consistent with reasonable investment risk.
Fidelity Management & Research Company serves as the Fund's Investment advisor.
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<PAGE> 31
FIDELITY MAGELLAN(R) FUND
The investment objective of the Fund is capital appreciation by
investing primarily in common stock and securities convertible into common
stock. The Fund may also invest in foreign securities, which involves additional
risks. The Fund may also invest in stock index futures and options both of which
can be volatile investments. Fidelity Management & Research Company serves as
the Fund's Investment advisor.
FIDELITY OTC PORTFOLIO
The investment objective of the Fund is to seek capital appreciation by
investing primarily in securities traded on the over-the counter (OTC)
securities market. Securities traded on the OTC include, among others,
industrial corporations, financial services institutions, public utilities, and
transportation companies, common and preferred stocks, securities convertible
into common stock, warrants and similar rights, and debt securities, and
obligations of the federal government. The fund does not place any weight on
dividend and interest income unless it believes this income will have a
favorable influence on the market value of a security. Fidelity Management &
Research Company serves as the Fund's Investment advisor.
FIDELITY PURITAN FUND
The investment objective of the Fund seeks to obtain as much income as
possible, consistent with the preservation and conservation of capital, by
investing in a broadly diversified portfolio of securities, including common
stocks, preferred stocks, and bonds. While emphasis on income is an important
objective, this does not preclude growth in capital since some securities
offering a better than average yield may also possess some growth possibilities.
Fidelity Management & Research Company serves as the Fund's Investment advisor.
INVESCO INDUSTRIAL INCOME FUND, INC. (FORMERLY "FINANCIAL INDUSTRIAL INCOME
FUND, INC.")
The investment objective of the Fund is to seek the best possible
current income while following sound investment practices by investing in
securities which will provide a relatively high yield and stable return and
which, over a period of years, may also provide capital appreciation. Capital
growth potential is a secondary factor in the selection of portfolio securities
of the Fund. The Fund invests in common stocks, as well as convertible bond and
preferred stocks. INVESCO Funds Group, Inc. serves as the Fund's Investment
advisor.
JANUS FUND
The Janus Fund is a diversified fund that seeks long-term growth of
capital by investing primarily in common stocks of a large number of issuers of
any size. Janus Capital's fundamental analysis and selection process focuses on
stocks with earnings growth potential that may not be recognized by the market.
Such securities are selected solely for their capital growth potential;
investment income is not a consideration. Janus Capital Corporation serves as
the Fund's Investment advisor.
JANUS TWENTY FUND
The investment objective of the Fund is growth of capital in a manner
consistent with the preservation of capital. Under normal conditions, the Fund
will concentrate its investments in a core position of 20-30 common stocks.
However, the percentage of the Fund's assets invested in common stocks will
vary, depending upon its investment adviser's opinion of prevailing market,
financial and economic conditions. Consequently, the Fund may at times hold
substantial positions in cash, or interest-bearing securities. Janus Capital
Corporation serves as the Fund's Investment advisor.
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<PAGE> 32
MAS FUNDS FIXED INCOME PORTFOLIO
The investment objective of the Fund is to achieve above-average total
return over a market cycle of three to five years, consistent with reasonable
risk, by investing in a diversified portfolio of U.S. Government securities,
corporate bonds (including bonds rated below investment grade commonly referred
to as "junk bonds"), foreign fixed-income securities and mortgage-backed
securities of domestic issuers and other fixed-income securities. The
portfolio's average weighted maturity will ordinarily be greater than five
years. Miller Anderson & Sherrerd, L.L.P. serves as the Fund's Investment
advisor.
MFS(R) GROWTH OPPORTUNITIES FUND - CLASS A (FORMERLY "MFS(R) CAPITAL
DEVELOPMENT FUND")
The investment objective of the Fund is growth of capital. Dividend
income, if any, is incidental to the objective of capital growth. To achieve
this objective, a flexible approach toward types of companies as well as types
of securities is maintained by the Fund, depending upon the economic environment
and the relative attractiveness of the various securities markets. Massachusetts
Financial Services Company serves as the Fund's Investment advisor.
MFS(R) HIGH INCOME FUND - CLASS A
The investment objective of the Fund is high current income by
investing primarily in a professionally managed diversified portfolio of fixed
income securities, some of which may involve equity features. Securities
offering the high current income sought by this Fund are ordinarily in the lower
rating categories of recognized rating agencies or are unrated and generally
involve greater volatility of price and risk of principal and income than
securities in the high rating categories. Capital growth, if any, is a
consideration incidental to the investment objective of high current income.
Massachusetts Financial Services Company serves as the Fund's Investment
advisor.
MASSACHUSETTS INVESTORS GROWTH STOCK FUND - CLASS A
The investment objective of the Fund is long-term growth of capital and
future income rather that current income. Massachusetts Financial Services
Company serves as the Fund's Investment advisor.
NATIONWIDE(R) BOND FUND
The investment objective of the Fund is to generate a high level of
income, consistent with capital preservation, through investments in
high-quality bonds and other fixed income securities. Through investment in
long-term income obligations, including corporate debt securities, United States
and Canadian Government obligations and commercial paper, this Fund seeks to
serve those who are less willing to accept the risk associated with stocks.
Nationwide Advisory Services, Inc. serves as the Fund's Investment advisor.
NATIONWIDE(R) FUND
The investment objective of the Fund is to obtain a total return from a
flexible combination of current income and capital appreciation. Primary
emphasis is given to common stocks, but investments may also include convertible
issues, bonds and money market instruments. Nationwide Advisory Services, Inc.
serves as the Fund's Investment advisor.
NATIONWIDE(R) GROWTH FUND
The investment objective of the Fund is to achieve long-term capital
appreciation without emphasis on current return. Major emphasis in the selection
of securities is placed on companies which have capable management, and are in
fields where social and economic trends, technological developments, and new
processes or products indicate a potential for greater than average growth.
Nationwide Advisory Services, Inc. serves as the Fund's Investment advisor.
NATIONWIDE(R) MONEY MARKET FUND
The investment objective of the Fund is to provide as high a level of
current income as is consistent with the preservation of capital and maintenance
of liquidity, through investment in a diversified portfolio of high quality
money market instruments maturing in 397 days or less. These instruments
include, but are not limited to, U.S. Government and Agency obligations,
obligations of large commercial and foreign banks, certificates of deposit of
large savings associations, taxable or partly taxable obligations of state,
county and
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local governments, highly rated commercial paper, highly rated corporate
obligations, and repurchase agreements in any of the above. Nationwide Advisory
Services, Inc. serves as the Fund's Investment advisor.
NEUBERGER&BERMAN - GUARDIAN FUND
The Fund seeks capital appreciation and, secondarily, current income.
It invests, through its Portfolio, principally in common stocks of
long-established, high-quality companies. The Portfolio uses the value-oriented
investment approach in selecting securities. Management looks for such factors
as low price-to-earnings ratios, strong balance sheets, solid management and
consistent earnings. Neuberger&Berman Management Incorporated serves as the
Fund's Investment advisor.
NEUBERGER&BERMAN - MANHATTAN FUND
The Fund seeks capital appreciation without regard to income. It
invests, through its Portfolio, generally in securities believed to have the
maximum potential for long-term capital appreciation. It does not seek to invest
in securities that pay dividends or interest, and any such income is incidental.
The Portfolio focuses on companies with strong balance sheets and reasonable
valuations relative to their growth rates. It also diversifies its investment
among many companies and industries. Its aggressive growth investment program
involves greater risks and share price volatility than programs that invest in
more conservative investments. Neuberger&Berman Management Incorporated serves
as the Fund's Investment advisor.
NEUBERGER&BERMAN EQUITY FUNDS - PARTNERS FUND
The Fund seeks capital growth. It invests, through its Portfolio,
principally in common stocks of established companies using the value-oriented
investment approach. Management looks for securities believed to be undervalued
based on strong fundamentals, including a low price-to-earnings ratio,
consistent cash flow, and the company's track record through all parts of the
market cycle. Neuberger&Berman Management Incorporated serves as the Fund's
Investment advisor.
PUTNAM INVESTORS FUND - CLASS A
The investment objective of the Fund is long-term growth of capital and
any increased income resulting from such growth. The Fund is designed for
investors seeking long-term growth of capital from a portfolio consisting
primarily of common stocks. The Fund's management emphasizes investment in
quality growth stocks. Putnam Investment Management, Inc. serves as the Fund's
Investment advisor.
PUTNAM VOYAGER FUND - CLASS A
The investment objective of the Fund is capital appreciation. The Fund
invests primarily in common stocks believed by the Fund's Investment Manager,
Putnam Management, to have potential for capital appreciation significantly
greater than the market average. The Fund is designed for investors willing to
assume above-average risk in return for above-average capital growth potential.
Putnam Investment Management, Inc. serves as the Fund's Investment advisor
SEI INDEX FUNDS-S&P 500 INDEX PORTFOLIO
The S&P 500 Index Portfolio seeks to provide investment results that
correspond to the aggregate price and dividend performance of the securities in
the Standard & Poor's 500 Composite Stock Price Index which is comprised of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
The investment objective is a fundamental policy of the portfolio. There can be
no assurance that the Portfolio will achieve its investment objective. SEI Fund
Management serves as the Fund's Investment advisor.
SELIGMAN GROWTH FUND, INC. - CLASS A
The investment objective of the Fund is longer-term growth in capital
value and an increase in future income. Fund assets have been invested primarily
in common stocks with the inherent investment risks tempered by portfolio
diversification. J.&W. Seligman & Co., Incorporated serves as the Fund's
Investment advisor.
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SHORT-TERM INVESTMENTS TRUST - TREASURY PORTFOLIO - INSTITUTIONAL CLASS
The investment objective of the Portfolio is the maximization of
current income to the extent consistent with the preservation of capital and
maintenance of liquidity. The Portfolio seeks to achieve its objective by
investing in a portfolio consisting of direct obligations of the U.S. Treasury
and repurchase agreements secured by such obligations. The instruments purchased
by the Portfolio will have maturities of 397 days or less. AIM Advisors, Inc.
serves as the Fund's Investment advisor.
STRONG COMMON STOCK FUND, INC.
The Strong Common Stock Fund seeks capital growth. It seeks to
attain this objective by investing in a diversified portfolio of equity
securities which, in the opinion of the Fund's investment advisor, possess the
potential for price appreciation. Strong Capital Management, Inc. serves as the
Fund's Investment advisor.
TEMPLETON FOREIGN FUND - CLASS I
The investment objective of the Fund is long-term capital growth
through a flexible policy of investing in stocks and debt obligations of
companies and governments outside the United States. Any income realized will be
incidental. Templeton Investment Counsel, Inc. serves as the Fund's Investment
advisor.
TEMPLETON SMALLER COMPANIES GROWTH FUND, INC. - CLASS I
The investment objective of the Fund is long-term capital growth,
primarily through investment in common stocks and all types of common stock
equivalents, including rights, warrants and preferred stock, of companies of
various nations throughout the world. Templeton Investment Counsel, Inc. serves
as the Fund's Investment advisor.
T. ROWE PRICE INTERNATIONAL STOCK FUND(R)
The Fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. T. Rowe Price
Associates, Inc. serves as the Fund's Investment advisor.
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STATEMENT OF ADDITIONAL INFORMATION
-----------------------
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS ISSUED
BY NATIONWIDE DCVA-II OF
NATIONWIDE LIFE INSURANCE COMPANY
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 __________________.
The prospectus may be obtained from Nationwide Life Insurance Company, P.O. Box
16766, One Nationwide Plaza, Columbus, Ohio 43216, or by calling 1-800-545-4730
(TTY: 1-800-848-0833).
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.......................................................................................1
Services..............................................................................................................1
Purchase of Securities Being Offered..................................................................................1
Underwriters..........................................................................................................2
Calculation of Performance............................................................................................2
Annuity Payments......................................................................................................3
Financial Statements..................................................................................................4
</TABLE>
GENERAL INFORMATION AND HISTORY
Nationwide DCVA-II ("Variable Account") is a separate investment account of
Nationwide Life Insurance Company ("Company"). The Company is a member of the
"Nationwide Insurance Enterprise" and all of the Company's common stock is owned
by Nationwide Corporation. Nationwide Corporation is a holding company, all of
the common stock of which is held by Nationwide Mutual Insurance Company (95.2%)
and Nationwide Mutual Fire Insurance Company (4.8%).
SERVICES
The Company, 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 Owner and the
number and type of Contract issued to each such Owner and records with respect
to the Contract Value of each Contract.
All assets of the Variable Account are held in custody for safekeeping by
the Company. The assets of each Sub-Account will be kept physically segregated
and held separate and apart from assets of other Sub-Account and from assets of
any other firm, person, or corporation. The Company will maintain a record of
all purchases and redemption for shares of the Underlying Mutual Fund held in
each Sub-Account.
The Company, or affiliates of the Company 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 the
Company or an affiliate of the Company and provide for an annual fee based on
the average aggregate net assets of the Variable Account (and other separate
accounts of the Company or life insurance company subsidiaries of the Company)
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 financial statements and schedules included herein have been included
herein in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and
upon the authority of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states where
the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
For those Plans which provide this Contract and the Company's Group Fixed
Fund Retirement Contract, the Owner, or the Participant if the Plan so provides,
may exchange Accumulation Units between any Sub-Account of the Variable Account
and the deposit fund of the Group Fixed Fund Retirement Contract.
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Exchanges from the deposit fund to any Sub-Account will be subject to the
limitations of the Group Fixed Fund Retirement Contract. Exchanges will be
effected when received in good order by the Company at its home office.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by NAS. One
Nationwide Plaza, Columbus, Ohio 43215, a wholly owned subsidiary of the
Company. During the fiscal years ended December 31, 1995, 1994 and 1993, no
underwriting commissions were paid by the Company to NAS.
CALCULATION OF PERFORMANCE
Any current yield quotations of the Nationwide Money Market Fund
Sub-Account and the Dreyfus Cash Management Class A Fund Sub-Account, subject to
Rule 482 of the Securities Act of 1933, shall consist of a seven calendar day
historical yield, carried at least to the nearest hundredth of a percent. The
yield shall 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 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 Nationwide Money Market Fund Sub-Account
and the Dreyfus Cash Management - Class A Fund Sub-Account effective yield is
computed similarly but includes the effect of assumed compounding on an
annualized basis of the current yield quotations of the Underlying Mutual Fund.
The Nationwide Money Market Fund Sub-Account and the Dreyfus Cash
Management - CLASS A Fund Sub-Account yield and effective yield will fluctuate
daily. Actual yields will depend on factors such as the type of instruments in
the Underlying Mutual Funds' portfolio, portfolio quality and average maturity,
changes in interest rates, and the Underlying Mutual Funds' expenses. Although
each Sub-Account 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 under "Investment Manager and Other
Services" in the Underlying Mutual Funds' Statement of Additional Information.
There is no assurance that the yields quoted on any give 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 an Owner's investment in
the Nationwide Money Market Fund Sub-Account and the Dreyfus Cash Management -
Class A Fund Sub-Account 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 shall include quotations of average annual
total return, calculated in accordance with a standard method prescribed by
rules of the Securities and Exchange Commission, to facilitate comparison with
total return quoted by other variable annuity separate accounts. Standardized
average annual total return advertised for a specific period is found by first
taking a hypothetical $1,000 investment in each of the Sub-Account's 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. Average annual total return
reflects the deduction of a maximum $15 Contract Maintenance Charge and a
maximum 1.50% Actuarial Risk Fee as exhibited in the "Summary of Contract
Expense" provision of the prospectus. The redeemable value also reflects the
effect of any applicable Contingent Deferred Sales Charge 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. Non-standardized total return is calculated in a manner similar
to average annual total return except the total return does not reflect the
deduction of any applicable Contingent Deferred Sales Charge or Contract
Maintenance Charge, which, if reflected, would decrease the level of the
performance advertised.
The average annual total return and 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
total return figures will be based on rolling calendar quarters and will cover
periods of, at least, one, five, and ten years, or a period covering the time a
Underlying Mutual Fund held in the Sub-Account has been in existence, if the
Underlying Mutual Fund has not been in existence for one of the prescribed
periods. The non-standardized total return will cover the cumulative current
calendar year and the most recently completed calendar year, and periods of
three, five and ten years on a rolling calendar quarter basis. For those
Underlying Mutual Funds which have not been held as Sub-Account within the
Variable Account for one of the quoted periods, the standardized average annual
total return and non-standardized total return quotations will
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show the investment performance such Underlying Mutual Funds would have achieved
(reduced by the applicable charges) had they been held as Sub-Accounts for the
period quoted.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance, therefore,
should not be considered a guarantee of future performance. Factors affecting a
Sub-Account's performance include general market conditions, operating expenses
and investment management. A Contract Owner's and Participant's Account when
redeemed may be more or less than original cost.
SERIES PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN - MONEY MARKET
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
CURRENT YIELD EFFECTIVE YIELD
PERIOD ENDING PERIOD ENDING
SERIES OPTIONS 12/31/96 12/31/96
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dreyfus Cash Management-Class A 4.84% 4.96%
- ----------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 5.04% 5.17%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Below are quotations of average annual total return and total return,
calculated as described in this provision, for each of the Sub-Accounts
available.
SERIES PERFORMANCE SUMMARY (OTHER THAN MONEY MARKET)
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
SERIES OPTIONS TO 12/31/96 TO 12/31/96 TO 12/31/96
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM Constellation Fund - Institutional Class 4.59% 12.96% 16.57%
- -------------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 5.98% 5.45% 12.34%
- -------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 2.80% 1.45% 10.84%
- -------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 6.94% 3.41% 9.05%
- -------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 1.65% 8.98% 17.31%
- -------------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 14.15% 13.96% 14.55%
- -------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 11.98% 6.38% 10.43%
- -------------------------------------------------------------------------------------------------------------------
The Evergreen Total Return Fund 0.71% 5.82% 5.21%
- -------------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares -7.09% 1.50% 4.90%
- -------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities: 2-5 Years - -8.46% 0.99% 3.74%
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 0.55% 7.33% N/A
- -------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 9.62% 14.26% 17.30%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 8.72% 13.31% 10.28%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 7.74% 13.19% 14.38%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund -0.47% 10.75% 13.26%
- -------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 11.39% 11.55% 14.02%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 2.94% 10.74% 9.34%
- -------------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 4.48% 6.57% 11.79%
- -------------------------------------------------------------------------------------------------------------------
Janus Fund 7.33% 8.34% 13.49%
- -------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 15.45% 6.88% 13.55%
- -------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio -4.74% 3.89% 5.98%
- -------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 10.51% 8.03% 11.11%
- -------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A 9.55% 10.25% 9.67%
- -------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A 0.38% 8.21% 5.95%
- -------------------------------------------------------------------------------------------------------------------
Nationwide(R) Bond Fund -10.39% 2.13% 4.27%
- -------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 11.58% 7.84% 10.93%
- -------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 4.46% 8.21% 9.42%
- -------------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Guardian Fund 5.63% 12.28% 12.43%
- -------------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Manhattan Fund -2.29% 8.22% 10.28%
- -------------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Partners Fund 14.16% 14.11% 11.61%
- -------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 9.10% 11.33% 11.32%
- -------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 0.62% 11.46% 14.61%
- -------------------------------------------------------------------------------------------------------------------
SEI Index Funds -S&P 500 Index Portfolio 10.30% 10.71% 11.78%
- -------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 8.84% 7.80% 10.30%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
37 of 88
<PAGE> 38
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Investments Trust-Treasury Portfolio -6.66% -0.30% 2.44%
Institutional Class
- -------------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 8.17% 15.23% N/A
- -------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 3.76% 7.34% 8.00%
- -------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund- Class I 5.74% 8.23% 11.38%
- -------------------------------------------------------------------------------------------------------------------
Templeton Smaller Companies Growth Fund, Inc. - Class I 9.77% 9.88% 8.50%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
38 of 88
<PAGE> 39
SERIES PERFORMANCE SUMMARY
NON-STANDARDIZED TOTAL RETURN
(The total return figures shown below do not reflect the
deduction of the Contract Maintenance Charges or any
applicable Contingent Deferred Sales Charges)
<TABLE>
<CAPTION>
- -------------------------------------------------------- ------------- ------------- -------------- -------------
YEAR ENDED 3 YEARS 5 YEARS 10 YEARS
---------- ------- ------- --------
SERIES OPTIONS 12/31/96 TO 12/31/96 TO 12/31/96 TO 12/31/96
- -------------------------------------------------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 34.15% 15.69% 15.27% 17.70%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
AIM Weingarten Fund - Institutional Class 33.42% 15.31% 8.38% 13.59%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
American Century: Twentieth Century Growth 18.57% 9.24% 4.67% 12.14%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
American Century: Twentieth Century Select 20.85% 8.75% 6.46% 10.49%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
American Century: Twentieth Century Ultra 35.64% 13.04% 11.58% 18.37%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Davis New York Venture Fund, Inc. 38.48% 18.59% 16.27% 15.79%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
The Dreyfus Third Century Fund, Inc. 33.80% 14.32% 9.25% 11.84%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
The Evergreen Total Return Fund 22.03% 7.76% 8.57% 7.08%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Federated GNMA Trust-Institutional Shares 14.34% 4.33% 4.58% 6.66%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Federated U.S. Government Securities: 11.88% 3.33% 4.09% 5.60%
2-5 Years - Institutional Shares
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Fidelity Asset Manager(TM) 16.41% 5.96% 9.92% N/A
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Fidelity Contrafund 34.26% 16.25% 16.50% 18.49%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Fidelity Equity-Income Fund 29.86% 15.21% 15.60% 11.79%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Fidelity Growth & Income Portfolio 33.38% 16.69% 15.51% 15.58%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Fidelity Magellan(R) Fund 34.80% 12.79% 13.19% 14.51%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Fidelity OTC Portfolio 36.18% 16.75% 14.00% 15.26%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Fidelity Puritan Fund 19.66% 10.83% 13.13% 10.86%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
INVESCO Industrial Income Fund, Inc. 25.45% 10.95% 9.34% 13.08%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Janus Fund 27.52% 13.55% 10.98% 14.69%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Janus Twenty Fund 34.20% 15.81% 9.73% 14.84%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
MAS Funds Fixed Income Portfolio 17.27% 4.93% 6.76% 7.67%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Massachusetts Investors Growth Stock Fund - Class A 26.44% 12.03% 10.70% 12.50%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
MFS(R) Growth Opportunities Fund - Class A 32.50% 14.52% 12.78% 11.18%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
MFS(R) High Income Fund - Class A 15.41% 7.07% 10.73% 7.78%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Nationwide(R) Fund 28.06% 15.71% 10.57% 12.31%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Nationwide(R) Growth Fund 26.80% 13.37% 10.85% 10.91%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Nationwide(R) Money Market Fund 3.94% 3.18% 2.45% 3.99%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Neuberger&Berman - Guardian Fund 30.16% 14.43% 14.61% 13.75%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Neuberger&Berman - Manhattan Fund 29.06% 9.87% 10.77% 11.66%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Neuberger&Berman - Partners Fund 33.53% 17.14% 16.38% 13.01%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Putnam Investors Fund - Class A 35.51% 15.62% 13.79% 12.73%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Putnam Voyager Fund - Class A 38.08% 14.94% 13.87% 15.79%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
SEI Index Funds -S&P 500 Index Portfolio 35.31% 17.60% 13.23% 13.14%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Seligman Growth Fund, Inc. - Class A 26.57% 12.69% 10.47% 11.72%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Short-Term Investments Trust-Treasury Portfolio - 4.37% 3.60% 2.94% 4.42%
Institutional Class
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Strong Common Stock Fund, Inc. 30.45% 14.92% 17.38% N/A
- -------------------------------------------------------- ------------- ------------- -------------- -------------
T. Rowe Price International Stock Fund(R) 9.74% 7.03% 9.98% 9.53%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Templeton Foreign Fund- Class I 9.51% 7.96% 10.82% 12.60%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Templeton Smaller Companies Growth Fund, Inc. - Class I 15.91% 9.43% 12.36% 10.13%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
</TABLE>
ANNUITY PAYMENTS
See "Distribution of Participant Accounts (Retirement Period)"
in the prospectus.
39 of 88
<PAGE> 40
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules 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.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
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, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906
Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787
Mortgage loans on real estate 4,786,599 4,222,284
Real estate 239,089 252,681
Policy loans 370,908 340,491
Other long-term investments 67,280 63,914
Short-term investments (note 13) 45,732 131,643
----------- -----------
19,710,703 16,770,419
----------- -----------
Cash 10,485 7,436
Accrued investment income 239,881 220,540
Deferred policy acquisition costs 1,094,195 1,064,159
Deferred Federal income tax -- 36,515
Other assets 795,169 790,603
Assets held in Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
$40,614,111 31,112,133
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461
Policyholders' dividend accumulations 353,554 338,058
Other policyholder funds 71,155 72,770
Accrued Federal income tax (note 7):
Current 34,064 13,126
Deferred 238,877 -
----------- -----------
272,941 13,126
----------- -----------
Other liabilities 284,143 235,778
Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
37,945,599 29,203,654
----------- -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Additional paid-in capital 673,782 622,753
Retained earnings 1,606,607 1,401,579
Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668)
----------- -----------
2,668,512 1,908,479
----------- -----------
Commitments and contingencies (notes 9 and 15)
$40,614,111 31,112,133
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Traditional life insurance premiums $ 274,957 209,538 215,715
Accident and health insurance premiums 509,658 324,524 312,655
Universal life and investment product policy charges 307,676 239,021 188,057
Net investment income (note 5) 1,482,980 1,289,501 1,204,426
Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673
---------- ---------- ----------
2,576,107 2,046,200 2,034,526
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,656,287 1,279,763 1,236,906
Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Other operating costs and expenses 458,970 352,402 329,396
---------- ---------- ----------
2,256,375 1,772,970 1,721,625
---------- ---------- ----------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 319,732 273,230 312,901
---------- ---------- ----------
Federal income tax expense (note 7):
Current 103,464 79,847 75,124
Deferred 3,790 9,657 31,634
---------- ---------- ----------
107,254 89,504 106,758
---------- ---------- ----------
Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143
Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365
---------- ---------- ----------
Net income $ 212,478 183,726 211,508
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242
Capital contributions -- 111,000 -- -- 111,000
Dividends paid to shareholder -- -- (17,805) -- (17,805)
Net income -- -- 211,508 -- 211,508
Unrealized losses on equity securities, net -- -- -- (83,777) (83,777)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168
========== ========== ========= ========== ==========
1994:
Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168
Capital contribution -- 200,000 -- -- 200,000
Net income -- -- 183,726 -- 183,726
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 216,915 216,915
Unrealized losses on securities available-
for-sale, net -- -- -- (343,330) (343,330)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479
========== ========== ========== ========== ==========
1995:
Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479
Capital contribution (note 13) -- 51,029 -- (4,111) 46,918
Dividends paid to shareholder -- -- (7,450) -- (7,450)
Net income -- -- 212,478 -- 212,478
Unrealized gains on securities available-
for-sale, net -- -- -- 508,087 508,087
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 212,478 183,726 211,508
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994)
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Amortization and depreciation 10,319 6,207 11,156
Realized losses (gains) on invested assets, net 717 15,949 (113,648)
Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006)
Increase in accrued investment income (19,341) (29,654) (4,218)
Increase in other assets (3,227) (112,566) (549,277)
Increase in policy liabilities 198,200 1,038,641 509,370
Increase in policyholders' dividend accumulations 15,496 15,372 17,316
Increase in accrued Federal income tax payable 20,938 832 16,838
Increase in other liabilities 48,365 17,826 26,958
Other, net (20,556) (19,303) (11,745)
----------- ----------- ------------
Net cash provided by operating activities 211,000 945,174 18,392
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 706,442 579,067 --
Proceeds from sale of securities available-for-sale 131,420 247,876 247,502
Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093
Proceeds from sale of fixed maturities -- -- 33,959
Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047
Proceeds from sale of real estate 48,477 46,713 23,587
Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643
Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550)
Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831)
Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336)
Cost of real estate acquired (10,970) (15,962) (8,827)
Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491)
----------- ----------- ------------
Net cash used in investing activities (2,012,182) (2,261,105) (887,204)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions 46,918 200,000 111,000
Dividends paid to shareholder (7,450) -- (17,805)
Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740
Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504)
----------- ----------- -----------
Net cash provided by financing activities 1,718,320 1,391,378 884,431
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619
Cash and cash equivalents, beginning of year 139,079 63,632 48,013
----------- ----------- -----------
Cash and cash equivalents, end of year $ 56,217 139,079 63,632
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
Financial Horizons Life Insurance Company), West Coast Life Insurance
Company (WCLIC), Employers Life Insurance Company of Wausau and
subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
Financial Services, Inc. (NFS). NLIC and its subsidiaries are
collectively referred to as "the Company."
NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
and NCC is a property and casualty insurer. The Company is licensed in
all 50 states, the District of Columbia, the Virgin Islands and Puerto
Rico. The Company offers a full range of life insurance, health insurance
and annuity products through exclusive agents, brokers and other
distribution channels and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
Insurance Departments of states in which it is licensed, and undergoes
periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce insurer
profits, new legal theories or insurance company insolvencies through
guaranty fund assessments may create costs for the insurer beyond
those currently recorded in the consolidated financial statements. 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.
CREDIT RISK is 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
sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
INTEREST RATE RISK is 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.
(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 (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
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 December 31, 1995 consolidated financial statements include the
accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
and NFS. The December 31, 1994 and 1993 consolidated financial statements
include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
1994 consolidated balance sheet also includes the accounts of ELICW, which
was acquired by NLIC effective December 31, 1994. See Note 13. 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, 1995.
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 are 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.
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.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121). SFAS 121 requires impairment losses to be 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. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The statement is effective for fiscal years beginning after December 15,
1995 and earlier application is permitted. Previously issued consolidated
financial statements shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the consolidated financial statements is not
expected to be material.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums and
benefits and consist primarily of whole life, limited-payment life, term
life 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.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual and
group deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and investment
products consist of 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 benefits and claims incurred in the period in
excess of related policy account balances and interest credited to policy
account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums
are recognized as revenue over the terms of the policies. Policy claims are
charged to expense in the period that the claims are incurred.
(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 agency expenses have been deferred. For traditional life and
individual health 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. For
universal life and investment products, deferred policy acquisition costs
are being amortized with interest over the lives of the policies in
relation to the present value of estimated future gross profits from
projected interest margins, asset fees, cost of insurance, policy
administration and surrender charges. For years in which gross profits are
negative, deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs are
adjusted to reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific investment
objectives. The investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of the Separate
Accounts is not reflected in the consolidated statements of income and cash
flows except for the fees the Company receives for administrative services
and risks assumed.
(f) FUTURE POLICY BENEFITS
Future policy benefits for traditional life and individual health
insurance policies have been calculated using a net level premium method
based on 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. See note 6.
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Future policy benefits and claims for collectively renewable long-term
disability policies (primarily discounted at 5.2%) and group long-term
disability policies (primarily discounted at 5.5%) are the present value of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on other
group health insurance policies are not discounted.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 45% (45% in 1994 and
48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
45% in 1993) of life insurance premiums. The provision for policyholder
dividends is based on current dividend scales. Future dividends are
provided for ratably in future policy benefits based on dividend scales in
effect at the time the policies were issued. Dividend scales are approved
by the Board of Directors.
Income attributable to participating policies in excess of policyholder
dividends is accounted for as belonging to the shareholder. See note 12.
(h) FEDERAL INCOME TAX
NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
return with Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
income tax return with Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW files a separate Federal income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
from the deferred method of accounting for income tax of APB Opinion 11 to
the asset and liability method of accounting for income tax. Under the
asset and liability 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.
The Company has reported the cumulative effect of the change in method
of accounting for income tax in the 1993 consolidated statement of income.
See note 3.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits and
claims incurred are deducted from the respective income and expense
accounts. Assets and liabilities related to reinsurance ceded are reported
on a gross basis.
(j) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with original maturities of three
months or less to be cash equivalents.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(k) RECLASSIFICATION
Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(3) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,593,844
and $7,024,736, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994 has been recorded
as a direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
---------
$ 216,915
=========
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in
the 1993 consolidated statement of income as the cumulative effect of
changes in accounting principles, as follows:
Asset/liability method of recognizing income tax (note 2(h)) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296) (note 11) (20,979)
--------
$ 5,365
========
</TABLE>
(4) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
filed with the Department of Insurance of the State of Ohio (the
Department), California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by such
regulatory authorities. 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.
The statutory capital shares and surplus of NLIC as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$1,363,031, $1,262,861 and $992,631, respectively. The statutory net
income of NLIC as reported to regulatory authorities for the years
ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
$185,943, respectively.
<PAGE> 11
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(5) INVESTMENTS
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 772,589 674,346 --
Equity securities 1,436 550 7,230
Fixed maturities held-to-maturity 232,692 193,009 800,255
Mortgage loans on real estate 410,965 376,783 364,810
Real estate 39,222 40,280 39,684
Short-term investments 12,249 6,990 5,080
Other 61,701 42,831 33,832
---------- ---------- ----------
Total investment income 1,530,854 1,334,789 1,250,891
Less investment expenses 47,874 45,288 46,465
---------- ---------- ----------
Net investment income $1,482,980 1,289,501 1,204,426
========== ========== ==========
</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>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 6,792 (7,120) --
Equity securities 3,435 1,427 129,728
Fixed maturities -- -- 20,225
Mortgage loans on real estate (7,312) (20,462) (28,241)
Real estate and other (2,079) 9,771 (8,039)
-------- -------- --------
$ 836 (16,384) 113,673
======== ======== ========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- -------------
<S> <C> <C>
Gross unrealized gains (losses) $ 735,103 (266,618)
Adjustment to deferred policy acquisition costs (143,851) 82,525
Deferred Federal income tax (206,944) 64,425
--------- ---------
$ 384,308 (119,668)
========= =========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 1,001,706 (703,851) --
Equity securities 15 (1,990) (128,837)
Fixed maturities held-to-maturity 86,477 (421,427) 223,392
----------- ----------- -----------
$ 1,088,198 (1,127,268) 94,555
=========== =========== ===========
</TABLE>
<PAGE> 12
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities available-for-sale
were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 438,109 36,714 (53) 474,770
Obligations of states and political subdivisions 9,742 1,252 (1) 10,993
Debt securities issued by foreign governments 162,442 9,641 (66) 172,017
Corporate securities 8,902,494 524,796 (30,561) 9,396,729
Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868
--------- ----------- ----------- -----------
Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377
Equity securities 27,362 6,441 (85) 33,718
---------- ----------- ----------- -----------
$13,465,992 775,489 (40,386) 14,201,095
=========== =========== ============ ===========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
and fixed maturities held-to-maturity were as follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
---------- ---------- ---------- ---------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,372 6,637 (296) 24,713
---------- ---------- ---------- ---------
$8,337,237 77,888 (344,506) 8,070,619
========== ========= ========== =========
FIXED MATURITY SECURITIES HELD-TO-MATURITY
Obligations of states and political subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
---------- ---------- ---------- ---------
$3,688,787 34,383 (120,860) 3,602,310
========== ========== ========== =========
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
----------- ------------
<S> <C> <C>
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE
- --------------------------------------------
Due in one year or less $ 641,490 647,639
Due after one year through five years 5,365,703 5,623,126
Due after five years through ten years 2,477,457 2,609,262
Due after ten years 1,028,137 1,174,482
----------- -----------
9,512,787 10,054,509
Mortgage-backed securities 3,925,843 4,112,868
----------- -----------
$13,438,630 14,167,377
=========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 to available-for-sale
securities due to evidence of a significant deterioration in the issuer's
creditworthiness. The transfer of those fixed maturity securities resulted in
a gross unrealized loss of $4,285.
As permitted by the FASB's Special Report, A GUIDE TO IMPLEMENTATION OF
STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES, issued in November, 1995, the Company transferred all of its fixed
maturity securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the fixed
maturity securities had amortized cost of $3,705,644, resulting in a gross
unrealized gain of $171,531.
Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.
Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).
Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.
As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Allowance, beginning year $ 47,892
Additions charged to operations 7,653
Direct write-downs charged against the allowance (4,850)
--------
Allowance, end of year $ 50,695
========
</TABLE>
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
mortgage loans on real estate in process of foreclosure or in-substance
foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
value.
Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
of December 31, 1995 and 1994, respectively, were on deposit with various
regulatory agencies as required by law.
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts represents
approximately 82% and 81% of the total liability for future policy benefits
as of December 31, 1995 and 1994, respectively. The average interest rate
credited on investment product policies was approximately 6.5%, 6.5% and
7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.
The liability for future policy benefits for traditional life insurance and
individual health insurance policies has been established based upon the
following assumptions:
INTEREST RATES: Interest rates vary as follows:
<TABLE>
<CAPTION>
Health
Year of issue Life Insurance insurance
-------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
1995 7.6%, not graded - permanent contracts with loan provisions 4.5%
7.7%, not graded - all other contracts
1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0%
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0%
1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
</TABLE>
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published tables,
modified for the Company's actual experience.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the liability for unpaid claims and claim adjustment expenses is
summarized for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 637,998 592,180 760,209
Less reinsurance recoverables 438,761 430,720 547,683
--------- --------- ---------
Net balance, beginning of year 199,237 161,460 212,526
--------- --------- ---------
Incurred related to:
Current year 425,907 273,299 309,721
Prior years (17,203) (26,156) (26,248)
--------- --------- ---------
Total incurred 408,704 247,143 283,473
--------- --------- ---------
Paid related to:
Current year 290,605 175,700 208,978
Prior years 111,353 73,889 125,561
--------- --------- ---------
Total paid 401,958 249,589 334,539
--------- --------- ---------
Unpaid claims of acquired companies 2,542 40,223 --
--------- --------- ---------
Net balance, end of year 208,525 199,237 161,460
Plus reinsurance recoverables 491,321 438,761 430,720
--------- --------- ---------
Balance, end of year $ 699,846 637,998 592,180
========= ========= =========
</TABLE>
Reinsurance recoverables include amounts from affiliates, as discussed in
note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31,
1995, 1994, 1993 and 1992, respectively.
The provision for claims and claim adjustment expenses for prior years
decreased in each of the three years ended December 31, 1995 due to
lower-than-anticipated costs to settle accident and health insurance claims.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 179,916 124,044
Fixed maturity securities available-for-sale -- 95,536
Liabilities in Separate Accounts 129,120 94,783
Mortgage loans on real estate and real estate 26,062 25,632
Other policyholder funds 7,752 7,137
Other assets and other liabilities 47,215 57,528
--------- ---------
Total gross deferred tax assets 390,065 404,660
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 312,616 317,224
Fixed maturity securities available-for-sale 266,184 --
Equity securities available-for-sale and other
long-term investments 3,431 3,620
Other 46,711 47,301
--------- ---------
Total gross deferred tax liabilities 628,942 368,145
--------- ---------
$(238,877) 36,515
========= =========
</TABLE>
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company has determined that valuation allowances are not necessary as
of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
of the total gross deferred tax assets will not be realized. All future
deductible amounts can be offset by future taxable amounts or recovery of
Federal income tax paid within the statutory carryback period. In
addition, for future deductible amounts for securities available-for-sale,
affiliates of the Company which are included in the same consolidated
Federal income tax return hold investments that could be sold for capital
gains that could offset capital losses realized by the Company should
securities available-for-sale be sold at a loss.
<TABLE>
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
--------------- ----- -------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0
Tax exempt interest and dividends
received deduction (137) (0.1) (194) (0.1) (2,322) (0.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 1,704 0.5
Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7)
--------- ---- --------- ---- --------- ----
Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1
========= ==== ========= ==== ========= ====
</TABLE>
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the
years ended December 31, 1995, 1994 and 1993, respectively.
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral
from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated in
the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
consolidated financial statements. The DRA eliminated any additional
deferrals to the PSA. Any distributions from the PSA, however, will
continue to be taxable at the then current tax rate. The balance of the
PSA was approximately $35,344 as of December 31, 1995.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair
value information about existing on and off-balance sheet financial
instruments. SFAS 107 defines the fair value of a financial instrument as
the amount at which the financial instrument could be exchanged in a
current transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using present
value or other valuation techniques.
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. SFAS 107 excludes certain assets and liabilities from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are 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:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the consolidated balance sheets for these
instruments approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: 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.
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.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage
loans on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations. Fair
value for mortgages in default is the estimated fair value of the
underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities under
investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted cash
flow analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life 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.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts were
as follow as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments:
Securities available-for-sale:
Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906
Equity securities 33,718 33,718 24,713 24,713
Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310
Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284
Policy loans 370,908 370,908 340,491 340,491
Short-term investments 45,732 45,732 131,643 131,643
Cash 10,485 10,485 7,436 7,436
Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461
LIABILITIES
- -----------
Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556
Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384
Policyholders' dividend accumulations 353,554 353,554 338,058 338,058
Other policyholder funds 71,155 71,155 72,770 72,770
Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
</TABLE>
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
--------------------------------------------
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 80% 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 $361,974 extending into 1996 were
outstanding as of December 31, 1995.
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 20% (22%
in 1994) in any geographic area and no more than 2% (2% in 1994) with any
one borrower.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 140,732 110,361 534,814 184,201 970,108
East South Central 23,978 15,653 183,790 84,588 308,009
Mountain -- 18,940 144,156 48,727 211,823
Middle Atlantic 124,079 72,201 183,562 18,383 398,225
New England 9,594 39,526 153,644 1 202,765
Pacific 190,628 239,687 395,914 107,650 933,879
South Atlantic 101,904 74,731 458,355 279,692 914,682
West North Central 134,866 14,205 81,521 37,586 268,178
West South Central 69,143 99,618 194,717 272,323 635,801
--------- --------- --------- --------- ---------
$ 794,924 684,922 2,330,473 1,033,151 4,843,470
========= ========= ========= =========
Less valuation allowances and unamortized discount 56,871
---------
Total mortgage loans on real estate, net $4,786,599
=========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
--------- --------- --------- --------- ---------
$ 669,832 613,707 2,176,705 816,831 4,277,075
========= ========= ========= =========
Less valuation allowances and unamortized discount 54,791
---------
Total mortgage loans on real estate, net $4,222,284
=========
</TABLE>
(10) PENSION PLAN
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least one
thousand hours of service within a twelve-month period and who have met
certain age requirements. Benefits are based upon the highest average
annual salary of a specified number of consecutive years of the last ten
years 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.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost of
the enhanced benefit was borne by NMIC and certain of its property and
casualty insurance company affiliates.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual Insurance
Company Employees' Retirement Plan and the Wausau Insurance Companies
Pension Plan to form the Nationwide Insurance Enterprise Retirement
Plan. Immediately prior to the merger, the plans were amended to provide
consistent benefits for service after January 1, 1996. These amendments had
no significant impact on the accumulated benefit obligation or projected
benefit obligation as of December 31, 1995.
Pension costs charged to operations by the Company during the years ended
December 31, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
respectively.
The Company's net accrued pension expense as of December 31, 1995 and
1994 was $1,376 and $1,836, respectively.
The net periodic pension cost for the Nationwide Insurance Companies and
Affiliates Retirement Plan as a whole for the years ended December 31,
1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighed average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
in group annuity contracts of NLIC and ELICW. Prior to the merger, the
assets of the Nationwide Insurance Companies and Affiliates Retirement
Plan were invested in a group annuity contract of NLIC.
(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
-------------------------------------------
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.
Effective January 1, 1993, the Company adopted the provisions of STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
accrual method of accounting for postretirement life and health care
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $32,275 ($20,979 net of related income tax benefit) was
recorded in the 1993 consolidated statement of income as a cumulative
effect of a change in accounting principle. See note 3. The adoption of
SFAS 106, including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $35,277
to $36,544 in 1993. 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, 1995 and 1994 was $51,490 and $36,001, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was
$8,269 and $4,627, respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the plan as a whole as of
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
-------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance subsidiaries exceed the minimum risk-based capital
requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, as of the year-end shall
inure to the benefit of the shareholder. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall
be used only for the payment or apportionment of dividends to
participating policyholders at least to the extent required by statute
or for the purpose of making up any loss on participating policies.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In the opinion of counsel for the Company, the ultimate ownership of the
entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable to
participating policies in excess of the amounts paid as dividends to
policyholders belong to the shareholder rather than the policyholders,
and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares was
$2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
1993, respectively. The amount thereof not presently available for
dividends to the shareholder due to the New York restrictions was
$1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
respectively.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $2,468,687
of shareholder's equity, as presented in the accompanying consolidated
financial statements, is so restricted as to dividend payments in 1996.
Each of NLIC's insurance company subsidiaries are limited in their
payment of dividends by the state insurance department of their
respective state of domicile. As of December 31, 1995, the maximum amount
of shareholder's equity available for dividend payment to NLIC in 1996 by
its insurance company subsidiaries without prior approval are:
<TABLE>
<S> <C>
Nationwide Life and Annuity Insurance Company $10,143
West Coast Life Insurance Company 13,153
Employers Life Insurance Company of Wausau 10,132
National Casualty Company --
-------
$33,428
=======
</TABLE>
(13) TRANSACTIONS WITH AFFILIATES
----------------------------
On March 1, 1995, Corp. contributed all of the outstanding shares of
Farmland Life Insurance Company (Farmland) to NLIC, which then merged
Farmland into WCLIC effective June 30, 1995. The contribution resulted in
a direct increase to consolidated shareholder's equity of $46,918. The
contribution of Farmland has been accounted for in a manner similar to a
pooling of interests and accordingly, Farmland's results are included in
the consolidated statements of income beginning January 1, 1995. However,
prior period consolidated financial statements have not been restated due
to the impact of Farmland being immaterial.
Effective December 31, 1994, NLIC purchased all of the outstanding shares
of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC
transferred fixed maturity securities and cash with a fair value of
$155,000 to WSC on December 28, 1994, which resulted in a realized loss
of $19,239 on the disposition of the securities. The purchase price
approximated both the historical cost basis and fair value of net assets
of ELICW. ELICW has and will continue to share home office, other
facilities, equipment and common management and administrative services
with WSC.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Corp. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1995 were
$57,969, $50,470 and $44,577, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company 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 1995 and
1994 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
31, 1995. These contracts are immaterial to the consolidated financial
statements.
NCC participates in several 100% quota share reinsurance agreements with
NMIC and Nationwide Mutual Fire Insurance Company, the minority
shareholder of Corp. As a result of these agreements, the following
assets and (liabilities) are included in the consolidated financial
statements as of December 31, 1995 and 1994 for reinsurance ceded:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Reinsurance recoverable $ 590,379 541,289
Unearned premium reserves (112,467) (110,353)
Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
</TABLE>
The ceding of reinsurance does not discharge the original insurer from
primary liability to its policyholder. The insurer which assumes the
coverage assumes the related liability and it is the practice of insurers
to treat insured risks, to the extent of reinsurance ceded, as though
they were risks for which the original insurer is not liable. Management
believes the financial strength of NMIC reduces to an acceptable level
any risk to NCC under these intercompany reinsurance agreements.
ELICW assumes certain accident and health insurance business from
Employers Insurance of Wausau A Mutual Company, an affiliate. During
1995, total premiums assumed by ELICW under the reinsurance
agreement were $150,622.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash Management
Company (CCMC), both affiliates, under which NCMC and CCMC act as common
agents in handling the purchase and sale of short-term securities for the
respective accounts of the participants. Amounts on deposit with NCMC and
CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994,
respectively, and are included in short-term investments on the
accompanying consolidated balance sheets.
(14) BANK LINES OF CREDIT
--------------------
As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization.
(15) CONTINGENCIES
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to be
material to the Company's financial position or results of operations.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT INFORMATION
-------------------
The Company operates in the long-term savings, life insurance and
accident and health insurance lines of business in the life insurance and
property and casualty insurance industries. Long-term savings operations
include both qualified and non-qualified annuity contracts issued to both
individuals and groups. Life insurance operations include whole life,
universal life, variable universal life and endowment and term life
insurance issued to individuals and groups. Accident and health insurance
operations also provide coverage to individuals and groups. Corporate
primarily includes investments, and the related investment income, which
are not specifically allocated to one of the three operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better reflect
the way the businesses are managed. Prior periods have been restated to
reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in accounting
principles for the years ended December 31, 1995, 1994 and 1993 and
assets as of December 31, 1995, 1994 and 1993, by business segment.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 1,406,241 1,125,013 1,048,045
Life insurance 502,885 452,795 432,343
Accident and health insurance 532,383 345,545 339,764
Corporate 134,598 122,847 214,374
------------ ------------ ------------
$ 2,576,107 2,046,200 2,034,526
============ ============ ============
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 129,475 95,530 47,966
Life insurance 63,169 46,119 36,383
Accident and health insurance (12,521) 13,221 15,041
Corporate 139,609 118,360 213,511
------------ ------------ ------------
$ 319,732 273,230 312,901
============ ============ ============
Assets:
Long-term savings 34,634,892 25,815,273 20,695,598
Life insurance 3,675,581 3,231,651 2,897,574
Accident and health insurance 307,643 291,296 297,200
Corporate 1,995,995 1,773,913 1,515,989
------------ ------------ ------------
$ 40,614,111 31,112,133 25,406,361
============ ============ ============
</TABLE>
<PAGE> 26
Schedule I
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Summary of Investments - Other Than Investments in Related Parties
December 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
----------------- --------------- ------------------
Column B Column C Column D
----------------- --------------- ---------------
Amount at which
shown in the
consolidated
Cost Market value balance sheet
----------------- ---------------- -------------------
<S> <C> <C> <C>
Fixed maturities available-for-sale:
Bonds and notes:
U.S. Government and government agencies and authorities $ 3,913,961 4,116,744 4,116,744
States, municipalities and political subdivisions 9,742 10,993 10,993
Foreign governments 162,442 172,016 172,016
Public utilities 2,053,701 2,146,000 2,146,000
All other corporate 7,298,784 7,721,624 7,721,624
----------------- ---------------- -------------------
Total fixed maturities available-for-sale 13,438,630 14,167,377 14,167,377
----------------- ---------------- -------------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 26,037 32,474 32,474
Non-redeemable preferred stock 1,325 1,244 1,244
----------------- ---------------- -------------------
Total equity securities available-for-sale 27,362 33,718 33,718
----------------- ---------------- -------------------
Mortgage loans on real estate 4,838,432 4,786,599*
Real estate:
Investment properties 213,340 171,739*
Acquired in satisfaction of debt 82,930 67,350*
Policy loans 370,908 370,908
Other long-term investments 73,190 67,280#
Short-term investments 45,732 45,732
----------------- -------------------
Total investments $19,090,524 19,710,703
================= ===================
</TABLE>
* Difference from Column B is primarily due to accumulated depreciation
and valuation allowances due to impairments on real estate and
valuation allowances due to impairments on mortgage loans on real
estate. See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations and note 5 to the consolidated
financial statements.
# Difference from Column B is primarily due to operating losses of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 27
Schedule III
------------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplementary Insurance Information
December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
Segment acquisition claims and Unearned premiums benefits payable Premium
costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
1995: Long-term savings $ 668,784 14,847,449 455 -
Life insurance 416,209 2,494,344 408,990 274,957
Accident and health
insurance 9,202 858,335 15,264 509,658
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,094,195 18,200,128 424,709 784,615
============== ===================== ================== ===============
1994: Long-term savings 663,696 13,300,015 240 -
Life insurance 387,486 2,245,375 397,174 209,538
Accident and health
insurance 12,977 776,071 13,414 324,524
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,064,159 16,321,461 410,828 534,062
============== ===================== ================== ===============
1993: Long-term savings 506,243 11,308,024 1,262 -
Life insurance 291,683 2,047,844 378,788 215,715
Accident and health
insurance 14,018 736,387 14,595 312,655
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $ 811,944 14,092,255 394,645 528,370
============== ===================== ================== ===============
- ----------------------------------- -------------- -------------------- ------------------ ----------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Net Amortization Other
investment Benefits, claims, of deferred operating
Segment income losses and policy expenses Premiums
(3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
1995: Long-term savings $1,124,207 1,009,632 51,998 210,525
Life insurance 202,285 267,123 34,124 94,461
Accident and health
insurance 22,725 379,532 6,922 153,984 473,513
Corporate 133,763 - - -
-------------- -------------------- ------------------- ------------------
Total $1,482,980 1,656,287 93,044 458,970
============== ==================== =================== ==================
1994: Long-term savings 945,318 807,756 56,236 171,038
Life insurance 183,933 237,125 33,394 90,535
Accident and health
insurance 21,020 234,882 5,114 90,829 315,688
Corporate 139,230 - - -
-------------- -------------------- ------------------- ------------------
Total $1,289,501 1,279,763 94,744 352,402
============== ==================== =================== ==================
1993: Long-term savings 897,639 800,385 43,291 157,046
Life insurance 178,978 227,786 35,220 89,496
Accident and health
insurance 27,108 208,735 23,623 82,854 263,117
Corporate 100,701 - - -
-------------- -------------------- ------------------- ------------------
Total $1,204,426 1,236,906 102,134 329,396
============== ==================== =================== ==================
<FN>
(1) Unearned premiums are included in Column C amounts. (3) Allocations of net investment income and certain general
(2) Column E agrees to the sum of the consolidated balance expenses are based on a number of assumptions and
sheet captions, "Policyholders' dividend estimates, and reported operating results would
accumulations" and "Other policyholder funds". change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
Schedule IV
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
------------------- ------------------ ----------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
1995:
Life insurance in force $51,613,116 6,865,011 742,451 45,490,556 1.6%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 281,687 12,817 6,087 274,957 2.2%
Accident and health
insurance 427,943 73,131 154,846 509,658 30.4%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 709,630 85,948 160,933 784,615 20.5%
=================== ================== ================= ================== ===============
1994:
Life insurance in force $46,262,595 5,289,259 819,799 41,793,135 2.0%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 209,918 7,551 7,171 209,538 3.4%
Accident and health
insurance 389,573 69,095 4,046 324,524 1.2%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 599,491 76,646 11,217 534,062 2.1%
=================== ================== ================= ================== ===============
1993:
Life insurance in force $39,417,116 4,352,071 180,739 35,245,784 0.5%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 218,764 6,161 3,112 215,715 1.4%
Accident and health
insurance 398,289 88,506 2,872 312,655 0.9%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 617,053 94,667 5,984 528,370 1.1%
=================== ================== ================= ================== ===============
</TABLE>
See accompanying independent auditors' report.
<PAGE> 29
Schedule V
----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- ------------------------------------------------- ---------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1995:
Valuation allowances - fixed maturity securities $ - 10,153 - 10,153 -
Valuation allowances - mortgage loans on real
estate 47,892 7,653 - 4,850 50,695
Valuation allowances - real estate 27,330 (1,080) - - 26,250
Valuation allowances - other long-term
investments - 457 - - 457
1994:
Valuation allowances - fixed maturity securities 6,680 (6,680) - - -
Valuation allowances - mortgage loans on real
estate 42,350 21,672 - 16,130 47,892
Valuation allowances - real estate 31,357 (4,027) - - 27,330
1993:
Valuation allowances - fixed maturity securities 5,746 934 - - 6,680
Valuation allowances - mortgage loans on real
estate 31,872 28,241 - 17,763 42,350
Valuation allowances - real estate 35,471 (4,114) - - 31,357
Valuation allowances - other long-term
investments 700 (700) - - -
<FN>
(1) Amounts represent direct write-downs charged against the valuation
allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 41
PART C. OTHER INFORMATION
<TABLE>
<S> <C>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: PAGE
(1) Financial statements and schedule included
in Prospectus.
(Part A):
Condensed Financial Information. N/A
(2) Financial statements and schedule included __
in Part B: (Those financial statements and
schedules required by item 23 to be
included in Part B have been incorporated
therein by reference to the Prospectus (Part A))
Nationwide DCVA-II: N/A
Nationwide Life Insurance Company:
Independent Auditors' Report. 39
Consolidated Balance Sheets as of December 31, 1995 and
1994. 40
Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993. 41
Consolidated Statements of Shareholder's Equity for the years
ended December 31 1995, 1994 and 1993. 42
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993. 43
Notes to Consolidated Financial Statements. 44
Schedule I - Summary of Investments - Other Than Investments
In Related Parties. 64
Schedule III - Supplementary Insurance Information. 65
Schedule IV - Reinsurance. 66
Schedule V - Valuation and Qualifying Accounts. 67
</TABLE>
69 of 88
<PAGE> 42
<TABLE>
<S> <C>
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
Authorizing the Establishment of the Registrant -
Filed previously with initial registration
(file no. 333-12369) And is hereby incorporated
by reference.
(2) Not Applicable
(3) Underwriting or Distribution of Contracts between
the Registrant and Principal Underwriter - Filed
previously in connection with Registration
Statement (SEC File No. 33-82190) on November 8,
1994 and hereby incorporated by reference.
(4) The form of the variable annuity contract - To be
filed via Pre-Effective Amendment.
(5) Variable Annuity Application- Attached hereto.
(6) Articles of Incorporation of Depositor- Filed
previously with initial registration (File no,
333-12369) and is hereby incorporated by reference.
Additionally, bi-laws are attached hereto.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with initial
registration (File no. 333-12369) And is hereby
incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) An organizational chart for the Company is
attached hereto.
</TABLE>
70 of 88
<PAGE> 43
<TABLE>
<CAPTION>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olives, NC 28365
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Ray Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
71 of 88
<PAGE> 44
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
</TABLE>
72 of 88
<PAGE> 45
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
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
73 of 88
<PAGE> 46
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Investment Securities Agent
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies placed
through Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas, Texas Insurance Broker
Inc.
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
Employers Insurance of Wausau A Wisconsin Insurance Company
Mutual Company
</TABLE>
74 of 88
<PAGE> 47
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and Medicare
Supplement Insurance
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates Managed Care Delivery
System
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Cash Management Company Ohio Investment Securities Agent
</TABLE>
75 of 88
<PAGE> 48
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring,
or otherwise disposing of shares, bonds,
and other evidences of indebtedness,
securities, and contracts of other
persons, associations, corporations,
domestic or foreign and to form or acquire
the control of other corporations
Nationwide Development Company Ohio Owns, leases and manages commercial real
estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and deals in Real
Property
</TABLE>
76 of 88
<PAGE> 49
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Public Employees Benefit Services Delaware Marketing and Administration of Deferred
corporation Employee Compensation Plans for Public
Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
</TABLE>
77 of 88
<PAGE> 50
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
Wausau Business Insurance Company Illinois Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
** West Coast Life Insurance Company California Life Insurance Company
</TABLE>
78 of 88
<PAGE> 51
<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 Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Account-A Separate Account
* Nationwide VA Separate Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Account-B Separate Account
Nationwide VA Separate Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Account-C Separate Account
* Nationwide VA Separate Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Account-Q Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Contracts
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
</TABLE>
79 of 88
<PAGE> 52
ITEM 27. NUMBER OF CONTRACT OWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State of
Ohio, for indemnification by the Company 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 the Company, 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 the Company pursuant to the foregoing provisions, the
Company 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.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as general
distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
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 VLI Separate Account-2, Nationwide VLI Separate
Account-3, NACo Variable Account and the Nationwide Variable
Account, all of which are separate investment accounts of
the Company or its affiliates. NAS also acts as principal
underwriter for the Nationwide Investing Foundation,
Nationwide Separate Account Trust, Financial Horizons
Investment Trust, and Nationwide Investing Foundation II,
which are open-end management investment companies.
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, Ohio 43215
D. Richard McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Gordon E. McCutchan
One Nationwide Plaza Executive Vice President-Law and
Columbus, OH 43215 Corporate Services and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, Ohio 43215
Robert J. Woodward Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, Ohio 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
</TABLE>
80 of 88
<PAGE> 53
<TABLE>
<S> <C>
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
</TABLE>
<TABLE>
<CAPTION>
(c) Name Of Net Underwriting Compensation On
Principal Discounts And Redemption Or Brokerage
Underwriter Commissions Annuitization Commissions Compensation
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
81 of 88
<PAGE> 54
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
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 post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
(d) Represent that any contract offered by the prospectus and
which is issued pursuant to Section 403(b) of the Code, is
issued by the Registrant in reliance upon, and in compliance
with, the Securities and Exchange Commission's no-action
letter to the American Council of Life Insurance (publicly
available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with IRC
Section 403(b)(11).
(e) Represent that the fees and charges deducted under the
contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred, and
the risks assumed by the Company.
82 of 88
<PAGE> 55
OFFERED BY
NATIONWIDE
LIFE INSURANCE COMPANY
NATIONWIDE DCVA-II
Group
Flexible Fund
Retirement
Contracts
PROSPECTUS
-----------------
83 of 88
<PAGE> 56
NATIONWIDE LIFE INSURANCE COMPANY
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
Issued Through The Nationwide DCVA-II
(Supplement Dated to Prospectus Dated )
This supplement updates certain information contained in the Prospectus and
should be kept for future reference. This supplement is for use exclusively with
Contracts issued which offer Nationwide Asset Allocation Funds.
1. The "GLOSSARY OF TERMS" is hereby amended to add the following definition:
NATIONWIDE ASSET ALLOCATION FUND ("ASSET ALLOCATION FUND") -
One of a series of Underlying Mutual Funds advised by Nationwide
Advisory Services, Inc., each of which has been constructed as a
"fund of funds."
2. The section entitled "SUMMARY OF CONTRACT EXPENSES" on page ___ of the
Prospectus is hereby amended to include the following:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
------------------- ------------------- -------------------
Management Fees Other Expenses Total Fund Annual
Expenses
------------------------------------------------ ------------------- ------------------- -------------------
<S> <C> <C> <C>
Nationwide Asset Allocation Fund -
Aggressive Fund 0.50% 0.00% 0.50%
------------------------------------------------ ------------------- ------------------- -------------------
Nationwide Asset Allocation Fund -
Moderately Aggressive Fund 0.50% 0.00% 0.50%
------------------------------------------------ ------------------- ------------------- -------------------
Nationwide Asset Allocation Fund -
Moderate Fund 0.50% 0.00% 0.50%
------------------------------------------------ ------------------- ------------------- -------------------
Nationwide Asset Allocation Fund -
Moderately Conservative Fund 0.50% 0.00% 0.50%
------------------------------------------------ ------------------- ------------------- -------------------
Nationwide Asset Allocation Fund -
Conservative Fund 0.50% 0.00% 0.50%
------------------------------------------------ ------------------- ------------------- -------------------
</TABLE>
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
---------------------------------------
If you do not surrender your Contract
at the end of the applicable time
period.
- ------------------------------------------------------------ --------------------- -----------------
1 Yr. 3 Yrs.
- ------------------------------------------------------------ --------------------- -----------------
<S> <C> <C>
Nationwide Asset Allocation Fund - Aggressive Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderately Aggressive
Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderate Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderately Conservative
Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Conservative Fund
- ------------------------------------------------------------ --------------------- -----------------
</TABLE>
84 of 88
<PAGE> 57
EXAMPLE CONTINUED
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
---------------------------------------
If you do not surrender your Contract
at the end of the applicable time
period.
- ------------------------------------------------------------ --------------------- -----------------
1 Yr. 3 Yrs.
- ------------------------------------------------------------ --------------------- -----------------
<S> <C> <C>
Nationwide Asset Allocation Fund - Aggressive Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderately Aggressive
Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderate Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderately Conservative
Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Conservative Fund
- ------------------------------------------------------------ --------------------- -----------------
</TABLE>
EXAMPLE CONTINUED
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
---------------------------------------
If you do not surrender your Contract
at the end of the applicable time
period.
- ------------------------------------------------------------ --------------------- -----------------
1 Yr. 3 Yrs.
- ------------------------------------------------------------ --------------------- -----------------
<S> <C> <C>
Nationwide Asset Allocation Fund - Aggressive Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderately Aggressive
Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderate Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Moderately Conservative
Fund
- ------------------------------------------------------------ --------------------- -----------------
Nationwide Asset Allocation Fund - Conservative Fund
- ------------------------------------------------------------ --------------------- -----------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
3. The section entitled "VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS" on
page___ of the Prospectus is hereby amended by adding the following
sections:
CONTRACT SURRENDER CHARGE
Upon termination of the Contract, an Owner whose Contract is invested in
the Nationwide Asset Allocation Funds will be assessed a surrender charge
calculated using a market value adjustment formula which only applies to
the fixed interest contract portion of each Asset Allocation Fund. The
market value adjustment is the amount which the Company determines, in
accordance with its then current procedures applicable to all fixed
interest contracts of this type and class, would be the net capital loss,
if any, resulting to the Company if investments were liquidated to make the
lump sum withdrawal. The then current Company procedures for determination
of the market value adjustment will be provided to the Owner on request.
ASSET ALLOCATION FUND CHARGES
A Participant Account will be assessed a market value adjustment against
the fixed interest contract portion of an Asset Allocation Fund for any
exchange or transfer from such Asset Allocation Fund, when certain
restrictions are exceeded (said restrictions are more fully set forth in
the Section entitled "Exchanges and Transfers for Asset Allocation Funds").
The Company reserves the right to change the percentage of said market
value adjustment on a quarterly basis.
The section entitled "DESCRIPTION OF THE CONTRACTS - EXCHANGE PRIVILEGE"
on page ___ of the Prospectus is hereby amended by adding the following
sentence at the end of the first paragraph:
"Exchanges and transfers from the Asset Allocations are also subject
to the provisions of the
"Exchanges and Transfers for the Asset Allocation Funds" set forth
below.
4. The section entitled "DESCRIPTION OF THE CONTRACTS" on Page ___ of the
Prospectus is hereby amended by adding the following section after the
"EXCHANGE PRIVILEGE" section:
85 of 88
<PAGE> 58
EXCHANGES AND TRANSFERS FOR ASSET ALLOCATION FUNDS
The Company will permit the Owner or the Participant, if the Plan so
provides, to exchange or transfer amounts among the Asset Allocation Funds
as frequently as permitted by the Plan. Exchanges or transfers from another
investment vehicle to an Asset Allocation Fund are permitted, subject to
the limits and rules as set by any such other investment provider.
The following provisions apply to exchanges and transfers from an Asset
Allocation Fund. Fifty percent (50%) of a Participant Account may be
exchanged or transferred out of any Asset Allocation Fund per calendar
year. There will be no charge for such exchange or transfer. In the event
more than 50% of a Participant Account is exchanged or transferred in a
calendar year, then such exchange or transfer shall be subject to market
value adjustment (see "Asset Allocation Fund Charge"). One hundred percent
(100%) of a Participant Account value in each Asset Allocation Fund can be
exchanged or transferred over a two year period, free of charge, subject to
all of the following requirements:
1) At least 50% of a Participant Account must be exchanged or
transferred during the first calendar year. Any exchange or
transfer exceeding 50% is subject to the charge described in the
section entitled "Asset Allocation Fund Charges";
2) Upon such election, no new deferrals or exchanges will be
allowed into the Asset Allocation Fund until the end of the
second calendar year; and
3) 100% of the Participant Account must be exchanged or
transferred in one transaction during the second calendar year.
In the event the above conditions are not met, the election of this option
will have been deemed canceled and the Participant Account shall be
permitted to only transfer 50% of the Participant Account within such
calendar year without incurring the Asset Allocation Fund charge as
described above.
5. The section entitled "SUSPENSION AND TERMINATION" on page ___ of the
Prospectus is hereby amended by adding the following sentence.
"Upon such termination by the Owner, payment of Contract Values
will be subject to any applicable Contingent Deferred Sales Charge
and Contract Surrender Charge."
6. The Appendix located on page ___ of the Prospectus is hereby amended to
include the following information:
Each Asset Allocation Fund seeks to maximize total investment
return (i.e., capital growth and income) subject to its investment
restrictions and asset allocation policies. Each Fund has been
constructed as a "fund of funds" which means that it pursues its
investment objective primarily by allocating its investments among
other mutual funds (the "Underlying Funds"); some of the
Underlying Funds will invest primarily in equity securities
("Equity Funds") while others will invest primarily in bonds and
other fixed income securities ("Bond Funds"). The Underlying Funds
will include portfolios advised by the Asset Allocation Funds'
investment adviser, Nationwide Advisory Services, Inc. ("NAS"), as
well as other mutual funds which are not affiliated with the Funds
advised by NAS. Each of the Asset Allocation Funds, except the
Nationwide Asset Allocation Aggressive Fund will also invest in a
fixed interest contract issued by the Company (the "Nationwide
Contract").
86 of 88
<PAGE> 59
<TABLE>
<S> <C>
Nationwide Asset Allocation - Aggressive Fund -- Seeks to provide growth of capital. It will invest in Equity
Funds. It is generally appropriate for investors looking for
high returns over an investment time horizon of at least 15
years and having a higher tolerance for market fluctuations.
Nationwide Asset Allocation - Moderately Seeks to provide growth of capital. It will invest primarily
Aggressive Fund -- in Equity Funds, but the Fund will attempt to reduce its
volatility by also investing in the Nationwide Contract and
Bond Funds. It is generally appropriate for moderate
investors looking for high returns over an investment
horizon of at least 15 years or for more aggressive
investors over an investment horizon of 10 to 15 years.
Nationwide Asset Allocation - Moderate Fund -- Seeks growth of capital and income. It will also invest
primarily in Equity Funds, but will invest a significant
percentage of its assets in the Nationwide Contract and Bond
Funds. It is appropriate for moderate investors seeking
moderate returns over an investment time horizon of between
10 and 15 years, as well as more conservative investors over
an investment time horizon of over 15 years and more
aggressive investors over an investment time horizon of 5 to
10 years.
Nationwide Asset Allocation - Moderately Seeks income and, secondarily, long term growth of capital.
Conservative Fund -- It will generally invest half of its assets in Equity funds
with the remainder in the Nationwide Contract and Bond
Funds. It is appropriate for moderate investors seeking
lower fluctuations in returns combined with some of the
upside potential of equity investments over an investment
time horizon of between five and 10 years, as well as more
conservative investors over an investment time horizon of
between 10 and 15 years and more aggressive investors over
an investment time horizon of less than 5 years.
Nationwide Asset Allocation - Conservative Seeks income and secondarily, long term growth of capital.
Fund -- It will invest primarily in a fixed income combination of
the Nationwide Contract and the Bond Funds, with a smaller
investment in Equity Funds. It is appropriate for investors
seeking lower fluctuations in returns over an investment
time horizon of less than five years, as well as more
conservative investors with an investment time horizon of
between five and 10 years.
</TABLE>
87 of 88
<PAGE> 60
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company
Act of 1940, the Registrant, Nationwide DCVA-II has caused this Pre-Effective
Amendment No. 1 to be signed on its behalf in the City of Columbus, and State of
Ohio, on this 29th day of January, 1997.
NATIONWIDE DCVA-II
----------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
----------------------------------
(Depositor)
BY /S/ JOSEPH P. RATH
----------------------------------
Joseph P. Rath,
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Pre-Effective Amendment
No. 1 has been signed by the following persons in the capacities indicated on
the 29th day of January, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
- --------------------------------------------
Lewis J. Alphin
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/Chief
- -------------------------------------------- Operating Officer and Director
Joseph J. Gasper
CHARLES L. FUELLGRAF, JR. Director
- --------------------------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman of the Board
- -------------------------------------------- and Director
Henry S. Holloway
D. RICHARD MCFERSON Chairman and Chief Executive
- -------------------------------------------- Officer-Nationwide Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- --------------------------------------------
David O. Miller
C. RAY NOECKER Director
- --------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- -------------------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By: JOSEPH P. RATH
- -------------------------------------------- ---------------------------
James F. Patterson Joseph P. Rath, Attorney-in-Fact
ARDEN L. SHISLER Director
- --------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- --------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- --------------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- --------------------------------------------
Harold W. Weihl
</TABLE>
88 of 88
<PAGE> 1
MASTER ANNUITY APPLICATION
FOR GROUP FLEXIBLE FUND RETIREMENT CONTRACT
TO
NATIONWIDE LIFE INSURANCE COMPANY
COLUMBUS, OHIO 43215-2220
Application is hereby made for a
Group Flexible Fund Retirement Contract by:
--------------------------------------------------
(Entity Name)
Contract Provisions
1. 5% Alternate Assumed Investment Rate: [ ] Yes [ ] No
<TABLE>
<CAPTION>
2. Fund(s) Offered within the Separate Account:
<S> <C> <C>
[ ] AIM Weingarten Fund [ ] Fidelity Magellan(R)Fund [ ] Neuberger & Berman Manhattan Fund
[ ] AIM Constellation Fund [ ] Fidelity OTC Portfolio [ ] Neuberger & Berman Partners Fund, Inc.
[ ] Dreyfus Cash Management [ ] Fidelity Puritan Fund [ ] Davis New York Venture Fund, Inc.
Fund [ ] INVESCO Industrial Income Fund [ ] Putnam Investors Fund
[ ] The Dreyfus Third Century [ ] Janus Fund [ ] Putnam Voyager Fund
Fund [ ] Janus Twenty Fund [ ] SEI Index Funds - S&P 500 Index Portfolio
[ ] The Evergreen Total Return [ ] MAS Funds Fixed Income Portfolio [ ] Seligman Growth Fund, Inc.
Fund [ ] MFS(R)Growth Opportunities Fund [ ] Short-Term Investment Trust-
[ ] Federated GNMA Trust Treasury Portfolio
[ ] Federated U.S. Government [ ] MFS(R)High Income Fund [ ] Strong Common Stock Fund
Securities [ ] Massachusetts Investors Growth [ ] Templeton Foreign Fund
[ ] Fidelity Asset Manager(TM) Stock Fund [ ] Templeton Smaller Companies Growth
[ ] Fidelity Contrafund [ ] Nationwide(R)Bond Fund Fund
[ ] Fidelity Equity-Income Fund [ ] Nationwide(R)Fund [ ] T. Rowe Price International Stock
[ ] Fidelity Growth & Income [ ] Nationwide(R)Growth Fund Fund(R)
Portfolio [ ] Nationwide(R) Money Market Fund [ ] AmCent: Twentieth Century Growth
[ ] Neuberger & Berman Guardian Fund [ ] AmCent: Twentieth Century Select
[ ] AmCent: Twentieth Century Ultra
</TABLE>
3. It is understood that ownership and control of the contract applied for
under this Master Application will be vested in __________________________
_____________________________ .
The entity hereby certifies that before the application was signed a
representative from the entity received a current prospectus of the Group
Flexible Fund Retirement Contract that described all sales charges and
other information relative to the contract(s) being applied for.
[ ] Please send the entity a copy of the Statement of Additional
Information to the DCVA-II Prospectus.
THE ENTITY UNDERSTANDS THAT RETIREMENT INCOME PAYMENTS (AND TERMINATION VALUES,
IF ANY) PROVIDED BY THE CONTRACT(S) ARE VARIABLE WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT.
The Flexible Fund Retirement Contract applied for shall become effective upon
its Contract Date if the purchase payment and the application are each
acceptable to Nationwide Life. In the event the purchase payment or the
application is not acceptable, Nationwide Life's liability shall be limited to a
return of the sum of money paid.
<TABLE>
<CAPTION>
Signed at: this day of , 19 .
------------------------------------------- --- ------------------ ----
(Entity Name)
<S> <C>
- ------------------------------------------- ----------------------------------
(Entity Official Signature) (Date)
- -------------------------------------------
(Title)
- ------------------------------------------- ----------------------------------
(Authorized Representative Signature) (Date)
</TABLE>
DC-1096-B (1/97)
<PAGE> 1
NATIONWIDE LIFE INSURANCE COMPANY
AMENDED AND RESTATED CODE OF REGULATIONS
For the Government of the Shareholders and
Board of Directors
ARTICLE I
Meetings of Shareholders
Section 1. MEETINGS IN OR OUT OF STATE. Any meeting of shareholders may be held
in or outside of the State of Ohio.
Section 2. REGULAR ANNUAL MEETING. A regular annual meeting of the shareholders
shall be held on such date and at such place and time as is fixed by resolution
of the Board of Directors. If for any reason the regular annual meeting is not
held as provided for in this section, then the business to be transacted thereat
may be transacted at any special meeting of shareholders called as provided for
in Section 3 of this Article.
Section 3. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the
shareholders may be called by the Chairman of the Board, Chairman and Chief
Executive Officer-Nationwide Insurance Enterprise, President, a majority of the
members of the Board of Directors acting with or without a meeting, or upon the
written request of persons who hold 25% of all shares outstanding and entitled
to vote thereat. Upon request in writing by registered mail or delivered in
person to the Chairman and Chief Executive Officer-Nationwide Insurance
Enterprise, the President, the Secretary, or by any person or persons entitled
to call a meeting of shareholders, it shall be the duty of the officer receiving
such request forthwith to give notice to shareholders as provided in Section 4
of this Article, and if such notice shall not be so given, then the person or
persons making such request may give such notice to shareholders. Such notice
for special meetings shall specify the time, place and purpose or purposes
thereof and no business other than that included in the statements of such
notice shall be acted upon at such meeting except with the consent of all of the
shareholders entitled to attend and vote at the meeting in question.
Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. A written or printed notice of each
regular or special meeting of the shareholders, or where the Board of Directors
has elected to change the time and place of the annual meeting of shareholders
as provided in Section 2 of this Article, stating the time, place and purposes
thereof, shall be delivered or mailed to each shareholder of record entitled to
vote at such meeting or entitled to notice. If mailed, it shall be
<PAGE> 2
addressed to such shareholder's last known address as shown by the books of the
company. Such notices shall be so delivered or mailed not more than forty-five
(45) nor less than ten (10) days before the date fixed for the meeting, and the
shareholders entitled to such notice shall be those of record as of the day next
preceding the day on which notice is given or if a record date therefor is fixed
as provided by law or these Regulations, of record as of such date so fixed. In
the event of the transfer of shares after notice has been given and prior to the
holding of the meeting, it shall not be necessary to serve notice upon the
transferee. If any meeting is adjourned to another time or place, no further
notice as to such adjourned meeting need be given other than by announcement at
the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE. Any shareholder or shareholders entitled to notice
of any shareholders' meeting may, in person or by proxy, either before, at or
after such meeting, waive notice in writing, which writing shall be filed with
or entered upon the records of the meeting, of any or all of the provisions of
law, the Articles of Incorporation or Regula tions as to notice of such meeting,
including the time, place and purpose thereof or as to any irregularities in
such notice or arising in connection therewith or with the giving thereof and
shall thereby validate the proceedings at such meeting as fully as though all of
the requirements waived had been duly met in their respective cases. The
attendance of any shareholder at any such meeting, in person or by proxy,
without protesting the lack of a proper notice of such meeting shall be deemed
to be a waiver of notice of such meeting.
Section 6. QUORUM. A majority of the issued and outstanding shares, the holders
of which are entitled to attend and vote at a meeting of shareholders, shall
constitute a quorum for the transaction of business at that meeting, but if at
any regular or special meeting of the shareholders, or at any adjournment
thereof, such a quorum is not present, then a majority vote of the shares
present in person or by proxy shall constitute a quorum for the purpose of
adjourning a meeting until a quorum competent to act on any matter or proposal
is present.
Section 7. VOTING.
(a) WHO ENTITLED TO VOTE. Only shareholders of record of common shares on the
books of the company shall be entitled to vote at any regular or special meeting
of shareholders. Each such shareholder so entitled to vote shall have the right
to cast one vote in person or by proxy for each share standing opposite such
shareholder's name on the books of the company.
2
<PAGE> 3
(b) VOTING BY CORPORATION. Subject to the provisions of the Articles of
Incorporation and Section 7(a) of this Regulation, the Chairman, and Chief
Executive Officer-Nationwide Insurance Enterprise, President, Chairman of the
Board of Directors, Vice President, Secretary or Treasurer of any corporation
holding shares of this company and entitled to vote at any meeting shall
conclusively be deemed to have authority to vote such shares and to execute
proxies and written waivers or consents in relation thereto, whether such shares
are held in a fiduciary capacity or otherwise, unless before a vote is taken or
a consent or waiver is acted upon, a certified copy of a Regulation, Bylaw or
resolution, of the Board of Directors or Executive Committee of the corporation
holding such shares is delivered to the Secretary of the company, showing that
such authority does not exist or is vested in some other officer or person. A
person executing any such writing or so acting as one of such officers of such
corporation shall, for the purposes of this paragraph be prima facie deemed to
be duly elected, qualified and acting as such officer and to be fully
authorized.
(c) VOTING BY PROXIES. A shareholder may, through a written proxy, authorize
another person (who need not be a shareholder) to vote in the shareholder's
stead and to represent the shareholder at one or more shareholders' meetings or
any adjournment thereof, whether regular or special meetings, but such
instrument must be filed with the Secretary of the company or in the Secretary's
office before the convening of the meeting and before the person authorized
thereby may exercise the rights thereunder. A vote in accordance with the terms
of a duly filed proxy shall be valid notwithstanding the previous death of the
principal or the revocation of the appointment or the transfer of the share on
which the vote was given, unless notice in writing of such death, revocation or
transfer shall have been received by the Secretary of the company or in the
Secretary's office or such revocation is made in open meeting before the vote is
taken or the authority granted is otherwise exercised; provided, however, that
no proxy hereafter made shall be valid after the expiration of eleven (11)
months after date of its execution unless the shareholder executing it shall
have specified therein the length of time it is to continue in force. A
telegram, cablegram, wireless message or photograph, photostatic or equivalent
reproduction of a writing appointing a proxy or proxies shall be a sufficient
writing. Unless the writing appointing a proxy or proxies otherwise provides:
(l) each proxy shall have the power of substitution and when three or more
persons are appointed a majority of them or their respective substitutes may
appoint a substitute or substitutes to act for all; (2) if more than one proxy
is appointed, then (a) with respect to voting or giving consents at a
shareholders' meeting, a majority of such proxies as attend
3
<PAGE> 4
the meeting, or if only one attends then that one may exercise all the voting
and consenting authority thereat; and if an even number attend and a majority do
not agree on any particular issue; each proxy so attending shall be entitled to
exercise such authority with respect to an equal number of shares; (b) with
respect to exercising any other authority, a majority may act for all; (3) the
presence of a shareholder at a meeting shall not operate to revoke a writing
appointing a proxy. A shareholder, without affecting any vote previously taken,
may revoke such writing not otherwise revoked by giving notice to the company in
writing or in open meeting.
Section 8. INSPECTORS OF ELECTION. The Chairman of the Board, the Chairman and
Chief Executive Officer-Nationwide Insurance Enterprise or the person acting as
the chairman of any meeting of shareholders may, or upon the request of any
shareholder or proxy entitled to vote at a meeting of shareholders shall appoint
three (3) inspectors who need not be shareholders. The inspectors shall
determine the number of shares outstanding, the voting rights with respect to
each, the shares represented at the meeting, the existence of a quorum, and the
authenticity, validity, and effect of proxies; receive votes, ballots, consents,
waivers, or releases; hear and determine all challenges and questions arising in
connection with the vote; count and tabulate all votes, consents, waivers, and
releases; determine and announce the result; and do such acts as are proper to
conduct the election or vote with fairness to all shareholders. The decision,
act or certificate of a majority of the inspectors shall be effective in all
respects as the decision, act or certificate of all three (3). If requested to
do so, the inspectors shall make a report in writing of any challenge, question
or matter determined by them, and make and execute a certificate of any facts
found by them. The certificate of the inspectors shall be prima facie evidence
of the facts therein stated and of the vote as certified by them.
Section 9. ORDER OF BUSINESS. At all shareholders' meetings, the order of
business shall be as follows, unless changed by a majority of the shares
represented at that meeting:
1. Reading of minutes of preceding meeting;
2. Reading and consideration of reports and
statements--report of the Chairman and Chief
Executive Officer-Nationwide Insurance Enterprise,
President, any other officer, and any committee;
3. Election of directors (at annual or special meeting
called for that purpose);
4. Old or unfinished business;
5. New business;
6. Adjournment.
4
<PAGE> 5
ARTICLE II
Fiscal Year
Section 1. FISCAL YEAR. The fiscal year of the company shall begin on the first
day of January and end on the last day of December of each year, but the Board
of Directors shall have the power to change such fiscal year at any time it
deems such change advisable.
ARTICLE III
Directors
Section 1. POWERS OF DIRECTORS. The corporate powers, business and property of
the company shall be exercised, conducted and controlled by, or under the
direction of, the Board of Directors except as otherwise required by statute,
the Articles of Incorporation or these Regulations with regard to action
required to be taken or approved by the shareholders.
Section 2. NUMBER, QUALIFICATION AND ELIGIBILITY. The number of directors shall
be fifteen (15).
Section 3. CLASSIFICATION AND ELECTION. The directors shall be divided into
three classes and each class shall consist as near as may be of one-third of the
number of directors. At each regular annual meeting of shareholders, the
successors of the class of directors whose term shall expire in that year shall
be elected by ballot for a term of three years and until their respective
successors are elected and qualified. Directors shall be elected by receiving
the highest number of votes cast on the ballot. No requirements shall exist as
to notice of such annual election other than those contained in this Code of
Regulations. If directors are not elected at the regular annual meeting of the
shareholders for any cause, they may be elected at any other meeting duly called
for that purpose.
Section 4. VACANCIES. Whenever a vacancy occurs in the Board of Directors of the
company, the vacancy may be filled for the unexpired term by the vote of a
majority of the Board of Directors present if those present constitute a quorum;
provided, however, if the Board is reduced to less than a majority by reason of
vacancies, however caused, the remaining directors, by a majority vote or the
remaining director may fill such vacancies. The Board of Directors may declare
the office of a director vacant if the director shall be declared of unsound
mind by an order of court or be adjudicated a bankrupt or if the director does
not qualify within sixty (60)
5
<PAGE> 6
days of election by accepting in writing election to such office or by acting at
a meeting of the Board of Directors and the Board of Directors may thereupon
fill such declared vacancy.
Section 5. COMPENSATION. The members of the Board of Directors, other than
salaried officers, shall receive such compensation as shall be fixed by the
Board of Directors from time to time for the performance of services for the
company, together with reimbursement for their expenses incurred in the
performance of such services
Section 6. ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING. Unless
otherwise restricted by the Articles of Incorporation or Code of Regulations,
any action required or permitted to be taken by the Board of Directors may be
taken without a meeting, if all members of the Board Shall individually or
collectively consent in writing to such action; provided action by written
consent or consents shall be filed with minutes of the proceedings of the Board.
Any action without a meeting of the Board shall be limited to those situations
where time is of the essence and not in lieu of a regularly scheduled board
meeting.
ARTICLE IV
Executive or Other Committees of the Board
Section 1. EXECUTIVE OR OTHER COMMITTEES OF THE BOARD. The Board of Directors by
vote of a majority of the Board may, at its discretion, appoint or elect an
Executive Committee of not less than three (3) members from its own number, who
shall have and may exercise the powers of the Board of Directors in the interim
between meetings of the Board of Directors, except filling vacancies in the
Board of Directors or in any committee of the Board of Directors. The Executive
Committee shall, at all times, be subject to any instructions issued by the
Board of Directors. Such Executive Committee shall, from time to time, make a
report of its acts and transactions to the Board of Directors. Such other
committees of the Board may be appointed or elected as may be provided for by
resolution of the Board of Directors. The act of a majority of the Executive
Committee or any other committee of the Board shall be effective in all respects
as the act of such committee at a meeting, or any such committee may act by a
writing signed by all of its members without a meeting.
6
<PAGE> 7
ARTICLE V
Officers
Section 1. OFFICERS. The officers shall be a Chairman of the Board of Directors,
Chairman and Chief Executive Officer-Nationwide Insurance Enterprise, President,
one or more Vice Presidents, General Counsel, Secretary, Treasurer and such
other vice presidents, assistant secretaries, assistant treasurers and other
officers as the Board of Directors may appoint or elect or provide by resolution
from time to time. The Chairman of the Board, Chairman and Chief Executive
Officer-Nationwide Insurance Enterprise and President must be members of the
Board of Directors. Any two or more of the offices may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law or by the Articles
of Incorporation or Code of Regulations to be executed, acknowledged or verified
by two or more officers.
All of the above officers shall be chosen by the Board of Directors by ballot
and by the vote of the majority of the Board of Directors at the regular annual
meeting of the Board. The officers shall hold office until the date of the next
regular annual meeting of the Board of Directors and until their respective
successors are elected and qualified; provided, however, that any officer may be
removed from office with or without cause at any time by a vote of at least
two-thirds of the entire Board of Directors. If, for any cause, there is no
regular annual meeting of the Board of Directors, or if such meeting is held and
no one is elected or re-elected to one or more of the offices, the omitted
election may be held in the manner above described at any other meeting of the
Board of Directors if such meeting is duly called as a special meeting for that
purpose or if each member of the Board of Directors shall be present or shall
waive in writing the call and notice thereof.
ARTICLE VI
Duties of Officers
Section 1. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors shall
preside at all meetings of the shareholders and the Board of Directors, shall
sign the record of such meetings at which the Chairman shall preside and shall
have such other powers and duties as may be prescribed by the Board of
Directors. In the absence of the Chairman of the Board and the Chairman and
Chief Executive Officer-Nationwide Insurance Enterprise, another director shall
be selected by those directors present to serve as temporary Chairman, and shall
be
7
<PAGE> 8
authorized to sign the records of meetings at which such director presides.
Section 2. CHAIRMAN AND CHIEF EXECUTIVE OFFICER-NATIONWIDE INSURANCE ENTERPRISE.
The Chairman and Chief Executive Officer-Nationwide Insurance Enterprise shall
be the Chief Executive Officer and shall exercise general administrative
leadership and direction of the company in conformity with actions and controls
established and maintained by the Board of Directors. The Chairman and Chief
Executive Officer-Nationwide Insurance Enterprise shall have the power and
authority to execute on behalf of the company any and all documents, contracts,
instruments, or other papers to which the signature of the company is to be
attached; provided, however, a facsimile signature may be printed, engraved, or
stamped on any approved document, contract, instrument, or other papers of the
company.
In the absence of the Chairman of the Board, or at the request thereof, the
Chairman and Chief Executive Officer-Nationwide Insurance Enterprise shall
preside at meetings of the shareholders and the Board of Directors, sign the
record of such meetings at which the Chairman and Chief Executive
Officer-Nationwide Insurance Enterprise shall preside and shall have such other
powers and duties as may be prescribed by the Board of Directors.
Section 3. PRESIDENT. The President shall be the Chief Operating Officer of the
company and shall, in compliance with the laws of the State of Ohio, Articles of
Incorporation and this Code of Regulations, and in concurrence with the Chairman
and Chief Executive Officer-Nationwide Insurance Enterprise and actions of the
Board of Directors, direct the activities of its officers.
Except as provided for by resolution of the Board of Directors or by memorandum
from the Chairman and Chief Executive Officer-Nationwide Insurance Enterprise,
the President shall have the power and authority to execute on behalf of the
company those documents, contracts, instruments, or other papers to which the
signature of the company is to be attached; provided, however, a facsimile
signature may be printed, engraved or stamped on any approved document,
contract, instrument, or other papers of this company. The President shall
exercise the discretion of and perform generally all of the duties incident to
the Office of President and such other and further duties as may be required by
the Board of Directors and the Chairman and Chief Executive Officer-Nationwide
Insurance Enterprise.
Section 4. VICE PRESIDENTS. The Vice Presidents, who may be designated Executive
Vice President, Senior Vice President,
8
<PAGE> 9
Vice President, or Associate Vice President, shall have such powers and perform
such duties as may be assigned to them by the Chairman and Chief Executive
Officer-Nationwide Insurance Enterprise or President and approved by the Board
of Directors. The officer designated by the President and approved by the
Chairman and Chief Executive Officer-Nationwide Insurance Enterprise shall act
for the President in the absence or disability of the President.
Section 5. GENERAL COUNSEL. The General Counsel shall furnish legal counsel on
corporate matters as required; render legal opinions to the Board of Directors,
the Chairman and Chief Executive Officer-Nationwide Insurance Enterprise,
President and other officers and employees as requested; interpret all laws and
regulations relating to the business of the company; initiate recommendations
with respect to legislation affecting the business of the company; and shall
perform such other and further duties as may be required by the Board of
Directors, Chairman and Chief Executive Officer-Nationwide Insurance Enterprise
or President.
Section 6. SECRETARY. The Secretary shall issue notices and maintain the
official records of all meetings of the shareholders and the Board of Directors
and such records shall be attested by the Secretary or by such other person as
shall have acted as secretary of such meeting in the case of the Secretary's
absence for any reason; shall have charge of the seal, share or other security
books of the company and shall issue and attest all certificates of shares or
other securities of the company; provided, however, a facsimile signature may be
printed, engraved or stamped on certificates for shares, bonds or other
securities of the company when such certificates are countersigned by an
incorporated transfer agent or registrar. In case a transfer agent or registrar
of the shares or other securities of the company shall be duly appointed by it,
the Secretary may place in charge of such transfer agent or registrar the seal
and share or other security books of the company and such transfer agent or
registrar may perform in the Secretary's stead all duties in connection with the
shares of the company. The Secretary shall have power and authority to sign or
attest on behalf of the company all approved instruments, papers and documents
where required in carrying on the business of the company; provided, however, a
facsimile signature may be printed, engraved or stamped thereon; and shall
perform such other and further duties as may from time to time be assigned by
the Chairman and Chief Executive Officer-Nationwide Insurance Enterprise or the
President and approved by the Board of Directors.
9
<PAGE> 10
Section 7. TREASURER. The Treasurer shall maintain custody of all funds,
securities and properties of the company; direct the receipt and deposit of all
funds and securities and payment of all authorized disbursements; direct the
administration of all accounting activities of the company; furnish financial
reports of the company, as required; shall have the power and authority to sign
or attest all approved instruments, papers and documents where required in
carrying on the business of the company; and shall perform such other and
further duties as may from time to time be assigned by the Chairman and Chief
Executive Officer-Nationwide Insurance Enterprise or the President and approved
by the Board of Directors.
Section 8. ASSISTANT SECRETARY. The Assistant Secretary shall at all times act
as an assistant to the Secretary and have such powers and perform such duties as
shall be assigned by the Secretary and approved by the Chairman and Chief
Executive Officer-Nationwide Insurance Enterprise or the President. In case both
the Secretary and the Assistant Secretary are at the same time absent or unable
to perform their duties the Board of Directors may appoint a secretary pro
tempore with the power and duty to act as Secretary during such absence or
disability of both the Secretary and Assistant Secretary.
Section 9. ASSISTANT TREASURER. The Assistant Treasurer shall at all times act
as an assistant to the Treasurer and shall have powers and perform such duties
as shall be assigned by the Treasurer and approved by the President
Section 10. EXECUTION OF INSTRUMENTS. Any vice president and any assistant
secretary or assistant treasurer shall have the power and authority to sign all
approved documents, instruments, contracts or other papers in connection with
the operation of the business of the company in addition to the Chairman and
Chief Executive Officer-Nationwide Insurance Enterprise, President, Treasurer
and Secretary; provided, however, the signature of any of them may be printed,
engraved or stamped on any approved document, contract, instrument or other
papers of the company.
Section 11. VACANCIES. Whenever a vacancy occurs in any office of the company
for any cause, the vacancy may be filled for the unexpired term by the vote of a
majority of the Board of Directors present, if those present constitute a quorum
thereof.
Section 12. BOND OF OFFICERS AND EMPLOYEES. Any officer or employee of the
company handling funds or negotiable instruments or any other property of the
company shall furnish such bond or shall be covered by a blanket bond in such
10
<PAGE> 11
amounts and with such surety and sureties as may be required by the Board of
Directors. The premium of any such bond shall be paid by the company.
ARTICLE VII
Indemnification
Section 1. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The company
shall indemnify 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 the company, or is
or was serving at the request of the company as a director, trustee, officer,
member, or employee of another corporation, domestic or foreign, non-profit or
for profit, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred 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; provided, however, that the
company shall indemnify any such person seeking indemnify in connection with an
action, suit or proceeding (or part thereof) initiated by such person only if
such action, suit or proceeding (or part thereof) initiated by such person was
authorized by the Board of Directors of the company. Such indemnification
(unless ordered by a court) shall be made as authorized in a specific case upon
a determination that indemnification of the director, trustee, officer or
employee is proper in the circumstances because such person has met the
applicable standards of conduct set forth in the General Corporation Law of the
State of Ohio. Such determination shall be made (1) by the Board of Directors by
a majority vote of a quorum consisting of directors who were not, and are not,
parties to or threatened with any such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or if a majority vote of a quorum of
disinterested directors so directs, in a written opinion by independent legal
counsel meeting the requirements of independence prescribed by the General
Corporation Law of Ohio, or (3) by the shareholders, or (4) by the Court of
Common Pleas or the court in which such action, suit or proceeding was brought.
Section 2. OTHER RIGHTS. The foregoing right of indemnification shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under the Articles of Incorporation, these Regulations, any
agreement, vote of shareholders or disinterested directors or
11
<PAGE> 12
otherwise, and shall continue as to a person who has ceased to be a director,
trustee, officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 3. ADVANCE PAYMENT OF EXPENSES. The company shall pay to any director,
and may pay to any other person entitled to indemnification pursuant to Section
1 of this Article IX, expenses, including attorneys' fees, incurred in defending
any action, suit or proceeding referred to in Section 1 of this Article IX, in
advance of the final disposition of such action, suit or proceeding; provided,
however, that the payment of such expenses in advance of the final disposition
of such action, suit or proceeding shall be made only upon delivery to the
company of any legally required undertaking by or on behalf of such director or
other person.
Section 4. CONTRACTUAL RIGHTS; APPLICABILITY. The right to be indemnified or to
the reimbursement or advancement of expenses pursuant hereto (i) is a contract
right based upon good and valuable consideration, pursuant to which the person
entitled hereto may bring suit as if the provision hereof were set forth in a
separate written contract between the company and such person, (ii) is intended
to be retroactive and shall be available with respect to events occurring prior
to the adoption hereof, and (iii) shall continue to exist after the rescission
or restrictive modification hereof with respect to events occurring prior
thereto.
Section 5. REQUESTED SERVICE. Any person serving, in any capacity, (i) another
corporation of which a majority of the shares entitled to vote in the election
of its directors is held by the by the company, or (ii) any employee benefit
plan of the company or of any corporation referred to in clause (i), shall be
deemed to be doing so at the request of the company.
Section 6. INSURANCE. The company may purchase and maintain insurance on behalf
of any person who is or was a director, officer, member, or employee of the
company, or is or was serving at the request of the company as a director,
trustee, officer or employee of another corporation, domestic or foreign,
non-profit or for profit, partnership, joint venture, trust, or other enterprise
against any liability asserted against such person and incurred in any such
capacity, or arising out of the status as such, whether or not the company would
have the power to indemnify such person against such liability under this
Article VII.
12
<PAGE> 13
ARTICLE VIII
Shares
Section 1. CERTIFICATES OF SHARES. Each shareholder of the company whose shares
are paid in full shall be entitled to a certificate or certificates showing the
number of shares registered in such shareholder's name on the books of the
company. Such certificates shall be issued in numerical order and signed by the
Chairman and Chief Executive Officer-Nationwide Insurance Enterprise or the
President and the Secretary, or such other officers or persons as may be
authorized by the Board of Directors. The signature of any of said officers may
be facsimile, engraved, stamped or printed when such certificates are
countersigned by an incorporated transfer agent or registrar. A full record of
each certificate as issued shall be entered on the stock record books of the
company. No new certificate shall be issued until the former certificate for the
same number of shares shall have been surrendered and canceled, except as
provided for in Section 3 below of this Article of these Regulations.
Section 2. TRANSFER OF SHARES. The shares of the company may be transferred on
the books of the company by the holder thereof in person or by a duly authorized
attorney upon the surrender of the certificate therefor properly endorsed and
assigned.
Section 3. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. If any share
certificate in this company becomes worn, defaced or mutilated, the Secretary,
upon presentation or surrender thereof, may order the same canceled, and may
issue a new certificate in lieu thereof. If any share certificate be lost,
stolen or destroyed, the Secretary may issue a new certificate in lieu thereof
to the person entitled to such lost, stolen or destroyed certificate upon
receiving a bond of indemnity containing such terms as the Board of Directors
may require to protect the company or any person, firm or other corporation from
loss, cost or damage resulting from the issue of such new certificate.
Section 4. CLOSING OF TRANSFER BOOKS. The Board of Directors shall have the
power to close the share transfer books of the company for a period not to
exceed forty-five (45) days preceding the date of any meeting of shareholders,
or the date for payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital shares
shall go into effect; provided, however, that in lieu of closing the share
transfer books, the Board of Directors may fix in advance a date not exceeding
forty-five (45) days preceding the date of any meeting of shareholders, or the
date for the payment of any dividend, or the date for
13
<PAGE> 14
the allotment of rights, or the date when any change or conversion or exchange
of shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of, and to vote at any such meeting, or entitled
to receive payment of any such dividend, or to any such allotment of rights or
to exercise the rights in respect of any such change, conversion or exchange of
shares, and in such cases only such shareholders as shall be shareholders of
record on the date so fixed shall be entitled to such notice of, and to vote at
such meeting, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, as the case may be
notwithstanding any transfer of any share on the books of the company after any
such record date fixed as aforesaid. The company shall be entitled to treat the
holder of record of any share or shares of the company as the holder in fact
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to, or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as expressly provided
by the laws of the State of Ohio.
Section 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint,
or revoke the appointment of, transfer agents and registrars and may require all
certificates for shares to bear the signatures of such transfer agents and
registrars, or any of them. The Board of Directors shall have authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer, and registration of certificates for shares of the company.
ARTICLE IX
Seal
Section 1. SEAL. The seal of the company shall be circular with the name of the
company engraved around the margin and the word "SEAL" engraved across the
center.
ARTICLE X
Amendments
Section 1. AMENDMENTS. This Code of Regulations may be adopted, amended, changed
or repealed by the affirmative vote of the holders of record of shares entitling
them to exercise a majority of the voting power on such proposal at any meeting
of shareholders of the company.
Effective: April 4, 1996
14
<PAGE> 1
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |_________________________________
| Contribution Note Cost |_________________________________
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________ __________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | | | |
| | | | | NATIONWIDE LLOYDS | | COMPANIES |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | | | |
| ------------- Shares | | ------------- Shares |_____| |_____| AGENCY OF |
| | | |_____| |_____| |
| Cost | | Cost | | | | TEXAS, INC. |
| ---- | | ---- | | A TEXAS LLOYDS | | |
| Employers-- | | Employers-- | | | | |
| 100% $15,683,300 | | 100% $106,763,000 | | | | |
|_______________________________| |________________________________| |_____________________| |__________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 10,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $21,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $44,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| |
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
___| NATIONWIDE MUTUAL |_____________________________________________| NATIONWIDE MUTUAL |
___| INSURANCE COMPANY |_____________________________________________| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
|_________________________________________| |___________________________|
| || |________________________________________________________________ |
| || | | |
______________|_______________ || | _____________________________ _____________|_______|______________
| | || | | | | |
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NATIONWIDE |
| | || | | INSURANCE COMPANY | | CORPORATION |
| Common Stock: 2,936 | || | | | | |
| ------------- Shares | || | | Common Stock: 20,000 Shares | | Common Stock: Control |
| Cost | || |___| ------------- | | ------------- ------- |
| ---- | || | | | | $13,642,432 100% |
| Casualty-26% $88,320 | || | | Cost | | |
| Fire-26% $88,463 | || | | ---- | | Shares Cost |
| Preferred Stock: 1,466 Shares| || | | Casualty-100% $5,944,422 | | ----- ---- |
| ---------------- | || | |_____________________________| | Casualty 12,992,922 $751,352,485 |
| Cost | || | | Fire 649,510 24,007,936 |
| ---- | || | | |
| Casualty-6.8% $100,000 | || | | (See Page 2) |
| Fire-6.8% $100,000 | || | |____________________________________|
|______________________________| || |
|| |
_________________________ || | _____________________________
| | || | | |
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY |
| INSURANCE COMPANY | || | | AND CASUALTY |
| | || | | INSURANCE COMPANY |
| Guaranty Fund |______|| | | |
| ------------- |_______| | | Common Stock: 60,000 Shares |
| Certificate | | | ------------- |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | |
| | | COLONIAL INSURANCE |
_______________|___________ | | COMPANY OF CALIFORNIA |
| F & B, INC. | | | (COLONIAL) |
| | | | |
| Common Stock: 1 Share | |___| Common Stock: 1,750 Shares |
| ------------- | | | ------------- |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | | | |
| | | | SCOTTSDALE | | NATIONAL PREMIUM & |
| NATIONWIDE AGRIBUSINESS | | | INSURANCE COMPANY | | BENEFIT ADMINISTRATION |
| INSURANCE COMPANY | | | | | COMPANY |
| | | | Common Stock: 30,136 Shares | | |
| Common Stock: 1,000,000 |___|___| ------------- |______| Common Stock: 10,000 |
| ------------- Shares | | | | | ------------ Shares |
| | | | Cost | | |
| | | | ---- | | Cost |
| | | | Casualty-100% $150,000,000 | | ---- |
| Casualty-99.9% $26,714,335 | | |_____________________________| | Scottsdale-100% $10,000 |
| | | |__________________________|
| Other Capital: | |
| -------------- | |
| Casualty-Ptd. $ 713,567 | |
|____________________________| |
|
|
|
|
| _____________________________ ______________________________
| | NECKURA HOLDING | | NECKURA |
| | COMPANY (NECKURA) | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |_____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS INSURANCE |
| | | BROKERAGE AND SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIREKT |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT COMPANY | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY COMPANY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | INDEMNITY COMPANY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares |______| Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | | | |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty-100% $5,000,000 | | Colonial $500,000 |
| |_____________________________| | Lone Star 150,000 |
| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | CORPORATION |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________
| | CALIFORNIA CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 90 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $9,000 |
| |_____________________________|
|
|
| _____________________________ __________________________
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| | | | |
| | Common Stock: 14,750 Shares | | Common Stock: 750 Shares |
|___| ------------- |_____| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Contractual Association - Double Line
December 31, 1995
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|_________________
| NATIONWIDE LIFE INSURANCE |
| COMPANY (NW LIFE) |
|Common Stock: 3,814,779 Shares|
| ------------- |
| |
| NW Corp.- Cost |
| 100% ---- |
| $950,226,915 |
|______________________________|
_________________________________________________________________________________|
____________|_____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | NATIONWIDE LIFE AND |
| FINANCIAL SERVICES, INC. | | COMPANY (NC) | | | ANNUITY INSURANCE COMPANY |
| (NW FIN. SERV.) | | Common Stock: 100 Shares | | | |
______|Common Stock: 7,676 Shares| | ------------- | | | Common Stock: 66,000 Shares |
| ____|------------- | | | |_______| ------------- |
| | | Cost | | Cost | | | NW Life- Cost |
| | | ---- | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |__________________________| |___________________________| | |______________________________|
| | __________________________ ___________|_______________ | ________________________________
| | | NATIONWIDE | | | | | WEST COAST LIFE |
| | | INVESTOR SERVICES, INC. | | | | | INSURANCE COMPANY |
| | | Common Stock: 5 Shares | | NCC OF AMERICA, INC. | | | Common Stock: 1,000,000 Shares|
| |___| ------------- | | (INACTIVE) | |_______| ------------- |
| | | NW Fin. Serv.-100% | | | | | |
| | | Cost | | NC-100% | | | Cost |
| | | ---- | | | | | ---- |
| | | $5,000 | | | | | NW Life-100% $133,809,265 |
| | |__________________________| |___________________________| | |________________________________|
| | __________________________ ______________________________ | ____________________________
| | | NATIONWIDE | | EMPLOYERS LIFE INSURANCE CO. | | | NATIONWIDE PROPERTY |
| | | INVESTING | | OF WAUSAU (ELIOW) | | | MANAGEMENT, INC. |
| | | FOUNDATION | | | | | Common Stock: 59 Shares |
| |___| | ______| Common Stock: 250,000 Shares |____|_______| ------------ |
| ___| | | | ------------- Cost | | | Cost |
| | | | | | ---- | | | ---- |
| | | | | | NW Life-100% $155,000,000 | | | NW Life-100% $1,907,896 |
| | | COMMON LAW TRUST | | |______________________________| | |__________________________ |
| | |__________________________| | | |
| | | _____________________________ | __________|_______________
| | __________________________ | | WAUSAU PREFERRED | | | MRM INVESTMENTS, INC. |
| | | NATIONWIDE | | | HEALTH INSURANCE CO. | | | |
| | | INVESTING | | | | | | Common Stock: 1 Share |
| |___| FOUNDATION II | |______| Common Stock: 200 Shares | | | ------------ |
| ___| | | | ------------- | | | |
| | | | | | Cost | | | Cost |
| | | | | | ---- | | | Nat. Prop. ---- |
| | | COMMON LAW TRUST | | | ELIOW -- 100% $57,413,193 | | | Mgmt.-100% $550,000 |
| | |__________________________| | |_____________________________| | |___________________________|
| | | |
| | | _____________________________ | ___________________________
| | __________________________ | | KEY HEALTH PLAN, INC. | | | NWE, INC. |
| | | NATIONWIDE | | | | | | |
| | | SEPARATE ACCOUNT | |______| Common Stock: 1,000 Shares | |______| Common Stock: 100 Shares |
| | | TRUST | | ------------- | | ------------ |
| |___| | | Cost | | Cost |
| ___| | | ---- | | ---- |
| | | COMMON LAW TRUST | | ELIOW-80% $2,700,000 | | NW Life-100% $35,971,375 |
| | | | |_____________________________| |___________________________|
| | |__________________________|
| |
| | __________________________
| | | FINANCIAL HORIZONS |
| | | INVESTMENT TRUST |
| |___| |
|_____| |
| COMMON LAW TRUST |
|__________________________|
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| INSURANCE COMPANY |___________________________________________________________
| (CASUALTY) |
|_______________________________________|
| _______________________________________________________________
__________________|______________|___
| 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 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_________________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES BENEFIT | | GATES, McDONALD | | NATIONWIDE FINANCIAL |
|SERVICES CORPORATION (PEBSCO) | | & COMPANY (GATES) | | INSTITUTION DISTRIBUTORS |
______| Common Stock: 236,494 Shares | | Common Stock: 254 Shares | | AGENCY, INC. (NFIDAI)|
| ____| ------------- | | ------------- |___ _____| Common Stock: 1,000 Shares|
| | | Cost | | | | | ___| ------------- |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $ 7,830,936 | | ---- | | | | | NW Corp. ---- |
| | |______________________________| | NW Corp.- $25,683,532 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK, INC. | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 Shares | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- | | | | | |___|Common Stock: 10,000 Shares|
| | | Cost | | Cost | | | | |----------- |
| | | ---- | | ---- | | | | | Cost |
| | | PEBSCO-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |____________________________| | | | | | | NFIDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | ALABAMA | | | | | | | LANDMARK FINANCIAL |
| | |Common Stock: 100,000 Shares| | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____|------------- | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___|Common Stock: 10,000 Shares|
| | | ---- | | ---- | | | |------------- |
| | | PEBSCO-100% $1,000 | | $93,750 | | | | Cost |
| | |____________________________| |___________________________| | | | ---- |
| | | | | NFIDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ____________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 Shares| | | | FINANCIAL HORIZONS |
| |____| ------------- | | | | SECURITIES CORP. |
| | | Cost | ________________________________|_|___|Common Stock: 10,000 Shares|
| | | ---- | | AFFILIATE AGENCY, INC. | | | |------------- |
| | | PEBSCO-100% $500 | | | | | | Cost |
| | |____________________________| | Common Stock: 100 Shares | | | | ---- |
| | | | | | | NFIDAI-100% $153,000 |
| | | NFIDAI-100% Cost | | | |___________________________|
| | | ---- | | |
| | ___________________________ | $100 | | |
| | | PEBSCO OF MASSACHUSETTS | |___________________________| | |
| | | INSURANCE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 1,000 Shares| | | | |
| | | ------------- | | | | FINANCIAL HORIZONS |
| | | Cost | | |___| DISTRIBUTORS |
| | | ---- | | ___| AGENCY OF OHIO, |
| | | PEBSCO-100% $1,000 | | | | INC. |
| | |___________________________| | | |___________________________|
| | | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | MONTANA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 500 Shares | | ___| DISTRIBUTORS AGENCY |
| | | ------------- | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | ---- | | |
| | | PEBSCO-100% $500 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | NEW MEXICO | | | | |
| | | | | |___| FINANCIAL HORIZONS |
| |____|Common Stock: 1,000 Shares | | ___| DISTRIBUTORS AGENCY |
| | |------------- | | | | OF TEXAS, INC. |
| | | Cost | | | |___________________________|
| | | ----- | | |
| | | PEBSCO-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____| AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS, INC. | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE INSURANCE COMPANY |
| (FIRE) |
|_______________________________________|
________________________________________|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | NATIONWIDE HMO, INC. |
| INVESTOR SERVICES, INC. | | | (NW HMO) |
| (NEA) | | | Common Stock: 100 Shares |
_______| Common Stock: 500 Shares | |_____| ------------ |
| _____| ------------- | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $14,603,732 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MANAGEMENT |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| |_____| OF ALABAMA, INC. | | | Common Stock: 100 Shares |
| | | Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW HMO ---- |
| | | NEA-100% $5,000 | | | INC.-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH |
| | | INVESTOR SERVICES | | | AGENCY, INC. |
| | | OF MONTANA, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | Cost |
| | | Cost | | NW HMO ---- |
| | | ----- | | INC.-99% $116,077 |
| | | NEA-100% $500 | |___________________________|
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF NEVADA, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF OHIO, INC. |
| | | Common Stock: 100 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-91% $5,000 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF WYOMING, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | |
| | | NEA VALUEBUILDER |
| |_____| INVESTOR SERVICES |
| | | OF TEXAS, INC. |
| | | |
| | |___________________________|
| |
| | ___________________________
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
</TABLE>
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
Page 2
