<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. 2
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
PRE-EFFECTIVE AMENDMENT NO. 2
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 ................................................. 15
Item 4. Condensed Financial Information ........................................ N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies... 16
Item 6. Deductions and Expenses ................................................ 17
Item 7. General Description of Variable Annuity Contracts....................... 19
Item 8. Annuity Period ......................................................... 23
Item 9. Death Benefit .......................................................... 23
Item 10. Purchases and Contract Value ........................................... 20
Item 11. Redemptions ............................................................ 22
Item 12. Taxes .................................................................. 28
Item 13. Legal Proceedings ...................................................... 29
Item 14. Table of Contents of the Statement of Additional Information............ 29
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page ............................................................. 36
Item 16. Table of Contents ...................................................... 36
Item 17. General Information and History ........................................ 36
Item 18. Services ............................................................... 36
Item 19. Purchase of Securities Being Offered ................................... 37
Item 20. Underwriters ........................................................... 37
Item 21. Calculation of Performance ............................................. 37
Item 22. Annuity Payments ....................................................... 41
Item 23. Financial Statements ................................................... 42
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits ...................................... 67
Item 25. Directors and Officers of the Depositor ............................... 68
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant ............................................................. 70
Item 27. Number of Contract Owners .............................................. 79
Item 28. Indemnification ........................................................ 79
Item 29. Principal Underwriters ................................................. 79
Item 30. Location of Accounts and Records ....................................... 81
Item 31. Management Services .................................................... 81
Item 32. Undertakings ........................................................... 81
</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 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
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 May 1, 1997 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 MAY 1, 1997, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 27 OF THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
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 at a
maximum annual rate of Up to 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.
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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>
<S> <C>
GLOSSARY OF TERMS...............................................................................2
SUMMARY OF CONTRACT EXPENSES....................................................................5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..........................................................6
SYNOPSIS.......................................................................................13
CONDENSED FINANCIAL INFORMATION...............................................................N/A
NATIONWIDE LIFE INSURANCE COMPANY..............................................................14
NATIONWIDE DCVA-II.............................................................................14
Voting Rights.........................................................................14
PERIODIC REPORTS...............................................................................14
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS..................................................15
Contingent Deferred Sales Charge......................................................15
Contract Maintenance Charge...........................................................15
Mortality Risk Charge, Expense Risk And Administration Charge.........................16
Premium Taxes and Other Expenses......................................................16
Experience Credits....................................................................16
DESCRIPTION OF THE CONTRACTS...................................................................17
A. General..........................................................................17
Purpose of the Contracts.........................................................17
Modification of the Contract.....................................................17
Contract Rights and Privileges and Assignments...................................17
Exchange Privilege...............................................................17
Suspension and Termination.......................................................18
B. Participant Account Values.......................................................18
Application of Purchase Payments.................................................18
Variable Account Accumulation Units..............................................19
Crediting Accumulation Units.....................................................19
Allocation of Purchase Payments..................................................19
Valuation of an Account..........................................................19
C. Redemption of Participant Accounts (Termination).................................20
D. Distribution of Participant Accounts (Retirement Period).........................20
Retirement Income Payments.......................................................20
Election of Income Form and Date.................................................20
Allocation of Retirement Income..................................................21
Fixed Dollar Annuity.............................................................21
Minimum Payment..................................................................21
Death Benefit Before Retirement..................................................21
Optional Retirement Income Forms.................................................21
Death of Retired Participant.....................................................22
Withdrawal.......................................................................22
Frequency of Payment.............................................................22
Determinations of Payouts Under Options A1 and A2................................22
Determinations of Payouts Under Options B1 and B2................................22
Determination of Amount of Variable Monthly Payments for the First Year..........23
Determination of Amount of Variable Monthly Payments for the Second
and Subsequent Years.........................................................23
Alternate Assumed Investment Rate................................................23
GENERAL INFORMATION............................................................................24
Substitution of Securities............................................................24
Performance Advertising...............................................................24
Contract Owner Inquiries..............................................................25
Net Investment Factor.................................................................25
Valuation of Assets...................................................................26
Federal Tax Status....................................................................26
Contracts Issued Under the New York Model Plan........................................26
LEGAL PROCEEDINGS..............................................................................27
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.......................................27
APPENDIX.......................................................................................28
</TABLE>
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<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<CAPTION>
<S> <C>
PARTICIPANT TRANSACTION EXPENSES
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>
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<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AFTER EXPENSE REIMBURSEMENT)
(As a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
-------------------------------------------------------
Management Other 12b-1 Total Fund
Fees Expenses Fees Annual
Expenses
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 0.61% 0.05% 0.00% 0.66%
- -------------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 0.61% 0.04% 0.00% 0.65%
- -------------------------------------------------------------------------------------------------------------------
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. 0.59% 0.14% 0.14% 0.87%
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 0.20% 0.00% 0.00% 0.20%
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 0.75% 0.36% 0.00% 1.11%
- -------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 0.98% 0.21% 0.00% 1.19%
- -------------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 0.40% 0.20% 0.00% 0.60%
- -------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities: 2-5 Years - 0.40% 0.14% 0.00% 0.54%
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 0.68% 0.27% 0.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 0.63% 0.27% 0.00% 0.90%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 0.45% 0.23% 0.00% 0.68%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 0.51% 0.24% 0.00% 0.75%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 0.47% 0.21% 0.00% 0.68%
- -------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 0.53% 0.30% 0.00% 0.83%
- -------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 0.46% 0.28% 0.00% 0.74%
- -------------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 0.51% 0.36% 0.25% 1.12%
- -------------------------------------------------------------------------------------------------------------------
Janus Fund 0.65% 0.22% 0.00% 0.87%
- -------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 0.66% 0.22% 0.00% 0.87%
- -------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 0.38% 0.11% 0.00% 0.49%
- -------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 0.31% 0.23% 0.19% 0.73%
- -------------------------------------------------------------------------------------------------------------------
MFS(R) Growth Opportunities Fund - Class A 0.90% 0.36% 0.25% 1.51%
- -------------------------------------------------------------------------------------------------------------------
MFS(R) High Income Fund - Class A 0.45% 0.34% 0.26% 1.05%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
AFTER EXPENSE REIMBURSEMENT
(CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Fund
Fees Expenses Fees Annual
Expenses
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide(R)Bond Fund 0.50% 0.20% 0.00% 0.70%
- -----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 0.50% 0.11% 0.00% 0.61%
- -----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 0.50% 0.14% 0.00% 0.64%
- -----------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 0.45% 0.15% 0.00% 0.60%
- -----------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Guardian Fund, Inc. 0.70% 0.00% 0.12% 0.82%
- -----------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Manhattan Fund, Inc. 0.79% 0.19% 0.00% 0.98%
- -----------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Partners Fund, Inc. 0.74% 0.10% 0.00% 0.84%
- -----------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 0.59% 0.19% 0.25% 1.03%
- -----------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 0.51% 0.27% 0.25% 1.03%
- -----------------------------------------------------------------------------------------------------------------
SEI Index Funds -S&P 500 Index Portfolio 0.19% 0.06% 0.00% 0.25%
- -----------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 0.70% 0.27% 0.23% 1.20%
- -----------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust-Treasury Portfolio -
Institutional Class 0.06% 0.04% 0.00% 0.10%
- -----------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 1.00% 0.12% 0.00% 1.12%
- -----------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 0.68% 0.20% 0.00% 0.88%
- -----------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund- Class I 0.61% 0.26% 0.25% 1.12%
- -----------------------------------------------------------------------------------------------------------------
Templeton Smaller Companies Growth Fund, Inc. - Class I 0.75% 0.20% 0.32% 1.27%
- -----------------------------------------------------------------------------------------------------------------
</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%.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT
REIMBURSEMENT OR WAIVER
- -----------------------------------------------------------------------------------------------------------
<S> <C>
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%.
- -----------------------------------------------------------------------------------------------------------
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 0.51% and 0.96% respectively.
- -----------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund The Fund will waive 0.05% of the total 0.50%
management fee until further notice.
- -----------------------------------------------------------------------------------------------------------
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.
8
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<PAGE> 11
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under the 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 113 160 210 348
- -------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 113 160 210 347
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 116 171 228 383
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 116 171 228 383
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 116 171 228 383
- -------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 115 167 221 370
- -------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 108 146 186 298
- -------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 118 174 234 395
- -------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 118 177 238 403
- -------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 112 158 207 341
- -------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years - 112 156 204 335
Institutional Shares
- -------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 116 169 226 378
- -------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 115 168 223 373
- -------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 113 161 211 350
- -------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 114 163 215 357
- -------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 113 161 211 350
- -------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 115 166 219 366
- -------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 114 163 215 356
- -------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 118 175 234 396
- -------------------------------------------------------------------------------------------------------------
Janus Fund 115 167 221 370
- -------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 115 168 223 373
- -------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 111 155 201 330
- -------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 114 162 214 355
- -------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 115 167 221 370
- -------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 117 173 231 389
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Bond Fund 113 161 212 352
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 112 159 208 343
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 113 160 209 346
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 106 141 178 281
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Guardian Fund, Inc. 109 148 189 306
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Manhattan Fund, Inc. 110 153 198 323
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Partners Fund, Inc. 109 148 191 308
- -------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 111 155 201 329
- -------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 111 155 201 329
- -------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 106 130 158 241
- -------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 113 160 210 347
- -------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 101 124 150 222
Institutional Class
- -------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 112 157 206 338
- -------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 109 150 193 312
- -------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 112 157 206 338
- -------------------------------------------------------------------------------------------------------------
Templeton Smaller Companies Growth Fund, Inc. - Class I 113 162 213 354
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
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<PAGE> 12
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the 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 23 70 120 258
- ------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 23 70 120 257
- ------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 26 81 138 293
- ------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 26 81 138 293
- ------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 26 81 138 293
- ------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 25 77 131 280
- ------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 18 56 96 208
- ------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 28 84 144 305
- ------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 28 87 148 313
- ------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 22 68 117 251
- ------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years - 22 66 114 245
Institutional Shares
- ------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 26 79 136 288
- ------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 25 78 133 283
- ------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 23 71 121 260
- ------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 24 73 125 267
- ------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 23 71 121 260
- ------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 25 76 129 276
- ------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 24 73 125 266
- ------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 28 85 144 306
- ------------------------------------------------------------------------------------------------------------
Janus Fund 25 77 131 280
- ------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 25 78 133 283
- ------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 21 65 111 240
- ------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 24 72 124 265
- ------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 25 77 131 280
- ------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 27 83 141 299
- ------------------------------------------------------------------------------------------------------------
Nationwide(R) Bond Fund 23 71 122 262
- ------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 22 69 118 253
- ------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 23 70 119 256
- ------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 16 51 88 191
- ------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Guardian Fund, Inc. 19 58 99 216
- ------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Manhattan Fund, Inc. 20 63 108 233
- ------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Partners Fund, Inc. 19 58 101 218
- ------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 21 65 111 239
- ------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 21 65 111 239
- ------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 13 40 68 151
- ------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 23 70 120 257
- ------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 11 34 60 132
Institutional Class
- ------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 22 67 116 248
- ------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 60 103 222
- ------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 22 67 116 248
- ------------------------------------------------------------------------------------------------------------
Templeton Smaller Companies Growth Fund, Inc. - Class I 23 72 123 264
- ------------------------------------------------------------------------------------------------------------
</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
EXAMPLE (CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the 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 23 70 120 258
- -------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 23 70 120 257
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 26 81 138 293
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 26 81 138 293
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 26 81 138 293
- -------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 25 77 131 280
- -------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 18 56 96 208
- -------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 28 84 144 305
- -------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 28 87 148 313
- -------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 22 68 117 251
- -------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years - 22 66 114 245
Institutional Shares
- -------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 26 79 136 288
- -------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 25 78 133 283
- -------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 23 71 121 260
- -------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Fund 24 73 125 267
- -------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund 23 71 121 260
- -------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 25 76 129 276
- -------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 24 73 125 266
- -------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 28 85 144 306
- -------------------------------------------------------------------------------------------------------------
Janus Fund 25 77 131 280
- -------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 25 78 133 283
- -------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 21 65 111 240
- -------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 24 72 124 265
- -------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 25 77 131 280
- -------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 27 83 141 299
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Bond Fund 23 71 122 262
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 22 69 118 253
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund 23 70 119 256
- -------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund 16 51 88 191
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Guardian Fund, Inc. 19 58 99 216
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Manhattan Fund, Inc. 20 63 108 233
- -------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Partner's Fund, Inc. 19 58 101 218
- -------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 21 65 111 239
- -------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 21 65 111 239
- -------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 13 40 68 151
- -------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 23 70 120 257
- -------------------------------------------------------------------------------------------------------------
Short-Term Investments Trust - Treasury Portfolio - 11 34 60 132
Institutional Class
- -------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 22 67 116 248
- -------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 60 103 222
- -------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 22 67 116 248
- -------------------------------------------------------------------------------------------------------------
Templeton Smaller Companies Growth Fund, Inc. - Class I 23 72 123 264
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
11
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<PAGE> 14
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").
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<PAGE> 15
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 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").
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<PAGE> 16
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.
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.
14
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<PAGE> 17
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.
15
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<PAGE> 18
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 imposed 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%. This range is subject to
change. The Company is currently not deducting such taxes but reserves the right
to do so when such taxes are incurred. The method used to recoup premium tax
expenses will be determined by the Company at its sole discretion and in
compliance with applicable state law. The Company currently deducts such charges
from a Contract Owner's Contract Value either: (1) at the time the Contract is
surrendered, (2) at Annuitization, or (3) at such earlier date as the Company
may become subject to such taxes.
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 which are non-participating. 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
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<PAGE> 19
Experience Credits to date. The Company cannot offer any assurance that there
will be Experience Credits in the future.
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 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.
The Company may modify the Contract at any time without consent of the
Owner or Participants, if 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.
17
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<PAGE> 20
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-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"). Upon such termination by the Owner, payment of
Contract Values will be subject to any applicable Contingent Deferred Sales
Charge.
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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<PAGE> 21
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 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.
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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 Investment Services Corporation ("NISC"), One Nationwide Plaza,
Columbus, Ohio 43215.
C. REDEMPTION OF PARTICIPANT ACCOUNTS
The Owner's right to redeem 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. Retirement Income
Payments may be reduced or accumulation units cancelled in order to provide
premium taxes assessed.
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
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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
will be paid as provided by the Plan upon: 1) the Company's receipt of
verification and proof of death; and 2) the Company's verification of
beneficiary designations. 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 than 5 Participant Account Years would result in
imposition of the applicable Contingent Deferred Sales Charge.
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OPTION B1-Life Income with Payment Certain. Payments will be
made monthly during the lifetime of a Participant. 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 the
Company.
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.
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
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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.
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
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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,
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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 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 cannot exceed a maximum annual rate of
1.50% of average Variable Account value.
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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.
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
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is
expected to have a material adverse effect on the Company.
In recent years, life insurance companies have been named as defendants
in lawsuits, including class action lawsuits, relating to life insurance
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements. In October 1996, a policyholder of
Nationwide Life filed a complaint in Alabama state court against Nationwide
Life and an agent of Nationwide Life (Wayne M. King v. Nationwide Life
Insurance Company and Danny Nix), related to the sale of a whole life
policy on a "vanishing premium" basis and seeking unspecified compensatory
and punitive damages. In February 1997, Nationwide Life was named as a
defendant in a lawsuit filed in New York Supreme Court also related to the
sale of whole life policies on a "vanishing premium" basis (John H. Snyder
v. Nationwide Mutual Insurance Company, Nationwide Mutual Insurance Co. and
Nationwide Life Insurance Co.). The plaintiff in such lawsuit seeks to
represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit is in an early
stage and has not been certified as a class action. Nationwide Life intends
to defend these cases vigorously. There can be no assurance that any future
litigation relating to pricing and sales practices will not have a material
adverse effect on the Company.
The General Distributor, Nationwide Investment Services Corporation is
not engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History..........................................1
Services.................................................................1
Purchase of Securities Being Offered.....................................2
Underwriters.............................................................2
Calculation of Performance...............................................2
Annuity Payments.........................................................6
Financial Statements.....................................................7
27
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<PAGE> 30
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 Services, Inc. services 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 Services, Inc. services 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
smaller companies. American Century Investment Services, Inc. services 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.
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<PAGE> 31
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.
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.
EVERGREEN INCOME AND GROWTH FUND (FORMERLY 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 MANAGER(TM)
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> 32
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.
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.
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<PAGE> 33
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 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.
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<PAGE> 34
NEUBERGER&BERMAN - GUARDIAN FUND, INC.
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, INC.
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 - PARTNERS FUND, INC.
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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<PAGE> 35
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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<PAGE> 36
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
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 May 1, 1997. 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..................................2
Underwriters..........................................................2
Calculation of Performance............................................2
Annuity Payments......................................................6
Financial Statements..................................................7
</TABLE>
GENERAL INFORMATION AND HISTORY
Nationwide DCVA-II ("Variable Account") is a separate investment account of
Nationwide Life Insurance Company (the "Company"). The Company is a member of
the Nationwide Insurance Enterprise and all of the Company's common stock is
owned by Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS has
two classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all the outstanding Class B Common Stock)
to control NFS. Nationwide Corporation is a holding company as well. All of its
common stock is held by Nationwide Mutual Insurance Company (95.2%) and
Nationwide Mutual Fire Insurance Company (4.8%), the ultimate controlling
persons of Nationwide Insurance Enterprise.
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 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.
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<PAGE> 37
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. 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
Nationwide Investment Services Corporation ("NISC"). One Nationwide Plaza,
Columbus, Ohio 43215, a wholly owned subsidiary of the Company. During the
fiscal years ended December 31, 1996, 1995 and 1994, no underwriting commissions
were paid by the Company to NISC.
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
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<PAGE> 38
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 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.
<TABLE>
<CAPTION>
SERIES PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN - MONEY MARKET
- ----------------------------------------------------------------------------------------------------------------------
CURRENT YIELD EFFECTIVE YIELD
PERIOD ENDING PERIOD ENDING
SERIES OPTIONS 12/31/96 12/31/96
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dreyfus Cash Management-Class A 3.78% 3.85%
- ----------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 3.44% 3.49%
- ----------------------------------------------------------------------------------------------------------------------
</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.
<TABLE>
<CAPTION>
SERIES PERFORMANCE SUMMARY (OTHER THAN MONEY MARKET)
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------------------------------------------------------------------------------------
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%
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 11.98% 6.38% 10.43%
- -------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth 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%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 39
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
SERIES OPTIONS TO 12/31/96 TO 12/31/96 TO 12/31/96
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
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, Inc. 5.63% 12.28% 12.43%
- -------------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Manhattan Fund, Inc. -2.29% 8.22% 10.28%
- -------------------------------------------------------------------------------------------------------------------
Neuberger&Berman - Partners Fund, Inc. 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%
- -------------------------------------------------------------------------------------------------------------------
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>
4
39 of 88
<PAGE> 40
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%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Dreyfus Third Century Fund, Inc. 33.80% 14.32% 9.25% 11.84%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Evergreen Income and Growth 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, Inc. 30.16% 14.43% 14.61% 13.75%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Neuberger&Berman - Manhattan Fund, Inc. 29.06% 9.87% 10.77% 11.66%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Neuberger&Berman - Partners Fund, Inc. 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%
- -------------------------------------------------------- ------------- ------------- -------------- -------------
</TABLE>
5
40 of 88
<PAGE> 41
<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>
- -------------------------------------------------------- ------------- ------------- -------------- -------------
Templeton Smaller Companies Growth Fund, Inc. - Class 15.91% 9.43% 12.36% 10.13%
I
- -------------------------------------------------------- ------------- ------------- -------------- -------------
</TABLE>
ANNUITY PAYMENTS
See "Distribution of Participant Accounts (Retirement Period)" in the
prospectus.
6
41 of 88
<PAGE> 42
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company) as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
Assets 1996 1995
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------------- ----------------
18,306,921 17,778,860
----------------- ----------------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
$47,766,246 38,507,633
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------------- ----------------
192,382 281,928
----------------- ----------------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
45,628,372 35,879,121
----------------- ----------------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------------- ----------------
2,137,874 2,628,512
----------------- ----------------
$47,766,246 38,507,633
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
--------------- -------------- -------------
1,992,838 1,798,651 1,599,499
--------------- -------------- -------------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
--------------- -------------- -------------
1,677,341 1,511,079 1,357,641
--------------- -------------- -------------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
--------------- -------------- -------------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
--------------- -------------- -------------
110,889 99,808 78,589
--------------- -------------- -------------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
--------------- -------------- -------------
Net income $ 215,932 212,478 183,728
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($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>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
=========== ============= =============== ================= ===============
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
=========== ============= =============== ================= ===============
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
=========== ============= =============== ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
--------------- --------------- ---------------
Net cash provided by operating activities 346,159 187,633 39,880
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------------- --------------- ---------------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------------- --------------- --------------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------------- --------------- --------------
Net increase (decrease) in cash 34,329 5,832 (16,315)
---------------- --------------- ---------------
Cash, beginning of year 9,455 3,623 19,938
---------------- --------------- ---------------
Cash, end of year $ 43,784 9,455 3,623
================ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary
of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries
of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC),
Employers Life Insurance Company of Wausau and subsidiaries (ELICW),
National Casualty Company (NCC), West Coast Life Insurance Company
(WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide
Financial Services, Inc.), Nationwide Investment Services Corporation
(formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and
its subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in
November 1996 as a holding company for NLIC and the other companies of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. On January 27, 1997, Nationwide Corp.
contributed to NFS the common stock of NLIC and three marketing and
distribution companies. NFS is planning an initial public offering of
its Class A common stock during the first quarter of 1997.
In anticipation of the restructuring described above, on September 24,
1996, NLIC's Board of Directors declared a dividend payable January 1,
1997 to Nationwide Corp. consisting of the outstanding shares of common
stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer
or distribute long-term savings and retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and another affiliate effective January 1, 1996. These
subsidiaries and all accident and health and group life insurance
business have been accounted for as discontinued operations for all
periods presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC intends
to make an $850,000 distribution to NFS which will then make an
equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and retirement
products to retail and institutional customers and is subject to
competition from other financial services providers 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 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, 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 reinsurance and credit and collection
policies and by providing for any amounts deemed uncollectible.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies that offer or distribute long-term savings and
retirement products. Prior to the contribution by Nationwide Corp. to
NFS of the outstanding common stock of NLIC and other companies, NLIC
effected certain transactions with respect to certain subsidiaries and
lines of business that were unrelated to long-term savings and
retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend to
Nationwide Corp. consisting of the outstanding shares of common stock
of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group
accident and health and group life insurance business and maintains it
offices in Wausau, Wisconsin. NCC is a property and casualty company
that serves as a fronting company for a property and casualty
subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate.
NCC maintains its offices in Scottsdale, Arizona. WCLIC writes high
dollar term life insurance policies and is located in San Francisco,
California. ELICW, NCC and WCLIC have been accounted for as
discontinued operations for all periods presented. NLIC did not
recognize any gain or loss on the disposal of these subsidiaries.
A summary of the combined results of operations, including the results
of the accident and health and group life insurance business ELICW
assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and
WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
During 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 13 for a
complete discussion of the reinsurance agreements. NLIC has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated companies
and will cease writing any new business prior to December 31, 1997.
NLIC's accident and health and group life insurance business is
accounted for as discontinued operations for all periods presented.
NLIC did not recognize any gain or loss on the disposal of the accident
and health and group life insurance business. The assets, liabilities,
results of operations and activities of discontinued operations are
distinguished physically, operationally and for financial reporting
purposes from the remaining assets, liabilities, results of operations
and activities of NLIC.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the results of operations, net of amounts ceded to ELICW
and NMIC in 1996, and assets and liabilities of NLIC's accident and
health and group life insurance business as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) 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. Annual Statements for NLIC and its insurance
subsidiaries, filed with the department of insurance of each insurance
company's state of domicile, are prepared on the basis of accounting
practices prescribed or permitted by each department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
Subsidiaries Classified as Discontinued Operations" in the
accompanying consolidated balance sheets and "Income for
Discontinued Operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1996 or 1995.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate 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. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
---------------------
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. Universal life insurance
products include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: 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. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(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
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life products,
these deferred policy acquisition costs are predominantly being
amortized with interest over the premium paying period of the
related policies in proportion to the ratio of actual annual
premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 3(b).
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life 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 and claims for collectively renewable
long-term disability policies and group long-term disability
policies 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. All health insurance
business is accounted for as discontinued operations. See note 2.
(g) Participating Business
----------------------
Participating business represents approximately 52% in 1996 (54%
in 1995 and 55% in 1994) of the Company's life insurance in force,
78% in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) 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.
(h) Federal Income Tax
------------------
The Company, with the exception of ELICW, files a consolidated
federal income tax return with NMIC, the majority shareholder of
Nationwide Corp. The members of the consolidated tax return group
have a tax sharing arrangement which provides, in effect, for each
member to bear essentially the same federal income tax liability
as if separate tax returns were filed. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 2 and 13.
(j) Reclassification
----------------
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) Change in Accounting Principle
------------------------------
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 (SFAS)
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 $6,299,665
and $6,721,714, 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 $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
--------------
$ 212,553
==============
</TABLE>
(5) Investments
-----------
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ------------ ------------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ------------ ------------
$12,014,768 400,341 (51,339) 12,363,770
============ ========== ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
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>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
------------ ---------- ----------- ---------------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
------------ ---------- ----------- ---------------
$11,886,173 663,588 (34,244) 12,515,517
============ ========== =========== ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1996, 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 $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
--------------- --------------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
--------------- --------------
$11,970,878 12,304,639
=============== ==============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
--------------- --------------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
--------------- --------------
$173,592 384,304
=============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------------- ------------- --------------
$(280,342) 951,932 (1,075,483)
=============== ============= ==============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996,
1995 and 1994 were $299,558, $107,345 and $228,308, respectively.
During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994,
respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995
and 1994, respectively) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 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
$3,535.
As permitted by the Financial Accounting Standards Board'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 $3,320,093, resulting in a gross unrealized gain
of $155,940.
Investments that were non-income producing for the twelve month period
preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and
consisted of $248 ($6,982 in 1995) in fixed maturity securities,
$20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in
other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and
valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of
December 31, 1995).
The recorded investment of mortgage loans on real estate considered to
be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE)
as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995),
which includes $41,663 ($23,975 as of December 31, 1995) of impaired
mortgage loans on real estate for which the related valuation allowance
was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of
December 31, 1995) of impaired mortgage loans on real estate for which
there was no valuation allowance. During 1996, the average recorded
investment in impaired mortgage loans on real estate was approximately
$39,674 ($22,181 in 1995) and interest income recognized on those loans
was $2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------------- -------------
Allowance, end of year $51,038 49,128
============= ==============
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
--------------- ------------- --------------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
--------------- ------------- ---------------
Net investment income $1,357,759 1,294,033 1,210,811
=============== ============= ==============
</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>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------------ ------------ ------------
$ (326) (1,724) (16,527)
============ ============ ============
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592
as of December 31, 1996 and 1995, 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 87% and 87% of the total liability for future
policy benefits as of December 31, 1996 and 1995, respectively. The
average interest rate credited on investment product policies was
approximately 6.3%, 6.6% and 6.5% for the years ended December 31,
1996, 1995 and 1994, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
Interest rates: Interest rates vary as follows:
--------------
<TABLE>
<CAPTION>
Year of issue Interest rates
----------------- ----------------------------------------
<S> <C>
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$240,451 and $245,255 as of December 31, 1996 and 1995, respectively.
The contract is immaterial to the Company's results of operations. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. Under the terms of the contract,
Franklin has established a trust as collateral for the recoveries. The
trust assets are invested in investment grade securities, the market
value of which must at all times be greater than or equal to 102% of
the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 13. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(7) Federal Income Tax
-------------------
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
----------------- ---------------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
----------------- ---------------
Net deferred tax assets 441,527 345,748
================= ===============
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
----------------- ---------------
Total gross deferred tax liabilities 603,739 592,375
----------------- ---------------
$162,212 246,627
================= ===============
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1996, 1995 and 1994.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
------------ -------- ------------- -------- ------------- --------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
============ ======== ============= ======== ============= ========
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239
during the years ended December 31, 1996, 1995 and 1994,
respectively.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
SFAS 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.
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 is provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
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, which includes certain surrender
charges.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 analyses. 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 insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated balance
sheets for these instruments approximates their fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
Liabilities
-----------
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $327,456 extending into
1997 were outstanding as of December 31, 1996.
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 21% (20% in 1995) in any geographic area and no more than 2% (2%
in 1995) with any one borrower as of December 31, 1996.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
------------- ------------- ------------- -------------- ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
============ ============= ============= =============
Less valuation allowances and unamortized discount 58,369
--------------
Total mortgage loans on real estate, net $5,272,119
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
------------ ------------ ------------- ------------- --------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
============ ============= ============= =============
Less valuation allowances and unamortized discount 57,948
--------------
Total mortgage loans on real estate, net $4,602,764
==============
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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.
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, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996 and
1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance Enterprise
Retirement Plan as a whole for the year ended December 31, 1996 and for
the Nationwide Insurance Companies and Affiliates Retirement Plan as a
whole for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
--------------- --------------- ---------------
$ 72,189 53,866 55,046
=============== =============== ===============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
--------------- ---------------
$1,349,703 1,263,233
=============== ===============
Net accrued pension expense:
Projected benefit obligation for services rendered to
date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
--------------- ---------------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
--------------- ---------------
$ (26,819) (21,592)
=============== ===============
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(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.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation; however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1996 and 1995 was $34,884 and $33,537, respectively, and the net
periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994
was $3,286, $3,132 and $4,284, respectively.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
----------- ----------- -----------
$17,875 19,076 23,165
=========== =========== ===========
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
--------------- ---------------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
--------------- ---------------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
--------------- ---------------
$(159,216) (152,734)
=============== ===============
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
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, 1996 by $701 and the NPPBC for the year ended December 31,
1996 by $83.
(12) Shareholder's Equity, 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 company subsidiaries exceed the minimum risk-based capital
requirements.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State of
Ohio (the Department). NLIC's dividend of the outstanding shares of
common stock of certain companies which was declared on September 24,
1996 and the anticipated $850,000 dividend (as discussed in note 1) are
deemed extraordinary under Ohio insurance laws. As a result of such
dividends, any dividend paid by NLIC during the 12-month period
immediately following the $850,000 dividend would also be an
extraordinary dividend under Ohio insurance laws. Accordingly, no such
dividend could be paid without prior regulatory approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its stockholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(13) Transactions With Affiliates
----------------------------
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the
Company made lease payments to NMIC and its subsidiaries of $9,065,
$8,986 and $8,133, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $101,584, $107,112, and $100,601 in 1996,
1995 and 1994, respectively. The allocations are based on techniques
and procedures in accordance with insurance regulatory guidelines.
Measures used to allocate expenses among companies include individual
employee estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
intercompany agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $15,111 and $1,186 as of December 31, 1996 and 1995,
respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1996 and
1995 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance contracts exist between NLIC and, respectively
NMIC and ELICW whereby all of NLIC's accident and health and group life
insurance business is ceded on a modified coinsurance basis. NLIC
entered into the reinsurance agreements during 1996 because the
accident and health and group life insurance business was unrelated to
NLIC's long-term savings and retirement products. Accordingly, the
accident and health and group life insurance business has been
accounted for as discontinued operations for all periods presented.
Under modified coinsurance agreements, invested assets are retained by
the ceding company and investment earnings are paid to the reinsurer.
Under the terms of NLIC's agreements, the investment risk associated
with changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee is
paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC's
retention of such risk. The agreements will remain in force until all
policy obligations are settled. However, with respect to the agreement
between NLIC and NMIC, either party may terminate the contract on
January 1 of any year with prior notice. The ceding of risk does not
discharge the original insurer from its primary obligation to the
policyholder. NLIC believes that the terms of the modified coinsurance
agreements are consistent in all material respects with what NLIC could
have obtained with unaffiliated parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and NCC,
are summarized in note 2. Amounts ceded to ELICW in 1996 include
premiums of $224,224, net investment income and other revenue of
$14,833, and benefits, claims and other expenses of $246,641. Amounts
ceded to NMIC in 1996 include premiums of $97,331, net investment
income of $10,890, and benefits, claims and other expenses of $100,476.
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 $4,789 and $9,654 as of December 31,
1996 and 1995, respectively, and are included in short-term investments
on the accompanying consolidated balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the outstanding
shares, with shareholder equity value of $30, of NISC to NLIC. NLIC
contributed an additional $500 to NISC on August 30, 1996.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46,918. As discussed in note 2, WCLIC is
accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock 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. As discussed in note 2, ELICW is
accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Nationwide Corp. Total commissions and
fees paid to these affiliates for the years ended December 31, 1996,
1995 and 1994 were $76,922, $57,280 and $50,168, respectively.
(14) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, established a $600,000 revolving
credit facility which provides for a $600,000 loan over a five year
term on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by either NLIC or NMIC. NLIC
and NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. All previously existing line of
credit agreements were canceled.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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.
(16) Segment Information
-------------------
The Company has three primary segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Life Insurance segment consists of
insurance products that provide a death benefit and may also allow the
customer to build cash value on a tax-deferred basis. In addition, the
Company reports corporate expenses and investments, and the related
investment income supporting capital not specifically allocated to its
product segments in a Corporate and Other segment. In addition, all
realized gains and losses, investment management fees and other revenue
earned from mutual funds, other than the portion allocated to the
variable annuities and life insurance segments, are reported in the
Corporate and Other segment.
During 1996, 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 from continuing
operations before federal income tax expense for the years ended
December 31, 1996, 1995 and 1994 and assets as of December 31, 1996,
1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
----------------- --------------- ---------------
$ 1,992,838 1,798,651 1,599,499
================= =============== ===============
Income from continuing operations before federal income tax
expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
----------------- --------------- ---------------
$ 315,497 287,572 241,858
================= =============== ===============
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
----------------- --------------- ---------------
$47,766,246 38,507,633 29,246,024
================= =============== ===============
</TABLE>
<PAGE> 25
<TABLE>
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Summary of Investments -
Other Than Investments in Related Parties
As of December 31, 1996
($000's omitted)
<CAPTION>
- --------------------------------------------------------------- --------------- -------------- -----------------
Column A Column B Column C Column D
- --------------------------------------------------------------- --------------- -------------- -----------------
Amount at which
shown in the
consolidated
Type of Investment Cost Market value balance sheet
- --------------------------------------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale:
Bonds:
U.S. Government and government agencies and authorities $ 3,757,887 3,834,762 3,834,762
States, municipalities and political subdivisions 6,242 6,690 6,690
Foreign governments 100,656 101,940 101,940
Public utilities 1,798,736 1,843,938 1,843,938
All other corporate 6,307,357 6,517,309 6,517,309
--------------- -------------- -----------------
Total fixed maturity securities available-for-sale 11,970,878 12,304,639 12,304,639
--------------- -------------- -----------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 43,501 50,405 50,405
Non-redeemable preferred stock 389 8,726 8,726
--------------- -------------- -----------------
Total equity securities available-for-sale 43,890 59,131 59,131
--------------- -------------- -----------------
Mortgage loans on real estate, net 5,327,317 5,272,119 (1)
Real estate, net:
Investment properties 253,383 217,611 (1)
Acquired in satisfaction of debt 57,933 48,148 (1)
Policy loans 371,816 371,816
Other long-term investments 27,370 28,668 (2)
Short-term investments 4,789 4,789
--------------- ----------------
Total investments $18,057,376 18,306,921
=============== ================
<FN>
- ----------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 5 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains of investments
in limited partnerships.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 26
<TABLE>
<CAPTION>
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplemental Insurance Information
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
- ----------------------------------- -------------- ------------------ ----------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- ------------------ ----------------- ----------------- ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
acquisition claims and Unearned premiums benefits payable Premium
Segment costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- ------------------ ----------------- ---------------- --------------
<C> <C> <C> <C> <C> <C>
1996: Variable Annuities $ 791,611 - - -
Fixed Annuities 242,421 14,952,877 687 24,030
Life Insurance 414,417 1,995,802 395,739 174,612
Corporate and Other (81,940) 230,381 25,048 -
-------------- ------------------ ---------------- --------------
Total $1,366,509 17,179,060 421,474 198,642
============== ================== ================ ==============
1995: Variable Annuities 571,283 - - -
Fixed Annuities 221,111 14,221,622 455 32,774
Life Insurance 366,876 1,898,641 383,983 166,332
Corporate and Other (138,914) 238,351 28,886 -
-------------- ------------------ ---------------- --------------
Total $1,020,356 16,358,614 413,324 199,106
============== ================== ================ ==============
1994: Variable Annuities 395,397 - - -
Fixed Annuities 198,639 12,633,253 240 20,134
Life Insurance 327,079 1,806,762 371,984 156,524
Corporate and Other 74,445 233,569 26,927 -
-------------- ------------------ ---------------- --------------
Total $ 995,560 14,673,584 399,151 176,658
============== ================== ================ ==============
<CAPTION>
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Net Amortization Other
investment Benefits, claims, of deferred operating
income losses and policy expenses Premiums
Segment (3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- ------------------- ----------------- ----------------- --------------
1996: Variable Annuities $ (21,449) 4,624 57,412 132,357
Fixed Annuities 1,050,557 838,533 38,635 79,737
Life Insurance 174,002 211,386 37,347 78,965
Corporate and Other 154,649 106,037 - 51,335
-------------- ------------------- ----------------- -----------------
Total $1,357,759 1,160,580 133,394 342,394
============== =================== ================= =================
1995: Variable Annuities (17,640) 2,881 26,264 109,089
Fixed Annuities 1,002,718 804,980 29,499 80,260
Life Insurance 171,255 201,986 31,021 68,832
Corporate and Other 137,700 105,646 (4,089) 14,773
-------------- ------------------- ----------------- -----------------
Total $1,294,033 1,115,493 82,695 272,954
============== =================== ================= =================
1994: Variable Annuities (13,415) 2,277 22,135 83,701
Fixed Annuities 903,572 702,082 29,849 69,975
Life Insurance 166,329 191,006 29,495 69,861
Corporate and Other 154,325 97,302 4,089 17,115
-------------- ------------------- ----------------- -----------------
Total $1,210,811 992,667 85,568 240,652
============== =================== ================= =================
<FN>
- ----------
(1) Unearned premiums are included in Column C amounts.
(2) Column E agrees to the sum of the Balance Sheet captions, Policyholders'
dividend accumulations and Other policyholder funds.
(3) Allocations of net investment income and certain general expenses are based
on a number of assumptions and estimates, and reported operating results
would change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 27
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
<TABLE>
<CAPTION>
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Column A Column B Column C Column D Column E Column F
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
----------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
1996:
Life insurance in force $47,071,264 6,633,567 288,593 40,726,290 0.7%
================= ================= ================ ================ ===============
Premiums:
Life insurance 225,615 29,282 2,309 198,642 1.2%
Accident and health insurance 291,871 305,789 13,918 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 517,486 335,071 16,227 198,642 8.2%
================= ================= ================ ================ ===============
1995:
Life Insurance in force $41,087,025 8,935,743 391,174 32,542,456 1.2%
================= ================= ================ ================ ===============
Premiums:
Life insurance 221,257 24,360 2,209 199,106 1.1%
Accident and health insurance 298,058 313,036 14,978 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 519,315 337,396 17,187 199,106 8.6%
================= ================= ================ ================ ===============
1994:
Life Insurance in force $35,926,633 7,550,623 829,742 29,205,752 2.8%
================= ================= ================ ================ ===============
Premiums:
Life insurance 198,705 24,912 2,865 176,658 1.6%
Accident and health insurance 303,435 321,696 18,261 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 502,140 346,608 21,126 176,658 12.0%
================= ================= ================ ================ ===============
<FN>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on invesment products and universal life insurance
products.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
<TABLE>
<CAPTION>
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
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>
1996:
Valuation allowances - mortgage loans on real
estate $49,128 4,497 - 2,587 51,038
Valuation allowances - real estate 25,819 (10,600) - - 15,219
------------ ------------ -------------- ------------ -------------
Total $74,947 (6,103) - 2,587 66,257
============ ============ ============== ============ =============
1995:
Valuation allowances - fixed maturity securities - 8,908 - 8,908 -
Valuation allowances - mortgage loans on real
estate 46,381 7,433 - 4,686 49,128
Valuation allowances - real estate 27,330 (1,511) - - 25,819
------------ ------------ -------------- ------------ -------------
Total $73,711 14,830 - 13,594 74,947
============ ============ ============== ============ =============
1994:
Valuation allowances - fixed maturity securities 4,800 (4,800) - - -
Valuation allowances - mortgage loans on real
estate 42,150 20,445 - 16,214 46,381
Valuation allowances - real estate 31,357 (4,027) - - 27,330
------------ ------------ -------------- ------------ -------------
Total $78,307 11,618 - 16,214 73,711
============ ============ ============== ============ =============
<FN>
- ----------
(1) Amounts represent direct write-downs charged against the valuation allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 43
PART C. OTHER INFORMATION
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 42
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. 42
Consolidated Balance Sheets as of December 31, 1996
and 1995. 42
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994. 44
Consolidated Statements of Shareholder's Equity for
the years ended December 31 1996, 1995 and 1994. 45
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994. 46
Notes to Consolidated Financial Statements. 47
Schedule I - Consolidated Summary of Investments
Other Than Investments In Related Parties. 84
Schedule III - Supplementary Insurance Information. 85
Schedule IV - Reinsurance. 86
Schedule V - Valuation and Qualifying Accounts. 87
66 of 88
<PAGE> 44
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 - Attached hereto.
(4) The form of the variable annuity contract -
Attached hereto.
(5) Variable Annuity Application- Filed
previously with initial registration
(File No. 333-12369) and is hereby
incorporated by reference.
(6) Articles of Incorporation of Depositor-
Filed previously with initial registration
(File No. 333-12369) and is hereby
incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Attached hereto.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
67 of 88
<PAGE> 45
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
Keith W. Eckel
1647 Falls Road
Clarks Summit, PA 18411 Director
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 Board
1247 Stafford Road and Director
Darlington, MD 21034
Dimon 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, OH 43025
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
68 of 88
<PAGE> 46
<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, OH 43215
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 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 Individual Annuity Operations
Columbus, OH 43215
</TABLE>
69 of 88
<PAGE> 47
<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 Service
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Applications Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath Vice President
One Nationwide Plaza
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
70 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>
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
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
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
</TABLE>
71 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>
Farmland Mutual Insurance Company Iowa Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates, McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and Medicare
Supplement Insurance
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 Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
** Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
</TABLE>
72 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>
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
Nationwide Financial Institution Delaware real estate
Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services, Inc. Delaware Holding Company
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 Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation Michigan Investment Company
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Develops and operates Managed Care Delivery
System
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments.
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments.
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
</TABLE>
73 of 88
<PAGE> 51
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder 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
Physicians Plus Insurance Corporation Wisconsin Health Maintenance organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance organization
Public Employees Benefit Services Delaware Markets and Administraters Deferred
Corporation Compensation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Excess and surplus lines insurance company
Scottsdale Surplus Lines Insurance Arizona Excess and surplus lines insurance company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
</TABLE>
74 of 88
<PAGE> 52
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Wausau Business Insurance Company Wisconsin 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>
75 of 88
<PAGE> 53
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART) UNLESS
STATE OTHERWISE INDICATED
OF ORGANIZATION
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Life Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-A Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annunity Issuer of Life Insurance Policies
Account-B Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
76 of 88
<PAGE> 54
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| SAN DIEGO LOTUS | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| CORPORATION | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 748,212 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
|100% $29,000,000| |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $861,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | OF ILLINOIS, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 250 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | | |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | | |WSC-100% $2,500 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | | COMPANIES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | | AGENCY, INC. |
| | | | | | | CORPORATION | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |-------| | |---|Preferred Stock: 11,540 | |------| |
| | | | | |--------------- Shares | | | |
| | | | | | | | | |
| Cost | | Cost | | | Cost | | | Cost |
| ---- | | ---- | | | ---- | | | ---- |
|WSC-100% $1,000 | |WSC-100% $1,000 | | |WSC-33 1/3% $6,215,459| | |WSC-100% $10,000 |
- --------------------------- --------------------------- | ---------------------------- | ---------------------------
| |
| ---------------------------- | ---------------------------
| | PREVEA HEALTH | | | PENSION ASSOCIATES |
| | INSURANCE PLAN, INC. | | | OF WAUSAU, INC. |
| |Common Stock: 3,000 Shares| | |Common Stock: 1,000 |
| |------------ | | |------------ Shares |
----| | -------| |
| | | |
| Cost | |Companies Cost |
| ---- | |Agency, Inc. ---- |
|WSC-33 1/3% $500,000 | |(Wisconsin)-100% $10,000 |
---------------------------- ---------------------------
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 3,136 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-24.5% $88,320 | || | | Cost | | Cost |
|Fire-24.5% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-7.7% $100,000 | || | | | | | |
|Fire-7.7% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate | | |------------ Shares | | |------------ Shares |
|----------- Cost | | | Cost | | | Cost |
| ---- | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | -------------------------------- | --------------------------------
| | |
- -------------------------------- | -------------------------------- | --------------------------------
| F & B, INC. | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | COMPANY OF CALIFORNIA | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | (COLONIAL) | | | |
|------------ | |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | |------------ Shares | | |------------ Shares |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $10 | | |Casualty-100% $11,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | -------------------------------- | --------------------------------
| |
- -------------------------------- | -------------------------------- | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | NECKURA GENERAL |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 1,000,000 | | | | | | |
|------------ Shares | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |------------------|------------ Shares | |--------|------------ Shares |
| ---- | | Cost | | | Cost |
|Casualty-99.9% $26,714,335 | | ---- | | | ---- |
|Other Capital: | |Casualty-100% $150,000,000 | | |Neckura-100% DM 1,656,925 |
|------------- | | | | | |
|Casualty-Ptd. $ 713,567 | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| SCOTTSDALE | | | COLUMBUS INSURANCE |
| SURPLUS LINES | | | BROKERAGE AND SERVICE |
| INSURANCE COMPANY | | | GmbH |
| | | |Common Stock: 1 Share |
| | |--------|------------ |
| "NEWLY FORMED" | | | Cost |
| | | | ---- |
| | | |Neckura-100% DM 51,639 |
| | | | |
| | | | |
-------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| NATIONAL PREMIUM & | | | LEBEN DIREKT |
| BENEFIT ADMINISTRATION | | | INSURANCE COMPANY |
| COMPANY | | | |
|Common Stock: 10,000 | | |Common Stock: 4,000 Shares |
|------------ Shares |------------------|------------ |
| Cost | | Cost |
| ---- | | ---- |
|Scottsdale-100% $10,000 | |Neckura-100% DM 4,000,000 |
| | | |
| | | |
-------------------------------- --------------------------------
-------------------------------- --------------------------------
| SVM SALES | | AUTO DIREKT |
| GmbH | | INSURANCE COMPANY |
| | | |
|Common Stock: 50 Shares | |Common Stock: 1,500 Shares |
|------------ | |------------ |
| Cost | | Cost |
| ---- | | ---- |
|Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | |
| | | |
-------------------------------- --------------------------------
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
|------------ Shares | | | Cost |
| Cost | | | ---- |
| ---- | | |Casualty-90% $9,000 |
|Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
-------------------------------- | --------------------------------
|| |
-------------------------------- | --------------------------------
| COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| INSURANCE COMPANY | | | MANAGEMENT |
| | | | |
|Surplus Debentures | | |Common Stock: 90 Shares |
|------------------ | |----|------------ |
| Cost | | | Cost |
| ---- | | | ---- |
|Colonial $500,000 | | |Casualty-100% $9,000 |
|Lone Star 150,000 | | | |
-------------------------------- | --------------------------------
|
| -------------------------------- --------------------------------
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| |Common Stock: 14,750 | | |
| |------------ Shares | |Common Stock: 750 Shares |
-----| Cost |------------------|------------ |
| ---- | | Cost |
|Casualty-100% $11,510,000 | | ---- |
|Other Capital: | |NW Comm-100% $531,000 |
|------------- | | |
|Casualty-Ptd. 1,000,000 | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
March 6, 1997
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
(Left Side)
NATIONWIDE INSURANCE ENTERPRISE(R)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES | | DISTRIBUTORS AGENCY | || | |
| (NW LIFE) | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 68,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $58,070,003 | | | NW Life--100% $5,996,261 | || | NFIDIA--100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTOR SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ Shares |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $35,971,375 | | | NW Adv. Serv.--100% $5,000| || | NFIDIA--100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life--100% $529,728 | | | COMMON LAW TRUST | || | NFIDIA--100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE LIFE INSURANCE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| COMPANY OF NEW YORK | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Common Stock: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------------ Shares |--| | |==|| | ------------ Shares |__||==| AGENCY OF |
| Cost | | | | || | | | OHIO, INC. |
| ---- | | | | || | Cost | | |
| NW Life--100% | | | | || | ---- | | |
| (Proposed) | | | COMMON LAW TRUST | || | NFIDIA--100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: | | | | ||
| ------ | | | |==||
| | | | | ||
| | | | | ||
| NW Life--90% | | | | ||
| NW Mutual--10% | | | COMMON LAW TRUST | ||
--------------------------- | --------------------------- ||
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | SEPARATE ACCOUNT | ||
| | | | TRUST | ||
| Units: | | | | ||
| ------ |__| | |__||
| | | |
| | | |
| NW Life--97.6% | | |
| NW Mutual--2.4% | | COMMON LAW TRUST |
--------------------------- ---------------------------
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
(Center)
<S> <C> <C> <C> <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 |
---------------------------------------
|
----------------------------------------------------------------------------------------------------------------------
| | | |
--------------------------- -------------------------- ----------------------------- ----------------------------
| NATIONWIDE FINANCIAL | | MRM INVESTMENTS, INC. | | WEST COAST LIFE | | NATIONAL CASUALTY |
| SERVICES, INC. (NFS) | | | | INSURANCE COMPANY | | COMPANY |
| | | | | | | (NC) |
| Common Stock: Control | | Common Stock: 1 | | Common Stock: 1,000,000 | | Common Stock: 100 |
| ------------ ------- | | ------------ Share | | ------------ Shares | | ------------ Shares |
| | | | | | | |
| | | Cost | | Cost | | Cost |
| Class A Public--100% | | ---- | | ---- | | ---- |
| Class B NW Corp--100% | | NW Corp.--100% $1,339,218 | | NW Corp.--100% $152,946,930 | | NW Corp.--100% $73,442,439 |
--------------------------- --------------------------- ----------------------------- ----------------------------
| |
- -------------------------------------------------------------------------------- |
| | |
--------------------------- --------------------------- ----------------------------
| PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | NCC OF AMERICA, INC. |
| SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | (INACTIVE) |
| (PEBSCO) | | (NEA) | | |
| Common Stock: 236,494 |==|| | Common Stock: 500 | | |
| ------------ Shares | || | ------------ Shares | | |
| | || | | | |
| NFS--100% | || | NFS--100% | | NFS--100% |
--------------------------- || ----------------------------- ----------------------------
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ALABAMA | || | INVESTOR SERVICES | ||
| | || | OF ALABAMA, INC. | ||
| Common Stock: 100,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $5,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $500 | || | NEA--100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| MONTANA | || | INVESTOR SERVICES | || | |
| | || | OF NEVADA, INC. | || | NEA VALUEBUILDER |
| Common Stock: 500 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OHIO, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $500 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| NEW MEXICO | || | INVESTOR SERVICES | || | |
| | || | OF WYOMING, INC. | || | NEA VALUEBUILDER |
| Common Stock: 1,000 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OKLAHOMA, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $1,000 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ----------------------------
| | || | NEA VALUEBUILDER | || | |
| | || | SERVICES INSURANCE | || | |
| PEBSCO OF | || | AGENCY, INC. | || | NEA VALUEBUILDER |
| TEXAS, INC. | || | Common Stock: 100 | || | INVESTOR SERVICES |
| |==|| | ------------ Shares |__||==| OF TEXAS, INC. |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA--100% $1,000 | | |
--------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE HMO, INC. |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | (NW HMO) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP.--100% $25,683,532 | | | NW CORP.--100% $126,509,480 | | | NW CORP.--100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 250,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | NW HMO Cost |
| | ---- | | | ---- | | | ---- |
| | GATES--100% $106,947 | | | NW CORP.--100% $57,413,193 | | | Inc.--100% $25,149 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| ----------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | KEY HEALTH PLAN, INC. | | | NATIONWIDE |
| | OF NEVADA | | | | | | AGENCY, INC. |
| | | | | | | | |
| | Common Stock: 40 | | | Common Stock: 1,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NW HMO Cost |
| | ---- | | ---- | | | ---- |
| | Gates--100% $93,750 | | ELIOPW--80% $2,700,000 | | | Inc.--99% $116,077 |
| ----------------------------- ------------------------------ | ------------------------------
|
| -----------------------------
| | GATES, MCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| NW CORP.--100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Partnership Interest -- Dotted Line
March 6, 1997
Page 2
</TABLE>
<PAGE> 60
ITEM 27. NUMBER OF CONTRACT OWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated 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 attorney 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
<TABLE>
<CAPTION>
NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper Chairman of the Board
One Nationwide Plaza and Director
Columbus, OH 43215
Richard A. Karas Vice Chairman
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon Richard McFerson Chairman and Chief Executive Officer -
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
Timothy E. Murphy
One Nationwide Plaza President
Columbus, OH 43215
Gordon E. McCutchan
One Nationwide Plaza Executive Vice President - Law and
Columbus, OH 43215 Corporate Services and Secretary
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer
Columbus, OH 43215
</TABLE>
79 of 88
<PAGE> 61
<TABLE>
<S> <C>
W. Sidney Druen Senior Vice President and General Counsel
One Nationwide Plaza
Columbus, OH 43215
Robert O. Cline Vice President - Treasurer and Assistant
One Nationwide Plaza Secretary
Columbus, OH 43215
Barbara J. Shane Vice President - Chief Compliance Officer
One Nationwide Plaza
Columbus, OH 43215
Dennis W. Click Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
James E. Brock Director
One Nationwide Plaza
Columbus, OH 43215
Harvey S. Galloway, Jr. Director
One Nationwide Plaza
Columbus, OH 43215
<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
Investment
Services
Corporation
</TABLE>
80 of 88
<PAGE> 62
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 postcard or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
(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).
The Depositor hereby represents:
(a) 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.
81 of 88
<PAGE> 63
OFFERED BY
NATIONWIDE
LIFE INSURANCE COMPANY
NATIONWIDE DCVA-II
Group
Flexible Fund
Retirement
Contracts
PROSPECTUS
MAY 1, 1997
82 of 88
<PAGE> 64
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT
SCHEDULES
The Board of Directors of Nationwide Life Insurance Company:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 31, 1997, included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such 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.
We consent to the use of our reports included herein and to the references to
our firm under the heading "Services" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 21, 1997
83 of 88
<PAGE> 65
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. 2 to be signed on its behalf in the City of Columbus, and State of
Ohio, on this 21st day of April, 1997.
NATIONWIDE DCVA-II
----------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
----------------------------------------
(Depositor)
By /s/ JOSEPH P. RATH
----------------------------------------
Joseph P. Rath
Vice President
As required by the Securities Act of 1933, this Pre-Effective Amendment
No. 2 has been signed by the following persons in the capacities indicated on
the 21st day of April, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <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
DIMON RICHARD McFERSON Chairman and Chief Executive
- -------------------------------------------- Officer-Nationwide Insurance Enterprise and Director
Dimon Richrad 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> 66
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide VA
Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C and Nationwide VA Separate Account-Q; and the registration of fixed
interest rate options subject to a market value adjustment offered under some or
all of the aforementioned individual Variable Annuity Contracts in connection
with Nationwide Multiple Maturity Separate Account and Nationwide Multiple
Maturity Separate Account-A, and the registration of Group Flexible Fund
Retirement Contracts in connection with Nationwide DC Variable Account,
Nationwide DCVA-II, and NACo Variable Account; and the registration of Group
Common Stock Variable Annuity Contracts in connection with Separate Account No.
1; and the registration of variable life insurance policies in connection with
Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, Nationwide VL Separate Account-A and Nationwide VL
Separate Account-B, hereby constitutes and appoints Dimon Richard McFerson,
Joseph J. Gasper, W. Sidney Druen, and Joseph P. Rath, and each of them with
power to act without the others, his/her attorney, with full power of
substitution and resubstitution, for and in his/her name, place and stead, in
any and all capacities, to approve, and sign such Registration Statements and
any and all amendments thereto, with power to affix the corporate seal of said
corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument may
be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 2nd day of April, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief
Financial Officer
/s/ Fred C. Finney /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director James F. Patterson, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director
and Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ Dimon Richard McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon Richard McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
</TABLE>
<PAGE> 1
MARKETING COORDINATION AND
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement entered into this ____ day of April, 1997, between Nationwide
Life Insurance Company ("Nationwide"), and Nationwide Investment Services
Corporation ("NISC").
Nationwide proposes to develop, issue and administer, and NISC proposes to
provide the exclusive national distribution services for certain annuity
products (the "Products"). The Products to be sold hereunder are the Group
Flexible Fund Retirement Contracts (The "Products") and such other products as
may hereafter be agreed upon by the parties.
The parties hereby agree as follows:
A. ADMINISTRATION OF PRODUCTS
--------------------------
1. Appointment of Product Administration
-------------------------------------
Nationwide is hereby appointed Product Administrator for the
Products.
2. Duties of Nationwide
--------------------
Nationwide will perform in a proper and timely manner, those
functions enumerated in the column marked "Nationwide" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
3. Duties of NISC
--------------
NISC will perform in a proper and timely manner, those
functions enumerated in the column marked "NISC" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
B. MARKETING COORDINATION AND SALES ADMINISTRATION
-----------------------------------------------
1. Distribution of Products
------------------------
The Products will be distributed through registered
representatives of NASD broker-dealer firms, appointed by
Nationwide, who shall be duly qualified and licensed as agents
(the "Agents"), in accordance with applicable state insurance
authority.
2. NISC shall be the exclusive National Distributor of the
Products.
<PAGE> 2
3. Appointment and Termination of Agents
-------------------------------------
Appointment and termination of Agents shall be processed and
executed by Nationwide. NISC reserves the right to require
Nationwide to consult with it regarding licensing decisions.
4. Advertising
-----------
NISC shall not print, publish or distribute any advertisement,
circular or document relating to the Products or relating to
Nationwide unless such advertisement, circular or document has
been approved in writing by Nationwide. Such approval shall
not be unreasonably withheld, and shall be given promptly,
normally within three (3) business days. Neither Nationwide
nor any of its affiliates shall print, publish or distribute
any advertisement, circular or document relating to the
Products or relating to NISC unless such advertisement,
circular or document has been approved in writing by NISC.
Such approval shall not be unreasonably withheld, and shall be
given promptly, normally within three (3) business days.
However, nothing herein shall prohibit any person from
advertising the Products on a generic basis.
5. Marketing Conduct
-----------------
The parties will jointly develop standards, practices and
procedures respecting the marketing of the Products. Such
standards, practices and procedures are intended to help
Nationwide meet its obligations as an issuer under the
securities laws, to assure compliance with state insurance
laws, and to help NISC meet its obligations under the
securities laws as National Distributor. These standards,
practices and procedures are subject to continuing review and
neither Nationwide nor NISC will object unreasonably to
changes to such standards, practices and procedures
recommended by the other to comply with the intent of this
provision.
6. Sales Material and Other Documents
----------------------------------
a. Sales Material
--------------
1) Nationwide shall develop and prepare all
promotional material to be used in the
distribution of the Products, in
consultation with NISC.
2) Nationwide is responsible for the printing
and the expense of providing such
promotional material.
3) Nationwide is responsible for approval of
such promotional material by state insurance
regulators, where required.
4) NISC and Nationwide agree to abide by the
Advertising and Sales Promotion Material
Guidelines, attached hereto as EXHIBIT B,
and incorporated herein by reference.
<PAGE> 3
b. Prospectuses
------------
1) Nationwide is responsible for the
preparation and regulatory clearance of any
required registration statements and
prospectuses for the Products. NISC is
responsible for the preparation and
regulatory clearance of any underlying
mutual fund registration statements and
prospectuses.
2) Nationwide is responsible for the printing
of Product prospectuses in such quantities
as the parties agree are necessary to assure
sufficient supplies.
3) Nationwide will bear the cost of providing
the required supply of mutual fund
prospectuses.
4) Nationwide is responsible for supplying
Agents with sufficient quantities of Product
prospectuses.
c. Contracts, Applications and Related Forms
-----------------------------------------
1) Nationwide, in consultation with NISC, is
responsible for the design and printing of
adequate supplies of Product applications,
contracts, related forms, and such service
forms as the parties agree are necessary.
2) Nationwide is responsible for supplying
adequate quantities of all such forms to the
Agents.
7. Appointment of Agents
---------------------
a. NISC will assist Nationwide in facilitating the
appointment of Agents by Nationwide.
b. Nationwide will forward all appointment forms and
applications to the appropriate states and maintain
all contacts with the states.
c. Nationwide will maintain appointment files on Agents,
and NISC will have access to such files as needed.
8. Licensing and Appointment Guide
-------------------------------
Nationwide shall provide to NISC a Licensing and Appointment
Guide (as well periodic updates thereto), setting forth the
requirements for licensing and appointment, in such quantities
as NISC may reasonably require.
<PAGE> 4
9. Other
-----
a. Product Training
----------------
Nationwide is responsible for any Product training
for the Agents.
b. Field Sales Material
--------------------
1) Nationwide, in consultation with NISC, is
responsible for the development, printing
and distribution of non-public field sales
material to be used by Agents.
2) NISC shall have the right to review all
field sales materials and to require any
modification mandated by regulatory
requirements.
c. Production Reports
------------------
Nationwide will deliver to NISC the items listed in
Production Reports to be Provided, attached hereto as
EXHIBIT C, and incorporated herein by reference.
d. Customer Service
----------------
Each party will notify the other of all material
pertinent inquiries and complaints it receives, from
whatever source and to whomever directed, and will
consult with the other in responding to such
inquiries and complaints.
10. Auditing
--------
NISC will maintain all records relating to the mutual funds or
other investment options in accordance with generally accepted
accounting procedures. Any such records shall be made
available to Nationwide or its accountants or auditors upon
reasonable written request. Nationwide will provide NISC with
any records, reports or other materials relative to the
distribution of the Products as may reasonably be required by
NISC or as may be required by any governmental agency having
jurisdiction.
C. GENERAL PROVISIONS
------------------
1. Waiver
------
The forbearance or neglect of either party to insist upon
strict compliance by the other with any of the provisions of
this Agreement, whether continuing or not, or to declare a
forfeiture of termination against the other, shall not be
construed as a waiver of any rights or privileges of the
forbearing party in the event of a further default or failure
of performance.
<PAGE> 5
2. Limitations
-----------
Neither party shall have authority on behalf of the other to:
make, alter or discharge any contractual terms of the
Products; waive any forfeiture; extend the time of making any
contributions to the products; guarantee dividends; alter the
forms which either may prescribe; nor substitute other forms
in place of those prescribed by the other.
3. Binding Effect
--------------
This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective successors
and assigns, provided that neither party shall assign or
sub-contract this Agreement or any rights or obligations
hereunder without prior written consent of the other.
4. Indemnification
---------------
Each party ("Indemnifying Party") hereby agrees to release,
indemnify and hold harmless the other party, its officers,
directors, employers, agents, servants, predecessors or
successors from any claims or liability arising out of the
acts or omissions of the Indemnifying Party not authorized by
this Agreement, including the violation of any federal or
state law or regulation.
5. Notices
-------
All notices, requests, demands and other communication under
this Agreement shall be in writing and shall be deemed to have
been given on the date of service if served personally on the
party to whom notice is to be given, or on the date of mailing
if sent postage prepaid by First Class Mail, Registered or
Certified mail, by overnight mail, properly addressed as
follows:
TO NATIONWIDE:
Nationwide Life Insurance Company
Duane C. Meek, Vice President-Sales
Sales - Financial Services
One Nationwide Plaza
Columbus, Ohio 43216
TO NISC:
Nationwide Investment Services Corporation.
Joseph P. Rath, Vice President-Compliance
One Nationwide Plaza
Columbus, Ohio 43216
<PAGE> 6
6. Governing Law
-------------
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio.
7. Arbitration
-----------
The parties agree that misunderstandings or disputes arising
from this Agreement shall be decided by arbitration, conducted
upon request of either party before three arbitrators (unless
the parties agree on a single arbitrator) designated by the
American Arbitration Association, and in accordance with the
rules of such Association. The expenses of the arbitration
proceedings conducted hereunder shall be borne equally by both
parties.
8. Confidentiality
---------------
Any information, documents and materials, whether printed or
oral, furnished by either party or its agents or employees to
the other shall be held in confidence. No such information
shall be given to any third party, other than to such
sub-contractors of NISC as may be permitted herein, or under
requirements of a lawful authority, without the express
written consent of the other party.
D. TERM OF AGREEMENT
-----------------
This Agreement, including the Exhibits attached hereto, shall remain in
full force and effect until terminated, and may be amended only by
mutual agreement of the parties in writing. Any decision by either
party to cease issuance or distribution of any specific Product shall
not effect a termination of the Agreement unless such termination is
mutually agreed upon, or unless notice is given pursuant to Section
E.2. hereof.
E. TERMINATION
-----------
1. Either party may terminate this Agreement for cause at any
time, upon written notice to the other, if the other knowingly
and willfully: (a) fails to comply with the laws or
regulations of any state or governmental agency or body having
jurisdiction over the sale of insurance or securities; (b)
misappropriates any money or property belonging to the other;
(c) subjects the other to any actual or potential liability
due to misfeasance, malfeasance, or nonfeasance; (d) commits
any fraud upon the other; (e) has an assignment for the
benefit of creditors; (f) incurs bankruptcy; or (g) commits a
material breach of this Agreement.
2. Either party may terminate this Agreement, without regard to
cause, upon six months prior written notice to the other.
3. In the event of termination of this Agreement, the following
conditions shall apply:
<PAGE> 7
a) The parties irrevocably acknowledge the continuing
right to use any Product trademark that might then be
associated with any Products, but only with respect
to all business in force at the time of termination.
b) NISC will continue to sell to Nationwide at net asset
value, shares of all mutual funds which serve as
underlying investments for Products actually issued
by Nationwide pursuant to this Agreement, until such
time as mutually agreed upon by the parties. NISC may
discontinue the sale at net asset value of such
shares in connection with the issuance by Nationwide
of new products after termination.
c) In the event this Agreement is terminated the parties
will use their best efforts to preserve in force the
business issued pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
NATIONWIDE LIFE INSURANCE
COMPANY
By
---------------------------------
Title
-----------------------------
NATIONWIDE INVESTMENT SERVICES
CORPORATION
By
---------------------------------
Title
-----------------------------
<PAGE> 8
EXHIBIT A
ANALYSIS OF ADMINISTRATIVE FUNCTIONS
A. PRODUCT UNDERWRITING/ISSUE
--------------------------
<TABLE>
<CAPTION>
NATIONWIDE NISC
<S> <C>
- - Establishes underwriting criteria for - Consults with regard to new business
application processing and rejections. procedures and processing.
- - Reviews the completed application.
Applies underwriting/issue criteria to
application.
- - Notifies Agent and/or customer of any
error or missing data necessary to
underwrite application and establish
records for owner of Product ("Contract
Owner").
- - Prepares policy data page for approved
business and mails with policy to
Contract Owner.
- - Establishes and maintains all records
required for each Contract Owner, as
applicable.
- - Prepares and mails confirmation and
other statements to Contract Owners
and Agents, as required.
- - Prints, provides all forms ancillary to
issue of contract/policy forms for
Products.
- - Maintains supply of approved
specimen policy forms and all
ancillary forms, distributes
same to Agents.
</TABLE>
<PAGE> 9
B. BILLING AND COLLECTION
----------------------
NATIONWIDE
- - Receives premium/purchase payments
and reconciles amount received with
remittance media.
- - Updates Contract Owner records to
reflect receipt of premium/purchase
payment and performs accounting/
investment allocation of each payment
received.
- - Deposits all cash received under the
Products in accordance with the terms
of the Products.
C. BANKING
-------
NATIONWIDE
- - Balances, edits, endorses and prepares
daily deposit.
- - Places deposits in depository account.
- - Transfers funds from depository account
to NISC within 24 hours following
underwriting approval, in accordance
with investment allocation.
- - Prepares daily cash journal summary
reports and maintains same for review
by NISC.
<PAGE> 10
D. PRICING/VALUATION/ACCOUNTING
----------------------------
<TABLE>
<CAPTION>
NATIONWIDE NISC
<S> <C>
- - Determines the "Net Amount Available for - Issues Fund Shares to Nationwide at
Investment" in Fund Shares and places Fund net asset Value.
Share purchase or redemption orders with
the Fund, by facsimile each day by 10:00 - Confirms Nationwide's Fund
a.m. E.T. If for any reason Nationwide is purchases and redemptions.
unable to process such orders, it will
provide NISC with estimates. - Transmit by facsimile Fund Share
prices to Nationwide by 6:00 p.m.
- - Maintains and makes available, as EST each day.
reasonably requested, records used in
determining "Net Amount Available for - Maintains records of all Fund Shares
Investment." owned by Nationwide, including the
date purchased and sold, cost, and
- - Collects information needed in determining other information maintained by
Variable Account unit values from the NISC in its ordinary course of
Funds including daily net asset value, business.
capital gains or dividend distributions, and
the number of Fund Shares acquired or sold - Cooperates in annual audit of
during the immediately preceding valuation separate account financials
period. conducted for purposes of financial
statement certification and
- - Performs daily unit valuation calculation. publication.
</TABLE>
<PAGE> 11
E. CONTRACT OWNER SERVICE/
-----------------------
RECORD MAINTENANCE
------------------
<TABLE>
<CAPTION>
NATIONWIDE NISC
<S> <C>
- - Receives and processes all Contract - Accommodates customer service function
Owner service requests, including but by providing any supporting information
not limited to informational requests, or documentation which may be in the
beneficiary changes, and transfers of control of NISC.
Contract Value among eligible
investment options.
- - Maintains daily records of all changes
made to Contract Owner accounts.
- - Researches and responds to all Contract - Researches and responds to Nationwide's
Owner/Agent inquiries. inquiries regarding fund performance.
- - Keeps all required Contract Owner
records.
- - Maintains adequate number of toll free
lines to service Contract Owner/Agent
inquiries.
F. DISBURSEMENTS
-------------
(SURRENDERS, DEATH
------------------
CLAIMS, LOANS)
--------------
NATIONWIDE NISC
- - Receives and processes surrenders, loans,
and death claims in accordance with
established guidelines.
- - Prepares checks for surrenders, loans,
and death claims, and forwards to
Contract Owner or Beneficiary. Prepares
and mails confirmation statement of
disbursement to Contract Owner/
Beneficiary with copy to Agent.
</TABLE>
<PAGE> 12
G. COMMISSIONS
-----------
<TABLE>
<CAPTION>
NATIONWIDE NISC
<S> <C>
- - Ascertains, on receipt of applications,
whether writing Agent is appropriately
licensed.
- - Pays commissions and other fees in
accordance with agreements relating to
same.
H. PROXY PROCESSING
----------------
NATIONWIDE NISC
- - Receives record date information from - Provides proxy, solicitation materials, and
Funds Receives proxy solicitation record date information.
materials from Funds.
- - Prepares Voting Instruction cards and
mails solicitation, if necessary.
- - Tabulates and votes all Fund Shares in
accordance with SEC requirements.
I. PERIODIC REPORTS TO CONTRACT OWNERS
-----------------------------------
NATIONWIDE NISC
- - Prepares and mails quarterly and annual
Statements of Account to Contract
Owners.
- - Prepares and mails all semi-annual and - Prepares and mails to Nationwide all
annual reports of Variable Account(s) to required semi-annual and annual financial
Contract Owners. reports to shareholder of the Funds.
</TABLE>
<PAGE> 13
J. REGULATORY/STATEMENT REPORTS
----------------------------
<TABLE>
<CAPTION>
NATIONWIDE NISC
<S> <C>
- - Prepares and files Separate Account
Annual Statements.
- - Prepares and mails the appropriate,
required IRS reports at the Contract
Owner level. Files same with required
regulatory agencies.
- - Prepares and files form N-SAR for the - Prepares and files form N-SAR for the
Separate Account. Funds.
K. PREMIUM TAXES
-------------
NATIONWIDE NISC
- - Collects, pays and accounts for premium
taxes as appropriate.
- - Prepares and maintains all premium tax
records by state.
- - Maintains liabilities in General Account
ledger for accrual of premium tax
collected.
- - Integrates all company premium taxes
due and performs related accounting.
L. FINANCIAL AND MANAGEMENT REPORTS
--------------------------------
NATIONWIDE NISC
- - Provides periodic reports in accordance - Provides periodic reports in accordance
with the Schedule of Reports to be with the Schedule of Reports to be
prepared jointly by Nationwide and prepared jointly by Nationwide and NISC.
NISC. (See EXHIBIT C) (See EXHIBIT C)
</TABLE>
<PAGE> 14
M. AGENT LICENSE RECORDKEEPING
---------------------------
<TABLE>
<S> <C>
NATIONWIDE NISC
- - Receives, establishes, processes, and - Cooperates with Nationwide in the Agent
maintains Agent appointment records. appointment process with the broker-
dealer firms.
</TABLE>
<PAGE> 15
EXHIBIT B
ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES
FOR APPROVAL BY THE OFFICE OF SALES-FINANCIAL SERVICES
In order to assure compliance with state and federal regulatory requirements and
to maintain control over the distribution of promotional materials dealing with
the Products, Nationwide and NISC require that ALL variable contract promotional
materials be REVIEWED and APPROVED by both Nationwide and NISC PRIOR to their
use. These guidelines are intended to provide appropriate regulatory and
distribution controls.
1. Sufficient lead time must be allowed in the submission of all
promotional material. The Office of Sales-Financial Services ("OS-FS")
and NISC shall approve in writing all promotional material. Such
approval shall not be unreasonably withheld, and shall be given
promptly, normally within three (3) days.
2. All promotional material will be submitted in "draft" form to permit
any changes or corrections to be made prior to the printing.
3. Nationwide and NISC will provide each other with details as to each and
every use of all promotional material submitted. Approval for one use
will not constitute approval for any other use. Different standards of
review may apply when the same advertising material is intended for
different uses. The following information will be provided for each
item of promotional material:
a. In what jurisdiction(s) the material will be used.
b. Whether distribution will be used (e.g., brochure, mailing,
482 ads, etc.).
c. How the material will be used (e.g., brochure, mailing, 482
ads, etc.).
d. The projected date of initial use and, if a special promotion,
the projected date of last use.
4. Each party will advise the other of the date it discontinues the use of
any material.
5. Any changes to previously approved promotional material must be
resubmitted, following these procedures. When approved material is to
be put to a different use, request for approval of the material for the
new use must be submitted.
6. OS-FS and NISC will assign a form number to each item of advertising
and sales promotional material. This number will appear on each piece
of advertising and sales promotional material. It will be used to aid
in necessary filings, and to maintain appropriate controls.
7. OS-FS and NISC will provide WRITTEN APPROVAL for all material to be
used.
8. Nationwide and NISC will provide each other with a minimum of 50 copies
of all material in final print form to effect necessary state filings.
9 NISC will coordinate SEC/NASD filings of sales and promotional
material.
10. All telephone communication and written correspondence regarding
promotional materials should be directed to Marketing Director, Office
of Sales-Financial Services, Nationwide Life Insurance Company, One
Nationwide Plaza, Columbus, Ohio 43216 (phone (614)249- 6258) or to
President, Nationwide Investment Services Corporation, One Nationwide
Plaza, Columbus, Ohio (phone (614) 249-7863).
EXHIBIT C
<PAGE> 16
PRODUCTION REPORTS TO BE PROVIDED
Nationwide agrees to provide the following reports to NISC:
<TABLE>
<S> <C>
1. Daily Receipt Report: Indicates which Agents are generating sales.
2. Daily Approval Report: Indicates which applications have been approved.
3. Daily Activity Summary: Indicates top firms' sales and liquidation by month, year-to-
date as well as total assets by firm.
4. Dealer Activity Indicates top firms' sales and
Summary by Territory: liquidation by month, year-to-date.
5. Summary of Sales by Indicates sales
Territory and Dealer: by territory/dealer/branch, including non-commissionable
amounts and actual commission payments, as well as
chargebacks. (Internal use only)
6. Summary of Sales by Indicates sales by territory/
Territory and Dealer: dealer/branch, including chargebacks.
7. Commission Report: Indicates commissions paid and chargebacks, matched to
commission checks.
</TABLE>
In addition, Nationwide will provide reports detailing current appointments and
other information, as reasonably requested by NISC.
<PAGE> 1
[Natiowide LOGO]
- -------------------------------------------------------------------------------
NATIONWIDE LIFE INSURANCE COMPANY (the Company) agrees to make payments to the
person or persons entitled thereto, in accordance with and subject to the terms
of this Contract.
CONTRACT SCHEDULE
Owner of Contract: Contract Number:
Plan: Contract Date:
Jurisdiction: Issue Date:
Termination Date:
This Contract has been issued in consideration of the application and payment of
Purchase Payments as provided herein. This Contract is issued and accepted
subject to all the terms set forth in the following pages, which are a part of
this Contract.
Signed for the Company at its Home Office, One Nationwide Plaza, Columbus, Ohio,
to be effective on the Contract Date.
Signature Signature
Secretary President
GROUP FLEXIBLE FUND RETIREMENT CONTRACT
NON-PARTICIPATING
ALL CONTRACTUAL VALUES BASED ON THE INVESTMENT RESULTS OF A SEPARATE ACCOUNT
INCLUDED IN THIS CONTRACT ARE VARIABLE (MAY INCREASE OR DECREASE) AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
Page
CONTRACT SUMMARY PAGE .....................................................iii
- ---------------------
<S> <C>
ARTICLE I: DEFINITIONS .......................................................1
Accumulation Unit
Actuarial Risk Fee
Beneficiary
Code
Company
Contingent Beneficiary
Contract
Contract Anniversary
Contract Date
Contract Maintenance Charge
Contract Value
Contract Year
Distribution
Distribution Period- Account
Exchange
General Account
Group Fixed Contract
Home Office
Initial Transfer Amount
Optional Retirement Income Forms
Owner
Participant
Participant Account
Participant Account Year
Participant Anniversary
Participant Effective Date
Plan
Purchase Payment
Retirement Commencement Date
Retirement Income Payments
Retired Participant
Sub-Account
Transfer
Underlying Mutual Fund
Valuation Date
Valuation Period
Variable Account
ARTICLE II: CHARGES ...........................................................2
Net Investment Factor
Contract Maintenance Charge
Mortality Risk Charge, Expense Risk and Administration Charge
Premium Taxes
Contingent Deferred Sales Charge
i
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE III: PARTICIPANT ACCOUNTS..............................................4
Purchase Payments
Crediting Accumulation Units
Accumulation Unit Value
Change of Allocation Percentage Between Sub-Account
Exchanges Between Sub-Account and Transfer to Deposit Fund
ARTICLE IV: BENEFITS ..........................................................5
Notice to Distribute
Elections
Death Benefit Before Retirement
Optional Retirement Income Forms
Special Provisions Relating to Options
Method of Calculating Retirement Income Payments
ARTICLE V: SUSPENSION AND TERMINATION .........................................7
Suspension and Termination
Redemption of Participants Accounts
Termination by Company
ARTICLE VI: GENERAL PROVISIONS.................................................8
The Contract
Modification of the Contract
Individual Certificates
Misstatements and Adjustments
Evidence of Survival
Ownership and Assignment
Designation of Beneficiary
Data to be Furnished to the Company
Non-Participating
Relation of this Contract to the Variable Account
Substitution of Fund Shares
ARTICLE VII: PURCHASE RATES, ANNUAL RATES ....................................10
Applicability and Basis of Tables
Adjusted Age
Illustrative Tables for Determining Variable Payments
</TABLE>
ii
<PAGE> 4
CONTRACT SUMMARY PAGE
Actuarial Risk Fee:
The Actuarial Risk Fee, taken
on a daily basis and is
computed at a maximum annual
rate up to 1.50% of the
average Variable Account
value and reflects the
charges made for the Mortality
Risk, the Expense Risk and the
Administration of the Variable
Account.
Administration Charge: The charge will be 1.00%.
Companion Contract(s): The Nationwide Life Insurance
Company's Group Fixed Annuity
Contract(s) or other
investment option(s) as
offered by the Plan and
accepted by the Company
Contingent Deferred Sales Charge:
<TABLE>
<CAPTION>
DEFERRED SALES CHARGE NUMBER OF PARTICIPANT DEFERRED SALES CHARGE NUMBER OF PARTICIPANT ACCOUNT
PERCENTAGE ACCOUNT YEARS PERCENTAGE YEARS
<S> <C> <C> <C>
9% 0-16 4% 0-16
8% 0-16 3% 0-16
7% 0-16 2% 0-16
6% 0-16 1% 0-16
5% 0-16 0% 16 and after
</TABLE>
This Contingent Deferred Sales 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 Contingent Deferred Sales Charge
is made by canceling a number of Accumulation Units equal in value to the
applicable Contingent Deferred Sales Charge.
Contract Anniversary: The date 12 months after the
Effective Date of the
Contract, and each 12-month
period thereafter.
Contract Maintenance Charge: $15 at the beginning of each
Participant Account Year for
the preceding Participant
Account Year.
Creditable Percentage: 100%.
Expense Risk Charge: 0.40%
Mortality Risk Fee: 0.10%
Plan: State ABC Internal Revenue
Code 457 Plan.
iii
<PAGE> 5
11
ARTICLE I: DEFINITIONS
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 at a
maximum annual rate of up to 1.50% of the average Variable Account value.
BENEFICIARY- The person named in the enrollment form 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 enrollment form 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.
EXCHANGE- An exchange from a Fund to a Companion Contract described in the
Contract Summary Page, if any or to another Fund.
GENERAL ACCOUNT- 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- A Participant is 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.
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<PAGE> 6
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.
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 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.
TRANSFER- A transfer of amounts from this Contract to any other non-Companion
investment option under the Plan, or to another Plan.
UNDERLYING MUTUAL FUND OR FUND- The registered management investment company,
specified in the enrollment form, 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.
ARTICLE II: CHARGES
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 will not exceed the
maximum annual rate, as reflected on the Contract Summary Page, times
the average Variable Account value.
2
<PAGE> 7
CONTRACT MAINTENANCE CHARGE
The Company will maintain individual records with respect to each
Participant and will make a charge for expenses attributable to
maintaining such records. The Company will effect such charge by
cancelling a number of Accumulation Units on each Participant
Anniversary 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 amoung Sub-Accounts on the basis of relative values at the
time the deduction is made.
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 one-twelfth
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 Charge 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. Such charge will be allocated
amoung 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 Account at the time the deduction
is made.
MORTALITY RISK CHARGE, EXPENSE RISK AND ADMINISTRATION CHARGE
The mortality risk portion of the Actuarial Risk Fee is to compensate
the Company for its guarantee to provide Retirement Income Payments
pursuant to the terms of this 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.
The Administration and the Expense Risk portions of the Actuarial Risk
Fee are to compensate the Company for the administration and other
expenses associated with this Contract.
PREMIUM TAXES
To the extent that any taxes are assessed against the Company for
Purchase Payments or the Contract Value the amount of any premium taxes
levied by a state or any other governemental entity upon annuity
considerations received by the Company, the Company may deduct such
taxes from the Contract Owner's Contract Value either : (1) at the time
the Contract is surrendered, (2) at Annuitization, or (3) at such
earlier date as the Company may become subject to such taxes. The
method used to recoup premium tax reserves will be determined by the
Company at its sole discretion and in compliance with applicable state
law.
CONTINGENT DEFERRED SALES CHARGE
In the event that a Contingent Deferred Sales Charge is due, as set
forth on the Contract Summary Page, the charge will be applied to the
following:
A Transfer made in accordance with Article III; or
The Contract Value in the event of termination of this
Contract in accordance with Article V.
Upon a Transfer or Contract termination, the applicable Contingent
Deferred Sales Charge will be applied to reduce the amount withdrawn,
in accordance with the schedule on the Contract Summary Page.
The Contingent Deferred Sales Charge will be assessed against amounts
withdrawn from this Contract if the deposits attributable to the amount
withdrawn were previously assessed a sales charge by the Company.
3
<PAGE> 8
No Contingent Deferred Sales Charge will be imposed on Contract Value
that is paid under:
a. any life income payment option;
b. 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
c. a one-sum or periodic payment payable because of a
Participant's death.
ARTICLE III: PARTICIPANT ACCOUNTS
PURCHASE PAYMENTS
The Company shall receive such Purchase Payments from the Owner as are
made in accordance with the requirements of the Plan. Net Purchase
Payments for each Participant must be at least $20 per Participant per
month. Purchase Payments must be no less frequent than monthly, unless
agreed to by the Company.
Under specific conditions, when authorized by state insurance law, the
Company may credit up to 8% of the Initial Transfer Amount into the
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.
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 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.
ACCUMULATION UNIT VALUE
The value of the accumulation unit for each Variable Account
Sub-Account was established at $1.00 as of the date Underlying Mutual
Fund shares were first purchased for that Sub-Account. The value of
Accumulation Units for any Variable Account Sub-Account for any
subsequent Business day is determined by multiplying the value for the
preceding Business day by the Variable Account net investment factor
for that Sub-Account for the period since that day.
CHANGE OF ALLOCATION PERCENTAGE BETWEEN SUB-ACCOUNT
The Company will permit the Owner, or the Participant if the Plan so
provides, to change the allocation percentages between 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.
EXCHANGES BETWEEN SUB-ACCOUNT AND TRANSFER TO DEPOSIT FUND
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 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. However, exchanges from the deposit fund to
any Sub-Account of the Variable Account will be subject to the
limitations set forth in the Group Fixed Fund Retirement Contract.
Exchanges will be effected when received in good order by the Company
at its Home Office.
4
<PAGE> 9
ARTICLE IV: BENEFITS
NOTICE TO DISTRIBUTE
At least one month prior to the date a Participant is eligible for
Retirement Income Payments in accordance with the Plan, the Owner shall
notify the Company to commence a Distribution from the Participant
Account and shall make the elections required. The Company shall then
determine the first monthly retirement income payment to be payable for
that Retired Participant in accordance with the terms of the Plan, with
Accumulation Units of each Sub-Account being applied to provide
Retirement Income Payments from that Sub-Account. All such payments
will be made by the Company to the Owner. The Company may, however, by
agreement with and on behalf of the Owner, make such payments directly
to the Retired Participant.
To the extent the Plan provides that a Participant may exercise any of
the rights provided the Owner by this Article, the Owner shall mean
Participant in this Article.
ELECTIONS
Retirement Income Form and Date--At least one month prior to a
Participant's Retirement Commencement Date, the Owner may by written
election to the Company at its home office, elect any one of the
retirement income options described below on behalf of a Participant.
Alternate Assumed Investment Rates--If not prohibited by the laws and
regulations of the state in which this Contract is issued, the 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.
In addition, if at any time the amount held in respect of the person
entitled to receive such annuity is less than $3,500, the Company shall
have the right to make a lump sum Distribution to such person.
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.
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 the Participant
Account will be paid as provided by the Plan upon (1) the Company's
receipt of verification of proof of death; and (2) the Company's
verification of Beneficiary designations. 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
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.
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, in exhausted. The final
installment will be the sum remaining with the Company.
Option B1--Life Income with Payment Certain. Payments will be made
monthly during the lifetime of a Participant. 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.
5
<PAGE> 10
Option B2--Joint and Last Survivor Life Income. Payments will be made
monthly during the joint lifetime of a Participant and a designated
Beneficiary. Upon the Participants 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.
SPECIAL PROVISIONS RELATING TO OPTIONS
Death of Retired Participant--If any Retired Participant dies while
receiving payments, any 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--At any time, 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. Unless prohibited by the Plan, a
Beneficiary receiving payments certain under Option B1 after the death
of the 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 in lieu of monthly. Any
change in frequency of payments must be on the anniversary of the
commencement of Retirement Income Payments.
METHOD OF CALCULATING RETIREMENT INCOME PAYMENTS
Determination of Payments Under Option A1 and A2--Monthly payments
under Option A1 and A2 will be determined in the manner set forth in
the description of those options. As each payment is made under either
of these options, a number of Accumulation Units equal in value to the
payment will be cancelled.
Determination of Payments Under Options B1 and B2--Variable monthly
payments under Option 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
payments 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 First Year--In
determining the amount of Retirement Income Payments under Option B1 or
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 a Participant Account by the
amount required to provide $1 per month (see illustrative purchase
rates shown in Article VII.)
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 (see illustrative annual premium
rates shown in Article VII). This deduction is made by cancelling a
number of Accumulation Units in the Participant Account equal in value
to the annual premium. The allocation of the annual premium
6
<PAGE> 11
between Sub-Accounts will be in such relationship as the monthly
payments from each Sub-Account have to each other.
Determination of the 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 rate shown in Article VII for the Retired
Participant age as then determined under the terms of Article VII. 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.
Premium Taxes- Retirement income payments calculated in accordance with
this Section may be reduced or accumulation units cancelled in order to
provide premium taxes assessed as described in Article II.
Death of Retired Participant--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 cancelled will either remain in
the Variable Account or be transferred to the General Account,
depending on the Company's obligation.
ARTICLE V: SUSPENSION AND TERMINATION
SUSPENSION AND TERMINATION
The Company may suspend the Contract at its option at any time by
giving 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 by giving ninety (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. 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. Upon such termination by the Owner, payment of Contract
Values will be subject to any applicable Contigent Deferred Sales
Charge.
REDEMPTION OF PARTICIPANT ACCOUNTS
The Owner's right to redeem Participant Accounts, either fully or
partially, will be governed by the terms of the Plan. 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. All such
payments will be made by the Company to the Owner. The Company may,
however, by agreement with and on behalf of the Owner, make such
payments directly to the Participant. No partial redemption will
directly affect either future requirements to make Purchase Payments
for that Participant or the retirement date of that Participant.
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 amoung the Sub-Account 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
7
<PAGE> 12
computed following receipt of such written request by the Company.
Payment of any such amount will be made to the Owner within seven 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 (other than customary holiday or weekend
closing), or (ii) in the event that the Securities and Exchange
Commission may by order direct for the protection of Owners or
Participants. In lieu 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 of this Contract subject to the minimums applicable to these
options.
TERMINATION BY COMPANY
This Contract will terminate at the close of business on the date upon
which the performance and fulfillment by the Company of all its duties
and obligations hereunder have been completed.
ARTICLE VI: GENERAL PROVISIONS
THE CONTRACT
This Contract consists of the Contract, any endorsements or signed
amendments,and the application of the Owner, and constitutes the entire
Contract between the Company and Owner. All statements made in the
application will be deemed representations and not warranties. Only an
officer of the Company has authority, and then only in writing, to
modify the Contract or waive any of the Company's rights or
requirements.
MODIFICATION OF THE CONTRACT
Contract provisions with respect to the deductions made from Purchase
Payments, Participant Accounts, Contigent Deferred Sales Charge, if
applicable, Contract Maintenance Charge and Acturial Risk Fees may be
decreased upon notice to the Owner.
The Company may modify the Contract at any time without consent of the
Owner or Participants, if such modification is considered necessary to
obtain the benefit of federal or state statutes or regulations or to
maintain qualification of the Plan.
INDIVIDUAL CERTIFICATES
The Company will issue a descriptive certificate to the Owner for
delivery to each Retired Participant or other person for whom an
Optional Retirement Income Form is purchased under this Contract, as of
the date of the first payment under such Optional Retirement Income
Form. Each such descriptive certificate will set forth in substance the
benefits to which such Retired Participant is entitled under such form.
Purchase Payments made at any time by or on behalf of any Participant
must be at least $20 per month. In addition, if any applicable law so
requires, the Company will issue a descriptive certificate to the Owner
for delivery to each Participant for whom an Optional Retirement Income
Form has not been purchased under this Contract. Each such descriptive
certificate will set forth in substance the benefits to which such
Participant is entitled. Such descriptive certificates will not be
considered a part of this Contract.
MISSTATEMENTS AND ADJUSTMENTS
If the age, or any other relevant fact relating to any person is found
to be misstated, the amount of retirement income payable by the Company
will be adjusted without changing the date of the first payment of such
retirement income, unless some other adjustment, satisfactory to the
Owner and the Company, is made with respect to such misstatement. Any
adjustment made under the terms of this Section shall be conclusive on
any person affected by such adjustment. The dollar amount of any
underpayment made by the Company will be paid in full with the next
payment due. The dollar amount of any overpayment by the Company due to
any misstatement will be deducted from the amounts otherwise payable
thereafter.
8
<PAGE> 13
EVIDENCE OF SURVIVAL
If the Company is making payments conditioned upon the survival of any
person, the Company will have the right to require proof that such
person is living on each date when such payment is due.
OWNERSHIP AND ASSIGNMENT
This Contract shall belong 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. The Contract may not be
assigned.
DESIGNATION OF BENEFICIARY
The Participant Beneficiary shall be specified by the Owner, who may
receive instructions from the Participant in this regard. The Owner, or
the Participant where permitted by the Plan, may change such
Beneficiary designation from time to time. Such change must be made by
written notice filed with the Company. However, an irrevocably
designated Beneficiary can be changed only with such Beneficiary's
written consent. Any new designation will not be effective until such
notice is recorded by the Company. When so recorded, the change will
take effect as of the date the notice was signed, whether or not the
Participant is then living. Any change of Beneficiary will be subject
to any payments made or any other action taken by the Company prior to
such recording.
Unless otherwise provided in the Beneficiary designation, if at a
Participant death there is more than one Beneficiary entitled to the
proceeds then accruing, each will receive equal shares of such
proceeds. If any of two or more beneficiaries die prior to the death of
the Participant, the share of such proceeds which would have been
payable to that Beneficiary will be payable to the surviving
Beneficiary or beneficiaries. If no designated Beneficiary is living at
the Participant death, the proceeds will be payable to the Participant
estate. If any Beneficiary dies simultaneously with the Participant or
within 15 days after the Participant death and before due proof of the
Participant death has been received by the Company; then, rights to the
proceeds will be determined as though such Beneficiary had died prior
to the Participant.
DATA TO BE FURNISHED TO THE COMPANY
The Owner or Participant, as applicable, will furnish all information
which the Company may reasonably require for the administration of the
Contract. The Company will not be liable for the fulfillment of any
obligations which in any way depend on such information, until it
receives such information in a form satisfactory to it.
NON-PARTICIPATING
This Contract is non-participating. It will not share in the surplus of
the Company.
RELATION OF THIS CONTRACT TO THE VARIABLE ACCOUNT
The Company shall have exclusive and absolute control of the assets of
the Variable Account. As long as the Variable Account continues to be
registered under the Investment Company Act of 1940 and the Variable
Account is invested in shares of one or more Funds, the Company will
vote Fund shares held in the Variable Account in accordance with the
instructions received from Owners of Contracts of this class which
provide variable benefits. Each such Owner will receive periodic
reports and proxy material of the applicable Funds and a form with
which to give voting instructions.
9
<PAGE> 14
SUBSTITUTION OF FUND SHARES
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.
ARTICLE VII: PURCHASE RATES, ANNUAL RATES
APPLICABILITY AND BASIS OF TABLES
The tables in this Article will be used to determine the monthly
Retirement Income Payments for the first and subsequent years for
Options B1 and B2. Under Option B1, the amount of monthly payment for
each payment year will depend on the Retired Participant adjusted age
at the time the first payment is due (for each payment year for
variable payments). Under Option B2, the amount of monthly payment for
each payment year will depend on the adjusted age of each Retired
Participant at the time the first monthly payment is due (for each
payment year for variable payments).
The Retirement Income Tables show for various adjusted ages the amount
of the first monthly payment per $1,000 in each Sub-Account in a
Participant Account.
Variable Retirement Income Payments would remain level each year if the
investment results of the Variable Account were exactly equal to the
investment rate assumed in the tables. Since each year's variable
monthly payments are based on the actual value of the Participant
Account at the time such payments are determined, those monthly
payments will vary from year to year.
The table illustrates for retirement ages 62 and 65 the purchase rates
and annual premium rates applicable to variable payments at the time
payments are determined for a payment year, and the amount transferred
to the General Account to provide variable payments for any year will
be determined by multiplying the applicable annual premium rate by the
value of the Participant Account at that time.
The tables in this Article are based on the Progressive Annuity Table
assuming births in the year 1925 and an investment rate of 31/2% per
year. Any rates or factors for any ages not shown will be furnished by
the Company upon request.
ADJUSTED AGE
The actual age of a Retired Participant as used in determining his
adjusted age for any payment year shall mean the age of the payee on his
last birthday preceding the date the first payment is due for that
payment date plus 0.25 for each completed three months between the last
birthday and the due date of that first payment.
Adjusted age for any payment year is determined as follows:
<TABLE>
<CAPTION>
CALENDAR YEAR ADJUSTMENT TO CALENDAR YEAR ADJUSTMENT TO
OF BIRTH ACTUAL AGE OF BIRTH ACTUAL AGE
<S> <C> <C> <C>
Prior to 1916 1941 to 1945 -1.50
1916 to 1920 -.26 1946 to 1950 -1.75
1921 to 1925 -.50 1951 to 1955 -2.00
1926 to 1930 -.75 1956 to 1960 -2.25
1931 to 1935 -1.00 1961 to 1965 -2.50
1936 to 1940 -1.25 1966 to 1970 -2.75
1971 to 1975 -3.00
</TABLE>
10
<PAGE> 15
ILLUSTRATIVE TABLE OF CALCULATION OF VARIABLE PAYMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
RETIREMENT INCOME PAYMENTS ON A LIFE INCOME WITH
10 YEARS CERTAIN UNISEX RATES
- ----------------------------------------------------------------------------------------------------------------------------
Adjusted Age 62 Column 2 Adjusted Age 65 Column 2
Beginning Of Column 1 Annual Column 1 Annual
Payment Year Purchase Rate Premium Rate Purchase Rate Premium Rate
------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
1 176.73 63.08 164.37 67.26
2 171.38 64.43 158.68 68.83
3 165.95 65.72 152.93 70.46
4 160.47 67.11 147.13 72.04
5 154.94 68.36 141.31 73.54
6 149.40 69.58 135.50 74.96
7 143.87 70.62 129.73 76.04
8 138.39 71.38 124.06 76.73
9 133.01 71.73 118.55 76.85
10 127.79 71.62 113.77 76.04
11 122.79 72.06 108.32 76.19
12 117.93 73.31 103.57 77.48
13 113.11 74.73 98.89 78.96
14 108.32 76.19 94.27 80.45
15 103.57 77.48 89.72 81.85
16 98.89 78.96 85.26 83.34
17 94.27 80.45 80.89 84.82
18 89.72 81.85 76.62 86.27
19 85.26 83.34 72.46 87.82
20 80.89 84.82 68.41 89.32
21 76.62 86.27 64.48 90.76
22 72.46 87.82 60.68 92.25
23 68.41 89.32 57.01 93.64
24 64.48 90.76 53.48 95.24
25 60.68 92.25 50.08 96.52
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Column 1 is the amount required to provide $1 per month to the Retired
Participant.
Column 2 is the amount per $1,000 to be transferred to the General Account to
provide payments for the payment year.
<PAGE> 16
[NATIONWIDE LIFE INSURANCE COMPANY LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
Home Office Columbus, Ohio
(Hereinafter Called the Company)
................................................................................
APPLICATION FOR GROUP FLEXIBLE FUND RETIREMENT CONTRACT, NON-PARTICIPATING
MADE TO
NATIONWIDE LIFE INSURANCE COMPANY
(Called Nationwide)
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
[Applicant]
- --------------------------------------------------------------------------------
(Exact Name of Applicant)
The Applicant applies for Group Flexible Fund Retirement annuity form DC-3008.
The Applicant approves and accepts the terms of the Contract.
The Applicant certifies that to the best of his or her knowledge the Applicant
has authority to enter into the Contract.
If Nationwide fails to accept this Application, the amounts received will be
refunded without interest or charge.
<TABLE>
<S> <C>
[May 1, 1997] [John Doe]
- ------------------------------------------------------ ----------------------------------------------------
Date Agent Signature
[May 1, 1997] [Mary Doe]
- ------------------------------------------------------ ----------------------------------------------------
Date Person Signing for Applicant
[May 1, 1997] [Officer]
- ------------------------------------------------------ ----------------------------------------------------
Date of Issue Title
</TABLE>
Any person who, with intent to defraud or knowing that he is facilitating a
fraud against an insurer, submits an application or files a claim containing a
false or deceptive statement is guilty of insurance fraud.
DC-3008-1(OH) (4/97)
<PAGE> 1
DRUEN, RATH & DIETRICH
ATTORNEYS AT LAW
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
BRIAN M. BACON RANDALL L. ORR (614) 249-7617 TELECOPIER
THOMAS E. BARNES ROBERT M. PARSONS (614) 249-2418
ROGER A. CRAIG THOMAS J. PRUNTE WRITER'S DIRECT DIAL NUMBER
ELIZABETH A. DAVIN JOSEPH P. RATH
THOMAS W. DIETRICH ARLENE L. REILLY 249-7452
W. SIDNEY DRUEN LUCINDA A. REYNOLDS
JEANNE A. GRIFFIN DANIEL R. RUPP
LEROY JOHNSTON, III ANNE DANZA SAXON
MARK B. KOOGLER THERESA R. SCHAEFER
WALTER R. LEAHY W. JOSEPH SCHLEPPI
GEORGE K. MACKLIN DAVID E. SIMAITIS
RANDALL W. MAY KENT N. SIMMONS
M. LINDA MAZZITTI LEE A. THORNBURY
REGINALD C. MOMAH PHILIP W. WHITAKER
SANDRA L. NEELY DAVID L. WHITE
PETER J. OESTERLING STEVEN L. ZISSER
Practice Limited to Nationwide Insurance Companies
and their associated companies
April 21, 1997
VIA EDGAR
- ---------
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Ladies and Gentlemen:
We have prepared the Registration Statement and amendments thereto filed with
the United States Securities and Exchange Commission for the purpose of
registering under the Securities Act of 1933, as amended Group Flexible Fund
Retirement Contracts to be sold by Nationwide Life Insurance Company and to be
issued and administered through Nationwide DCVA-II. In connection therewith, we
have examined the Articles of Incorporation and Code of Regulations of
Nationwide Life Insurance Company ("Nationwide"), minutes of meetings of the
Board of Directors, pertinent provisions of federal and Ohio laws, together with
such other documents as we have deemed relevant for the purposes of this
opinion. Based on the foregoing, it is our opinion that:
1. Nationwide is a stock life insurance company duly organized and validly
existing under the laws of the State of Ohio and duly authorized to
issue and sell life, accident and health insurance and annuity
contracts.
2. Nationwide DCVA-II has been properly created and is a validly existing
separate account pursuant to the laws of the State of Ohio.
3. The issuance and sale of the Group Flexible Fund Retirement Contracts
have been duly authorized by Nationwide. When issued and sold in the
manner stated in the prospectus constituting a part of the Registration
Statement, the contracts will be legal and binding obligations of
Nationwide in accordance with their terms, except that clearance must
be obtained, or the policy must be approved, prior to the
<PAGE> 2
Nationwide Life Insurance Company
April 21, 1997
Page 2
issuance thereof in certain jurisdictions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Opinions" in the prospectus contained in the Registration Statement.
Very truly yours,
DRUEN, RATH & DIETRICH
Brian M. Bacon
