<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 2-73432
'40 Act File No. 811-2662
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 20 /x/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 21 /x/
MFS VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(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 43216-6609
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in
respect of the Prospectus, Statement of Additional Information, and the
Financial Statements.
It is proposed that this filing will become effective (check appropriate
space)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ X/ on May 1, 1995 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(i) of Rule 485
/ / on (date) pursuant to paragraph (a)(i) of Rule (485)
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a
prior registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable fee
in the amount of $500 has been paid to the Commission. Registrant filed its
Rule 24f-2 Notice for the fiscal year ended December 31, 1994, on February 22,
1995.
================================================================================
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<PAGE> 2
MFS VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Synopsis or Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 5. General Description of Registrant, Depositor, and Portfolio Companies . . . . . . . . 27
Item 6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Item 7. General Description of Variable Annuity Contracts . . . . . . . . . . . . . . . . . . 33
Item 8. Annuity Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 9. Death Benefit and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Item 10. Purchases and Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Item 11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Item 12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Item 13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Item 14. Table of Contents of the Statement of Additional Information . . . . . . . . . . . . . 53
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 17. General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 18. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 19. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 20. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Item 21. Calculation of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Item 22. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Item 25. Directors and Officers of the Depositor . . . . . . . . . . . . . . . . . . . . . . . 93
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant . . . . 95
Item 27. Number of Contract Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Item 28. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Item 29. Principal Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Item 30. Location of Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Item 31. Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Item 32. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 16609
Columbus, Ohio 43216-6609
1-800-848-7529, TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE MFS VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
The Individual Deferred Variable Annuity Contracts described in this
Prospectus are flexible purchase payment contracts (collectively referred to as
the "Contracts"). The Contracts are sold to individuals for use in retirement
plans which may qualify for special federal tax treatment under the Internal
Revenue Code. Annuity payments under the Contracts are deferred until a
selected later date.
Purchase payments are allocated to the MFS Variable Account ("Variable
Account"), a separate account of Nationwide Life Insurance Company (the
"Company"). The Variable Account uses its assets to purchase shares at net
asset value in one or more of the following series of the underlying Mutual
Fund options:
<TABLE>
<S> <C>
MFS(R) Bond Fund - Class A (Formerly MFS(R) Total Return Fund - Class A (Formerly
Massachusetts Financial Bond Fund) Massachusetts Financial Total Return Trust)
MFS(R) Growth Opportunities Fund - Class A MFS(R) World Governments Fund - Class A
(Formerly MFS(R) Capital Development Fund) (Formerly MFS(R) Worldwide Governments Trust)
MFS(R) Emerging Growth Fund - Class A (Formerly MFS(R) Series Trust IV
Massachusetts Financial Emerging Growth Trust) MFS(R) Money Market Fund
(Formerly Massachusetts Cash
Management Trust - MFS(R) Money
Market Fund)
MFS(R) High Income Fund - Class A (Formerly Massachusetts Investors Growth Stock Fund -
Massachusetts Financial High Income Trust- Class A
Series I)
MFS(R) Research Fund - Class A Massachusetts Investors Trust - Class A
Nationwide Separate Account Trust-
Money Market Fund
</TABLE>
This Prospectus provides you with the basic information you should know
about the Individual Deferred Variable Annuity 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, 1995, 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 Nationwide Life Insurance Company by calling the number listed above, or
writing P. O. Box 16609, Columbus, Ohio 43216-6609.
1
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<PAGE> 4
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, 1995, IS
INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION APPEARS ON PAGE 51 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1995.
2
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<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 78 or younger at the time of contract issuance.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence, as originally shown on the Contract Data Page of the Contract unless
changed by the Owner.
ANNUITY PAYMENT OPTION- The method for making annuity payments. Several
options are available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- A Contingent Designated Annuitant, if named,
may be the recipient of certain rights or benefits under the Contract upon the
Designated Annuitant's death if the Designated Annuitant dies before the
Annuitization Date. Death benefits and other required distributions based on
the death of the Designated Annuitant will be based on the death of the last
survivor of the Designated Annuitant and the Contingent Designated Annuitant,
if named. The Owner's right to name a Contingent Designated Annuitant may be
restricted under the provisions of any retirement or deferred compensation plan
for which this Contract is issued.
CONTINGENT OWNER- A Contingent Owner, if named in the Application, succeeds to
the rights of Contract Owner upon the Contract Owner's death before
Annuitization.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date.
CONTRACT VALUE- The sum of the Variable Account Contract Value and the Fixed
Account Contract Value.
CONTRACT YEAR- Each year commencing with either the Date of Issue or the
Contract Anniversary thereafter shall be a Contract Year.
3
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<PAGE> 6
DATE OF ISSUE- The date shown as the Date of Issue on the Contract Data Page of
the Contract.
DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant.
The benefit does not apply upon the death of the Contract Owner when the Owner
and Designated Annuitant are not the same person. If the Annuitant dies after
the Annuitization Date, any benefit that may be payable shall be as specified
in the Annuity Payment Option elected.
DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in any segregated asset account.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during the annuity payment period.
INDIVIDUAL RETIREMENT ANNUITY- An annuity which qualifies for treatment under
Section 408 of the Internal Revenue Code.
MUTUAL FUNDS ("FUNDS") - The registered management investment companies, in
which the assets of the sub-account of the Variable Account will be invested.
NON-QUALIFIED CONTRACTS- Contracts other than Qualified Contracts, Tax
Sheltered Annuity Plans or Individual Retirement Annuities.
NON-QUALIFIED PLANS- Retirement Plans which do not receive favorable tax
treatment under the provisions of the Internal Revenue Code.
QUALIFIED CONTRACTS- Contracts issued under Qualified Plans.
QUALIFIED PLANS- Retirement Plans which receive favorable tax treatment under
the provisions of the Internal Revenue Code, including those described in
Section 401 and 403(a) of the Internal Revenue Code.
TAX SHELTERED ANNUITY- An annuity which qualifies for treatment under Section
403(b) of the Internal Revenue Code of 1986, as amended.
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 underlying Mutual Fund shares held by the
Variable Account such that the current net asset value of Variable Account's
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- A separate investment account of the Company into which
Variable Account purchase payments are allocated.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
4
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<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Contingent Deferred Sales Charge(1) . . . . . . . . . . . . . . . . . . . . . . . 5%
-------
ANNUAL CONTRACT MAINTENANCE CHARGE(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30
-------
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.30%
--------
Administration Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .00%
--------
Total Variable Account Annual Expenses . . . . . . . . . . . . . . . . . . . . . . . 1.30%
--------
</TABLE>
(1) For purchase payments made after 1/1/81, starting with the first year
after a purchase payment has been made, 5% of that purchase payment may
be withdrawn without imposition of a Contingent Deferred Sales Charge.
For Contracts issued prior to 7/17/81, starting with the third Contract
Year the Company will waive Contingent Deferred Sales Charge on 10% of
cumulative purchase payments (see "Contingent Deferred Sales Charge").
(2) The annual Contract Maintenance Charge is deducted on each Contract
Anniversary and in any year in which the entire Contract Value is
surrendered on the date of Surrender (see "Contract Maintenance Charge").
5
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<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
TOTAL PORTFOLIO
MANAGEMENT OTHER COMPANY
FEES EXPENSES EXPENSES
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MFS(R) BOND FUND - CLASS A 0.41% 0.54% 0.95%
- ---------------------------------------------------------------------------------------------------------------
MFS(R) GROWTH OPPORTUNITIES FUND - CLASS A 0.43% 0.42% 0.85%
- ---------------------------------------------------------------------------------------------------------------
MFS(R) EMERGING GROWTH FUND - CLASS A 0.75% 0.60% 1.35%
- ---------------------------------------------------------------------------------------------------------------
MFS(R) HIGH INCOME FUND - CLASS A 0.45% 0.54% 0.99%
- ---------------------------------------------------------------------------------------------------------------
MFS(R) RESEARCH FUND - CLASS A 0.39% 0.49% 0.88%
- ---------------------------------------------------------------------------------------------------------------
MFS(R) TOTAL RETURN FUND - CLASS A 0.37% 0.48% 0.85%
- ---------------------------------------------------------------------------------------------------------------
MFS(R) WORLD GOVERNMENTS FUND - CLASS A 0.90% 0.64% 1.54%
- ---------------------------------------------------------------------------------------------------------------
MFS(R) SERIES TRUST IV
MFS(R) MONEY MARKET FUND 0.48% 0.27% 0.75%
- ---------------------------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS GROWTH STOCK FUND -
CLASS A 0.31% 0.41% 0.72%
- ---------------------------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS TRUST - CLASS A 0.26% 0.46% 0.72%
- ---------------------------------------------------------------------------------------------------------------
NSAT - MONEY MARKET FUND 0.50% 0.02% 0.52%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(3) The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against separate 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 unit values of
the Variable Account.
6
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<PAGE> 9
EXAMPLE
The following chart depicts the dollar amount of expenses that would be
incurred under this contract assuming a $1000 initial purchase payment and 5%
annual return. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or lesser than those shown below. The expense amounts shown below are
derived from a formula which allows the $30 Contract Maintenance Charge to be
expressed as a percentage of the average contract account size for existing
contracts. Since the average contract account size for contracts issued under
this prospectus is greater than $1000, the expense effect of the Contract
Maintenance Charge is reduced accordingly.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR IF YOU DO NOT SURRENDER YOUR IF YOU ANNUITIZE YOUR
CONTRACT AT THE END OF THE CONTRACT AT THE END OF THE CONTRACT AT THE END OF THE
APPLICABLE TIME PERIOD APPLICABLE TIME PERIOD APPLICABLE TIME PERIOD
-----------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS.
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFS(R) Bond
Fund-Class A 75 121 170 277 25 76 130 277 * 76 130 277
- -----------------------------------------------------------------------------------------------------------------------
MFS(R) Growth
Opportunities
Fund-Class A 74 118 165 266 24 73 125 266 * 73 125 266
- -----------------------------------------------------------------------------------------------------------------------
MFS(R)
Emerging
Growth Fund- 79 133 191 318 29 88 151 318 * 88 151 318
- -----------------------------------------------------------------------------------------------------------------------
Class A
MFS(R) High
Income Fund-
Class A 75 122 172 281 25 77 132 281 * 77 132 281
- -----------------------------------------------------------------------------------------------------------------------
MFS(R)
Research Fund- 74 119 166 270 24 74 126 270 * 74 126 270
- -----------------------------------------------------------------------------------------------------------------------
Class A
MFS(R) Total
Return Fund-
Class A 74 118 165 266 24 73 125 266 * 73 125 266
- -----------------------------------------------------------------------------------------------------------------------
MFS(R) World
Governments
Fund-Class A 81 139 200 337 31 94 160 337 * 94 160 337
- -----------------------------------------------------------------------------------------------------------------------
MFS(R) Series
Trust IV 73 115 159 256 23 70 119 256 * 70 119 256
- -----------------------------------------------------------------------------------------------------------------------
Mass.
Investors
Growth Stock 72 114 158 253 22 69 118 253 * 69 118 253
- -----------------------------------------------------------------------------------------------------------------------
Fund-Class A
Mass.
Investors 72 114 158 253 22 69 118 253 * 69 118 253
- -----------------------------------------------------------------------------------------------------------------------
Trust-Class A
NSAT Money
Market Fund 70 107 147 231 20 62 107 231 * 62 107 231
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract years.
7
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<PAGE> 10
The purpose of the Summary of Contract Expenses and Example are to assist the
Contract Owner in understanding the various costs and expenses that a
Contract Owner will bear directly or indirectly. The expenses of the MFS
Variable Account as well as those of the underlying Mutual Funds are
reflected in the table. For more and complete descriptions of the expenses of
the Variable Account, see "Variable Account Charges, Purchase Payments, and
Other Deductions". For more and complete information regarding expenses paid
out of the assets of a particular underlying Mutual Fund option, see the
underlying Mutual Fund's prospectus. Deductions for premium taxes may also
apply but are not reflected in the Example shown on the previous page (see
"Premium Taxes").
8
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<PAGE> 11
SYNOPSIS
The Company does not deduct a sales charge from purchase payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct
from the Contract Owner's Contract Value a Contingent Deferred Sales Charge
equal to 5% of the lesser of the total of all purchase payments made within 96
months prior to the date of the request to 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").
In addition, on each Contract Anniversary the Company will deduct an
annual Contract Maintenance Charge of $30 from the Contract Value of the
Contracts. This charge is to reimburse the Company for administrative expenses
related to the issue and maintenance of the Contracts. The Company does not
expect to recover from these charges an amount in excess of accumulated
administrative expenses (see "Contract Maintenance Charge").
The Company deducts a Mortality Risk Premium equal to an annual rate of
0.80% of the daily net asset value of the Variable Account for mortality risk
assumed by the Company (see "Mortality Risk Premium").
The Company deducts an Expense Risk Charge equal to an annual rate of
0.50% of the daily net asset value of the Variable Account as compensation for
the Company's risk by undertaking not to increase administrative charges on the
Contracts regardless of the actual administrative costs (see "Expense Risk
Charge").
The initial first year purchase payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by purchase payments
made on an annualized basis. The cumulative total of all purchase payments
under a Contract may not exceed $1,000,000 without the prior consent of the
Company (see "Allocation of Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $500, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in
payments of at least $20 (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity 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").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the day the Contract
is received, it may be returned to the home office of the Company, at the
address shown on page 1 of this Prospectus. When the Contract is received by
the Company, the Company will void the Contract and refund the Contract Value
in full, unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be a return of purchase payments (see "Right to
Revoke").
9
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<PAGE> 12
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values (For an accumulation unit outstanding throughout the
period)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Series Trust IV 30.994333 31.765828 0 1994
- MFS(R) Money Market -----------------------------------------------------------------------
Fund-Q* 30.575287 30.994333 0 1993
-----------------------------------------------------------------------
29.974326 30.575287 0 1992
-----------------------------------------------------------------------
28.674122 29.974326 0 1991
-----------------------------------------------------------------------
26.882238 28.674122 0 1990
-----------------------------------------------------------------------
24.951768 26.882238 0 1989
-----------------------------------------------------------------------
23.537669 24.951768 0 1988
-----------------------------------------------------------------------
22.391979 23.537669 258 1987
-----------------------------------------------------------------------
21.265793 22.391979 258 1986
-----------------------------------------------------------------------
19.935023 21.265793 258 1985
-----------------------------------------------------------------------
18.248981 19.935023 278 1984
- -------------------------------------------------------------------------------------------------
MFS Series Trust IV 31.804010 32.595660 8,788 1994
- MFS(R) Money Market -----------------------------------------------------------------------
Fund-NQ* 31.374016 31.804010 10,894 1993
-----------------------------------------------------------------------
30.757355 31.374016 21,348 1992
-----------------------------------------------------------------------
29.423184 30.757355 22,044 1991
-----------------------------------------------------------------------
27.584489 29.423184 34,393 1990
-----------------------------------------------------------------------
25.603588 27.584489 35,921 1989
-----------------------------------------------------------------------
24.152548 25.603588 47,516 1988
-----------------------------------------------------------------------
22.976926 24.152548 38,413 1987
-----------------------------------------------------------------------
21.821319 22.976926 57,433 1986
-----------------------------------------------------------------------
20.455786 21.821319 48,463 1985
-----------------------------------------------------------------------
18.725699 20.455786 62,746 1984
- -------------------------------------------------------------------------------------------------
MFS Series Trust IV 27.370768 27.967294 2,012,165 1994
- MFS(R) Money Market -----------------------------------------------------------------------
Fund-QS* 27.082782 27.370768 2,386,518 1993
-----------------------------------------------------------------------
26.631168 27.082782 3,346,894 1992
-----------------------------------------------------------------------
25.553415 26.631168 4,316,381 1991
-----------------------------------------------------------------------
24.029764 25.553415 5,619,586 1990
-----------------------------------------------------------------------
22.371742 24.029764 6,212,230 1989
-----------------------------------------------------------------------
21.167833 22.371742 7,703,094 1988
-----------------------------------------------------------------------
20.198699 21.167833 8,942,048 1987
-----------------------------------------------------------------------
19.241127 20.198699 8,159,288 1986
-----------------------------------------------------------------------
18.091880 19.241127 9,450,141 1985
-----------------------------------------------------------------------
16.612203 18.091880 11,803,051 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
*The 7-day yield on the MFS Series Trust IV - MFS(R) Money Market Fund as
of December 31, 1994 was 5.0952%.
10
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<PAGE> 13
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS Series Trust IV 27.389788 27.986728 823,383 1994
- MFS(R) Money Market -----------------------------------------------------------------------
Fund-NQS* 27.101602 27.389788 962,484 1993
-----------------------------------------------------------------------
26.649674 27.101602 1,251,049 1992
-----------------------------------------------------------------------
25.571172 26.649674 1,661,279 1991
-----------------------------------------------------------------------
24.046461 25.571172 2,007,134 1990
-----------------------------------------------------------------------
22.387287 24.046461 2,137,971 1989
-----------------------------------------------------------------------
21.182540 22.387287 3,088,244 1988
-----------------------------------------------------------------------
20.212734 21.182540 4,195,980 1987
-----------------------------------------------------------------------
19.254498 20.212734 3,737,090 1986
-----------------------------------------------------------------------
18.104453 19.254498 4,221,626 1985
-----------------------------------------------------------------------
16.623747 18.104453 5,783,601 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Bond Fund- 42.399834 40.103391 254 1994
Class A-Q -----------------------------------------------------------------------
37.614804 42.399834 255 1993
-----------------------------------------------------------------------
35.745806 37.614804 255 1992
-----------------------------------------------------------------------
30.588668 35.745806 256 1991
-----------------------------------------------------------------------
28.810284 30.588668 261 1990
-----------------------------------------------------------------------
25.635091 28.810284 261 1989
-----------------------------------------------------------------------
23.902587 25.635091 460 1988
-----------------------------------------------------------------------
24.281790 23.902587 835 1987
-----------------------------------------------------------------------
21.067423 24.281790 1,047 1986
-----------------------------------------------------------------------
16.991348 21.067423 1,007 1985
-----------------------------------------------------------------------
15.245573 16.991348 1,106 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Bond Fund- 44.767184 42.342529 450 1994
Class A-NQ -----------------------------------------------------------------------
39.714988 44.767184 1,068 1993
-----------------------------------------------------------------------
37.741633 39.714988 1,400 1992
-----------------------------------------------------------------------
32.296567 37.741633 2,161 1991
-----------------------------------------------------------------------
30.418889 32.296567 2,290 1990
-----------------------------------------------------------------------
27.066400 30.418889 4,117 1989
-----------------------------------------------------------------------
25.237169 27.066400 3,385 1988
-----------------------------------------------------------------------
25.637550 25.237169 16,179 1987
-----------------------------------------------------------------------
22.243719 25.637550 17,007 1986
-----------------------------------------------------------------------
17.940063 22.243719 21,622 1985
-----------------------------------------------------------------------
16.245657 17.940063 18,216 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
11
13 of 112
<PAGE> 14
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) Bond Fund- 38.746280 36.536936 715,452 1994
Class A-QS -----------------------------------------------------------------------
34.477915 38.746280 873,520 1993
-----------------------------------------------------------------------
32.864457 34.477915 1,019,209 1992
-----------------------------------------------------------------------
28.208302 32.864457 1,231,635 1991
-----------------------------------------------------------------------
26.649337 28.208302 1,282,139 1990
-----------------------------------------------------------------------
23.784006 26.649337 1,684,129 1989
-----------------------------------------------------------------------
22.243883 23.784006 1,982,290 1988
-----------------------------------------------------------------------
22.665333 22.243883 1,903,237 1987
-----------------------------------------------------------------------
19.724578 22.665333 2,294,723 1986
-----------------------------------------------------------------------
15.956531 19.724578 2,181,955 1985
-----------------------------------------------------------------------
14.360737 15.956531 1,725,464 1984
- -------------------------------------------------------------------------------------------------
MFS(R) 38.714601 36.507070 278,445 1994
Bond Fund-Class A-NQS -----------------------------------------------------------------------
34.449725 38.714601 341,506 1993
-----------------------------------------------------------------------
32.837584 34.449725 395,096 1992
-----------------------------------------------------------------------
28.185248 32.837584 416,135 1991
-----------------------------------------------------------------------
26.627561 28.185248 423,448 1990
-----------------------------------------------------------------------
23.764566 26.627561 571,151 1989
-----------------------------------------------------------------------
22.225695 23.764566 653,935 1988
-----------------------------------------------------------------------
22.646797 22.225695 772,335 1987
-----------------------------------------------------------------------
19.708442 22.646797 947,420 1986
-----------------------------------------------------------------------
15.943476 19.708442 943,453 1985
-----------------------------------------------------------------------
14.354008 15.943476 869,382 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Bond Fund- 38.865999 36.649839 4,892 1994
Class A-NQS -----------------------------------------------------------------------
(81-225) 34.584435 38.865999 10,550 1993
-----------------------------------------------------------------------
32.965982 34.584435 10,644 1992
-----------------------------------------------------------------------
28.295444 32.965982 13,375 1991
-----------------------------------------------------------------------
26.731671 28.295444 13,709 1990
-----------------------------------------------------------------------
23.857482 26.731671 21,797 1989
-----------------------------------------------------------------------
22.312590 23.857482 26,355 1988
-----------------------------------------------------------------------
22.735342 22.312590 40,610 1987
-----------------------------------------------------------------------
19.785504 22.735342 47,466 1986
-----------------------------------------------------------------------
16.005819 19.785504 48,341 1985
-----------------------------------------------------------------------
14.405096 16.005819 56,246 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
12
14 of 112
<PAGE> 15
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts 74.716077 73.217470 17 1994
Investors -----------------------------------------------------------------------
Trust-Class A-Q 68.591640 74.716077 17 1993
-----------------------------------------------------------------------
64.520969 68.591640 17 1992
-----------------------------------------------------------------------
51.047405 64.520969 17 1991
-----------------------------------------------------------------------
51.615906 51.047405 17 1990
-----------------------------------------------------------------------
38.300069 51.615906 17 1989
-----------------------------------------------------------------------
35.047213 38.300069 181 1988
-----------------------------------------------------------------------
32.943205 35.047213 343 1987
-----------------------------------------------------------------------
28.389984 32.943205 343 1986
-----------------------------------------------------------------------
23.021810 28.389984 313 1985
-----------------------------------------------------------------------
22.592113 23.021810 724 1984
- -------------------------------------------------------------------------------------------------
Massachusetts 70.504398 69.090265 0 1994
Investors -----------------------------------------------------------------------
Trust-Class A-NQ 64.725197 70.504398 33 1993
-----------------------------------------------------------------------
60.883987 64.725197 33 1992
-----------------------------------------------------------------------
48.169920 60.883987 0 1991
-----------------------------------------------------------------------
48.706376 48.169920 0 1990
-----------------------------------------------------------------------
36.141141 48.706376 727 1989
-----------------------------------------------------------------------
33.071646 36.141141 727 1988
-----------------------------------------------------------------------
31.086228 33.071646 8,861 1987
-----------------------------------------------------------------------
26.789668 31.086228 1,355 1986
-----------------------------------------------------------------------
21.724098 26.789668 727 1985
-----------------------------------------------------------------------
21.323173 21.724098 728 1984
- -------------------------------------------------------------------------------------------------
Massachusetts 60.509797 59.116939 373,587 1994
Investors -----------------------------------------------------------------------
Trust-Class A-QS 55.718475 60.509797 402,085 1993
-----------------------------------------------------------------------
52.571200 55.718475 438,578 1992
-----------------------------------------------------------------------
41.719131 52.571200 470,627 1991
-----------------------------------------------------------------------
42.312382 41.719131 447,941 1990
-----------------------------------------------------------------------
31.491587 42.312382 448,766 1989
-----------------------------------------------------------------------
28.904326 31.491587 481,558 1988
-----------------------------------------------------------------------
27.251667 28.904326 614,029 1987
-----------------------------------------------------------------------
23.556339 27.251667 511,737 1986
-----------------------------------------------------------------------
19.160067 23.556339 485,422 1985
-----------------------------------------------------------------------
18.859832 19.160067 510,615 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
13
15 of 112
<PAGE> 16
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts 54.291825 53.042089 87,519 1994
Investors -----------------------------------------------------------------------
Trust-Class A-NQS 49.992851 54.291825 95,048 1993
-----------------------------------------------------------------------
47.168983 49.992851 107,558 1992
-----------------------------------------------------------------------
37.432067 47.168983 390,819 1991
-----------------------------------------------------------------------
37.964354 37.432067 388,337 1990
-----------------------------------------------------------------------
28.255508 37.964354 411,620 1989
-----------------------------------------------------------------------
25.934117 28.255508 408,442 1988
-----------------------------------------------------------------------
24.451286 25.934117 483,763 1987
-----------------------------------------------------------------------
21.135691 24.451286 428,860 1986
-----------------------------------------------------------------------
17.191173 21.135691 426,493 1985
-----------------------------------------------------------------------
16.921792 17.191173 312,664 1984
- -------------------------------------------------------------------------------------------------
Massachusetts 57.679687 56.351973 4,013 1994
Investors -----------------------------------------------------------------------
Trust-Class A-NQS 53.112457 57.679687 7,320 1993
(81-225) -----------------------------------------------------------------------
50.112374 53.112457 8,418 1992
-----------------------------------------------------------------------
39.767862 50.112374 8,657 1991
-----------------------------------------------------------------------
40.333366 39.767862 8,698 1990
-----------------------------------------------------------------------
30.018672 40.333366 9,643 1989
-----------------------------------------------------------------------
27.552431 30.018672 11,011 1988
-----------------------------------------------------------------------
25.977075 27.552431 11,213 1987
-----------------------------------------------------------------------
22.454579 25.977075 9,413 1986
-----------------------------------------------------------------------
18.263928 22.454579 10,717 1985
-----------------------------------------------------------------------
17.977736 18.263928 15,409 1984
- -------------------------------------------------------------------------------------------------
Massachusetts 86.815888 80.166185 0 1994
Investors -----------------------------------------------------------------------
Growth Stock Fund- 76.611479 86.815888 0 1993
Class A-Q -----------------------------------------------------------------------
72.701980 76.611479 582 1992
-----------------------------------------------------------------------
49.712553 72.701980 583 1991
-----------------------------------------------------------------------
52.714394 49.712553 584 1990
-----------------------------------------------------------------------
39.228702 52.714394 584 1989
-----------------------------------------------------------------------
38.061552 39.228702 585 1988
-----------------------------------------------------------------------
36.324086 38.061552 586 1987
-----------------------------------------------------------------------
32.616794 36.324086 587 1986
-----------------------------------------------------------------------
26.224319 32.616794 691 1985
-----------------------------------------------------------------------
27.642945 26.224319 1,510 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
14
16 of 112
<PAGE> 17
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts 66.343035 61.261465 1,043 1994
Investors -----------------------------------------------------------------------
Growth Stock Fund- 58.545028 66.343035 2,615 1993
Class A-NQ -----------------------------------------------------------------------
55.557463 58.545028 2,874 1992
-----------------------------------------------------------------------
37.989389 55.557463 3,000 1991
-----------------------------------------------------------------------
40.283347 37.989389 2,248 1990
-----------------------------------------------------------------------
29.977822 40.283347 4,948 1989
-----------------------------------------------------------------------
29.085907 29.977822 2,751 1988
-----------------------------------------------------------------------
27.758162 29.085907 3,063 1987
-----------------------------------------------------------------------
24.925123 27.758162 4,687 1986
-----------------------------------------------------------------------
20.040121 24.925123 26,358 1985
-----------------------------------------------------------------------
21.274030 20.040121 37,843 1984
- -------------------------------------------------------------------------------------------------
Massachusetts 70.852048 65.227303 375,617 1994
Investors -----------------------------------------------------------------------
Growth Stock Fund- 62.713932 70.852048 411,227 1993
Class A-QS -----------------------------------------------------------------------
59.694705 62.713932 450,956 1992
-----------------------------------------------------------------------
40.942088 59.694705 472,708 1991
-----------------------------------------------------------------------
43.546733 40.942088 457,230 1990
-----------------------------------------------------------------------
32.504355 43.546733 499,859 1989
-----------------------------------------------------------------------
31.632940 32.504355 526,502 1988
-----------------------------------------------------------------------
30.280685 31.632940 702,181 1987
-----------------------------------------------------------------------
27.272722 30.280685 681,343 1986
-----------------------------------------------------------------------
21.994110 27.272722 907,806 1985
-----------------------------------------------------------------------
23.254691 21.994110 1,118,015 1984
- -------------------------------------------------------------------------------------------------
Massachusetts 60.121583 55.348697 116,628 1994
Investors -----------------------------------------------------------------------
Growth Stock Fund- 53.215976 60.121583 132,123 1993
Class A-NQS -----------------------------------------------------------------------
50.654002 53.215976 154,986 1992
-----------------------------------------------------------------------
34.741451 50.654002 119,500 1991
-----------------------------------------------------------------------
36.951616 34.741451 124,361 1990
-----------------------------------------------------------------------
27.581591 36.951616 152,198 1989
-----------------------------------------------------------------------
26.842147 27.581591 148,306 1988
-----------------------------------------------------------------------
25.694695 26.842147 234,983 1987
-----------------------------------------------------------------------
23.142284 25.694695 274,468 1986
-----------------------------------------------------------------------
18.663117 23.142284 427,559 1985
-----------------------------------------------------------------------
19.732784 18.663117 506,226 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
15
17 of 112
<PAGE> 18
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Massachusetts 65.494712 60.295273 2,505 1994
Investors -----------------------------------------------------------------------
Growth Stock Fund- 57.971950 65.494712 3,382 1993
Class A-NQS -----------------------------------------------------------------------
(81-225) 55.181022 57.971950 7,430 1992
-----------------------------------------------------------------------
37.846336 55.181022 6,225 1991
-----------------------------------------------------------------------
40.254029 37.846336 6,677 1990
-----------------------------------------------------------------------
30.046604 40.254029 9,992 1989
-----------------------------------------------------------------------
29.241076 30.046604 14,248 1988
-----------------------------------------------------------------------
27.991066 29.241076 23,815 1987
-----------------------------------------------------------------------
25.210535 27.991066 25,475 1986
-----------------------------------------------------------------------
20.331052 25.210535 36,652 1985
-----------------------------------------------------------------------
21.496316 20.331052 55,987 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Research Fund- 92.76008 91.844201 0 1994
Class A-Q -----------------------------------------------------------------------
77.006871 92.760008 0 1993
-----------------------------------------------------------------------
69.993098 77.006871 0 1992
-----------------------------------------------------------------------
53.307836 69.993098 0 1991
-----------------------------------------------------------------------
57.290901 53.307836 0 1990
-----------------------------------------------------------------------
45.882915 57.290901 0 1989
-----------------------------------------------------------------------
42.019162 45.882915 0 1988
-----------------------------------------------------------------------
40.283065 42.019162 80 1987
-----------------------------------------------------------------------
35.664193 40.283065 80 1986
-----------------------------------------------------------------------
27.994475 35.664193 151 1985
-----------------------------------------------------------------------
29.907812 27.994475 151 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Research Fund- 74.327082 73.593263 599 1994
Class A-NQ -----------------------------------------------------------------------
61.704356 74.327082 807 1993
-----------------------------------------------------------------------
56.084333 61.704356 600 1992
-----------------------------------------------------------------------
42.714695 56.084333 660 1991
-----------------------------------------------------------------------
45.906255 42.714695 663 1990
-----------------------------------------------------------------------
36.765224 45.906255 768 1989
-----------------------------------------------------------------------
33.669260 36.765224 2,107 1988
-----------------------------------------------------------------------
32.278146 33.669260 2,381 1987
-----------------------------------------------------------------------
28.577125 32.278146 2,513 1986
-----------------------------------------------------------------------
22.431506 28.577125 2,583 1985
-----------------------------------------------------------------------
23.177070 22.431506 3,043 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
16
18 of 112
<PAGE> 19
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) Research Fund- 74.064821 73.111959 285,624 1994
Class A-QS -----------------------------------------------------------------------
61.673295 74.064821 262,270 1993
-----------------------------------------------------------------------
56.226647 61.673295 278,528 1992
-----------------------------------------------------------------------
42.952906 56.226647 308,259 1991
-----------------------------------------------------------------------
46.303111 42.952906 341,148 1990
-----------------------------------------------------------------------
37.195214 46.303111 406,916 1989
-----------------------------------------------------------------------
34.166322 37.195214 490,200 1988
-----------------------------------------------------------------------
32.854259 34.166322 598,337 1987
-----------------------------------------------------------------------
29.175468 32.854259 771,902 1986
-----------------------------------------------------------------------
22.970614 29.175468 756,670 1985
-----------------------------------------------------------------------
24.615522 22.970614 870,321 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Research Fund- 64.715547 63.882963 97,012 1994
Class A-NQS -----------------------------------------------------------------------
53.888228 64.715547 87,152 1993
-----------------------------------------------------------------------
49.129110 53.888228 77,535 1992
-----------------------------------------------------------------------
37.530937 49.129110 81,372 1991
-----------------------------------------------------------------------
40.458230 37.530937 87,510 1990
-----------------------------------------------------------------------
32.500035 40.458230 123,218 1989
-----------------------------------------------------------------------
29.853469 32.500035 163,490 1988
-----------------------------------------------------------------------
28.707029 29.853469 249,792 1987
-----------------------------------------------------------------------
25.492611 28.707029 411,916 1986
-----------------------------------------------------------------------
20.071004 25.492611 420,900 1985
-----------------------------------------------------------------------
21.508274 20.071004 549,451 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Research Fund- 73.200301 72.258548 1,727 1994
Class A-NQS -----------------------------------------------------------------------
(81-225) 60.953415 73.200301 1,975 1993
-----------------------------------------------------------------------
55.570339 60.953415 1,996 1992
-----------------------------------------------------------------------
42.451540 55.570339 2,041 1991
-----------------------------------------------------------------------
45.762638 42.451540 5,210 1990
-----------------------------------------------------------------------
36.761058 45.762638 5,773 1989
-----------------------------------------------------------------------
33.767510 36.761058 8,143 1988
-----------------------------------------------------------------------
32.470754 33.767510 10,087 1987
-----------------------------------------------------------------------
28.834897 32.470754 11,004 1986
-----------------------------------------------------------------------
22.702477 28.834897 12,212 1985
-----------------------------------------------------------------------
24.328184 22.702477 30,931 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
17
19 of 112
<PAGE> 20
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) Total Return 65.964662 63.581031 132 1994
Fund- Class A-Q -----------------------------------------------------------------------
57.871052 65.964662 132 1993
-----------------------------------------------------------------------
53.108093 57.871052 132 1992
-----------------------------------------------------------------------
44.107591 53.108093 132 1991
-----------------------------------------------------------------------
45.615581 44.107591 133 1990
-----------------------------------------------------------------------
37.441206 45.615581 133 1989
-----------------------------------------------------------------------
32.875946 37.441206 544 1988
-----------------------------------------------------------------------
32.075563 32.875946 134 1987
-----------------------------------------------------------------------
27.033998 32.075563 135 1986
-----------------------------------------------------------------------
20.968779 27.033998 3,315 1985
-----------------------------------------------------------------------
19.814650 20.968779 3,278 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Total Return 64.822235 62.479885 87 1994
Fund- Class A-NQ -----------------------------------------------------------------------
56.868802 64.822235 317 1993
-----------------------------------------------------------------------
52.188320 56.868802 712 1992
-----------------------------------------------------------------------
43.343699 52.188320 534 1991
-----------------------------------------------------------------------
44.825581 43.343699 535 1990
-----------------------------------------------------------------------
36.792773 44.825581 1,456 1989
-----------------------------------------------------------------------
32.306577 36.792773 2,385 1988
-----------------------------------------------------------------------
31.520064 32.306577 2,431 1987
-----------------------------------------------------------------------
26.565805 31.520064 4,507 1986
-----------------------------------------------------------------------
20.605630 26.565805 3,160 1985
-----------------------------------------------------------------------
18.856225 20.605630 3,162 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Total Return 61.021714 58.638949 902,191 1994
Fund- Class A-QS -----------------------------------------------------------------------
53.697197 61.021714 998,970 1993
-----------------------------------------------------------------------
49.427627 53.697197 977,013 1992
-----------------------------------------------------------------------
41.175343 49.427627 950,358 1991
-----------------------------------------------------------------------
42.712979 41.175343 942,653 1990
-----------------------------------------------------------------------
35.164779 42.712979 1,082,672 1989
-----------------------------------------------------------------------
30.970695 35.164779 1,047,263 1988
-----------------------------------------------------------------------
30.308462 30.970695 1,161,132 1987
-----------------------------------------------------------------------
25.622114 30.308462 889,959 1986
-----------------------------------------------------------------------
19.933897 25.622114 391,126 1985
-----------------------------------------------------------------------
18.894201 19.933897 299,660 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
18
20 of 112
<PAGE> 21
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) Total Return 59.066983 56.760546 224,713 1994
Fund- Class A-NQS -----------------------------------------------------------------------
51.977095 59.066983 272,164 1993
-----------------------------------------------------------------------
47.844295 51.977095 229,777 1992
-----------------------------------------------------------------------
39.856354 47.844295 216,586 1991
-----------------------------------------------------------------------
41.344744 39.856354 234,543 1990
-----------------------------------------------------------------------
34.038338 41.344744 299,175 1989
-----------------------------------------------------------------------
29.978604 34.038338 310,907 1988
-----------------------------------------------------------------------
29.337595 29.978604 385,086 1987
-----------------------------------------------------------------------
24.801371 29.337595 401,086 1986
-----------------------------------------------------------------------
19.295367 24.801371 184,404 1985
-----------------------------------------------------------------------
17.590621 19.295367 173,385 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Total Return 60.428053 58.068470 2,258 1994
Fund- Class A-NQS -----------------------------------------------------------------------
(81-225) 53.174791 60.428053 3,580 1993
-----------------------------------------------------------------------
48.946754 53.174791 3,681 1992
-----------------------------------------------------------------------
40.774760 48.946754 2,990 1991
-----------------------------------------------------------------------
42.297442 40.774760 3,950 1990
-----------------------------------------------------------------------
34.822674 42.297442 7,074 1989
-----------------------------------------------------------------------
30.669397 34.822674 9,076 1988
-----------------------------------------------------------------------
30.013610 30.669397 9,443 1987
-----------------------------------------------------------------------
25.372858 30.013610 8,710 1986
-----------------------------------------------------------------------
19.739982 25.372858 8,700 1985
-----------------------------------------------------------------------
18.710399 19.739982 10,328 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Growth 111.450698 105.450698 0 1994
Opportunities Fund- -----------------------------------------------------------------------
Class A-Q 96.886717 111.450698 0 1993
-----------------------------------------------------------------------
90.866062 96.886717 59 1992
-----------------------------------------------------------------------
74.980776 90.866062 60 1991
-----------------------------------------------------------------------
79.192602 74.980776 60 1990
-----------------------------------------------------------------------
62.255086 79.192602 60 1989
-----------------------------------------------------------------------
57.676664 62.255086 61 1988
-----------------------------------------------------------------------
56.051797 57.676664 119 1987
-----------------------------------------------------------------------
53.548281 56.051797 270 1986
-----------------------------------------------------------------------
42.855756 53.548281 725 1985
-----------------------------------------------------------------------
48.845469 42.855756 1,034 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
19
21 of 112
<PAGE> 22
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) Growth 81.961605 77.773322 2,807 1994
Opportunities Fund- -----------------------------------------------------------------------
Class A-NQ 71.251149 81.961605 2,923 1993
-----------------------------------------------------------------------
66.823526 71.251149 3,217 1992
-----------------------------------------------------------------------
55.141372 66.823526 3,285 1991
-----------------------------------------------------------------------
58.238773 55.141372 3,209 1990
-----------------------------------------------------------------------
45.782811 58.238773 4,173 1989
-----------------------------------------------------------------------
42.415808 45.782811 5,496 1988
-----------------------------------------------------------------------
41.220874 42.415808 8,031 1987
-----------------------------------------------------------------------
39.379772 41.220874 8,611 1986
-----------------------------------------------------------------------
31.516418 39.379772 10,914 1985
-----------------------------------------------------------------------
34.173699 31.516418 13,463 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Growth 76.918993 72.767772 1,029,309 1994
Opportunities Fund- -----------------------------------------------------------------------
Class A-QS 67.070484 76.918993 1,187,377 1993
-----------------------------------------------------------------------
63.094003 67.070484 1,351,519 1992
-----------------------------------------------------------------------
52.221717 63.094003 1,533,160 1991
-----------------------------------------------------------------------
55.323366 52.221717 1,718,069 1990
-----------------------------------------------------------------------
43.622463 55.323366 2,056,593 1989
-----------------------------------------------------------------------
40.536877 43.622463 2,481,997 1988
-----------------------------------------------------------------------
39.514677 40.536877 3,061,737 1987
-----------------------------------------------------------------------
37.864392 39.514677 3,763,669 1986
-----------------------------------------------------------------------
30.395524 37.864392 4,345,832 1985
-----------------------------------------------------------------------
34.749544 30.395524 4,712,891 1984
- -------------------------------------------------------------------------------------------------
MFS(R) Growth 65.338300 61.812074 214,829 1994
Opportunities Fund- -----------------------------------------------------------------------
Class A-NQS 56.972537 65.338300 241,558 1993
-----------------------------------------------------------------------
53.594751 56.972537 284,420 1992
-----------------------------------------------------------------------
44.359372 53.594751 319,081 1991
-----------------------------------------------------------------------
46.994048 44.359372 322,668 1990
-----------------------------------------------------------------------
37.054798 46.994048 420,211 1989
-----------------------------------------------------------------------
34.433775 37.054798 547,737 1988
-----------------------------------------------------------------------
33.565477 34.433775 741,946 1987
-----------------------------------------------------------------------
32.163649 33.565477 1,079,078 1986
-----------------------------------------------------------------------
25.819272 32.163649 1,254,570 1985
-----------------------------------------------------------------------
29.013698 25.819272 1,333,745 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
20
22 of 112
<PAGE> 23
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) Growth 72.093454 68.202665 16,083 1994
Opportunities Fund- -----------------------------------------------------------------------
Class A-NQS 62.862782 72.093454 20,590 1993
(81-225) -----------------------------------------------------------------------
59.135771 62.862782 23,039 1992
-----------------------------------------------------------------------
48.945558 59.135771 26,387 1991
-----------------------------------------------------------------------
51.852634 48.945558 32,466 1990
-----------------------------------------------------------------------
40.885800 51.852634 43,143 1989
-----------------------------------------------------------------------
37.993791 40.885800 63,217 1988
-----------------------------------------------------------------------
37.035722 37.993791 82,010 1987
-----------------------------------------------------------------------
35.488967 37.035722 101,995 1986
-----------------------------------------------------------------------
28.488661 35.488967 132,579 1985
-----------------------------------------------------------------------
32.569532 28.488661 215,681 1984
- -------------------------------------------------------------------------------------------------
MFS(R) High Income 51.425517 49.574586 0 1994
Fund-Class A-Q -----------------------------------------------------------------------
43.507773 51.425517 0 1993
-----------------------------------------------------------------------
37.547955 43.507773 0 1992
-----------------------------------------------------------------------
25.471529 37.547955 0 1991
-----------------------------------------------------------------------
30.899937 25.471529 0 1990
-----------------------------------------------------------------------
31.842604 30.899937 0 1989
-----------------------------------------------------------------------
28.627030 31.842604 0 1988
-----------------------------------------------------------------------
28.833132 28.627030 471 1987
-----------------------------------------------------------------------
26.254838 28.833132 471 1986
-----------------------------------------------------------------------
21.477475 26.254838 519 1985
-----------------------------------------------------------------------
20.425409 21.477475 520 1984
- -------------------------------------------------------------------------------------------------
MFS(R) High Income 51.758789 49.895862 359 1994
Fund-Class A-NQ -----------------------------------------------------------------------
43.789729 51.758789 721 1993
-----------------------------------------------------------------------
37.791286 43.789729 360 1992
-----------------------------------------------------------------------
25.636591 37.791286 360 1991
-----------------------------------------------------------------------
31.100170 25.636591 697 1990
-----------------------------------------------------------------------
32.048950 31.100170 698 1989
-----------------------------------------------------------------------
28.812532 32.048950 699 1988
-----------------------------------------------------------------------
29.019971 28.812532 5,039 1987
-----------------------------------------------------------------------
26.424963 29.019971 5,305 1986
-----------------------------------------------------------------------
21.616650 26.424963 10,004 1985
-----------------------------------------------------------------------
19.828539 21.616650 10,179 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
21
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<PAGE> 24
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) High Income 45.788518 44.007083 561,209 1994
Fund-Class A-QS -----------------------------------------------------------------------
38.856280 45.788518 709,698 1993
-----------------------------------------------------------------------
33.635599 38.856280 764,118 1992
-----------------------------------------------------------------------
22.886614 33.635599 797,975 1991
-----------------------------------------------------------------------
27.848883 22.886614 914,811 1990
-----------------------------------------------------------------------
28.785308 27.848883 1,535,254 1989
-----------------------------------------------------------------------
25.956938 28.785308 1,979,053 1988
-----------------------------------------------------------------------
26.223147 25.956938 2,331,207 1987
-----------------------------------------------------------------------
23.950663 26.223147 3,175,489 1986
-----------------------------------------------------------------------
19.651967 23.950663 3,171,675 1985
-----------------------------------------------------------------------
18.746328 19.651967 2,724,374 1984
- -------------------------------------------------------------------------------------------------
MFS(R) High Income 45.093866 43.339456 200,368 1994
Fund-Class A-NQS -----------------------------------------------------------------------
38.266802 45.093866 252,674 1993
-----------------------------------------------------------------------
33.125330 38.266802 263,452 1992
-----------------------------------------------------------------------
22.539408 33.125330 268,775 1991
-----------------------------------------------------------------------
27.426394 22.539408 301,912 1990
-----------------------------------------------------------------------
28.348616 27.426394 494,597 1989
-----------------------------------------------------------------------
25.563163 28.348616 708,091 1988
-----------------------------------------------------------------------
25.825328 25.563163 968,782 1987
-----------------------------------------------------------------------
23.587313 25.825328 1,229,202 1986
-----------------------------------------------------------------------
19.353832 23.587313 1,365,557 1985
-----------------------------------------------------------------------
18.202573 19.353832 1,269,327 1984
- -------------------------------------------------------------------------------------------------
MFS(R) High Income 45.788518 44.007083 6,622 1994
Fund-Class A-NQS -----------------------------------------------------------------------
(81-225) 38.856280 45.788518 9,385 1993
-----------------------------------------------------------------------
33.635599 38.856280 9,545 1992
-----------------------------------------------------------------------
22.886614 33.635599 9,353 1991
-----------------------------------------------------------------------
27.848883 22.886614 10,384 1990
-----------------------------------------------------------------------
28.785308 27.848883 25,607 1989
-----------------------------------------------------------------------
25.956938 28.785308 31,809 1988
-----------------------------------------------------------------------
26.223147 25.956938 37,240 1987
-----------------------------------------------------------------------
23.950663 26.223147 57,986 1986
-----------------------------------------------------------------------
19.651967 23.950663 72,456 1985
-----------------------------------------------------------------------
18.746329 19.651967 104,545 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
22
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<PAGE> 25
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MFS(R) World 46.532702 42.911877 229,107 1994
Governments Fund- -----------------------------------------------------------------------
Class A-QS 39.821939 46.532702 272,388 1993
-----------------------------------------------------------------------
39.811131 39.821939 260,769 1992
-----------------------------------------------------------------------
35.563134 39.811131 271,803 1991
-----------------------------------------------------------------------
30.561450 35.563134 315,655 1990
-----------------------------------------------------------------------
28.837079 30.561450 304,967 1989
-----------------------------------------------------------------------
27.989113 28.837079 371,673 1988
-----------------------------------------------------------------------
22.769485 27.989113 478,189 1987
-----------------------------------------------------------------------
17.721712 22.769485 640,918 1986
-----------------------------------------------------------------------
13.832824 17.721712 559,864 1985
-----------------------------------------------------------------------
13,695420 13,832824 391,172 1984
- -------------------------------------------------------------------------------------------------
MFS(R) World 45.366368 41.836304 44,619 1994
Governments Fund- -----------------------------------------------------------------------
Class A-NQS 38.823817 45.366368 57,120 1993
-----------------------------------------------------------------------
38.813287 38.823817 42,828 1992
-----------------------------------------------------------------------
34.671762 38.813287 35,166 1991
-----------------------------------------------------------------------
29.795448 34.671762 54,896 1990
-----------------------------------------------------------------------
28.114297 29.795448 40,122 1989
-----------------------------------------------------------------------
27.287568 28.114297 62,275 1988
-----------------------------------------------------------------------
22.198779 27.287568 102,749 1987
-----------------------------------------------------------------------
17.277522 22.198779 126,753 1986
-----------------------------------------------------------------------
13.486101 17.277522 127,578 1985
-----------------------------------------------------------------------
13.367290 13.486101 30,970 1984
- -------------------------------------------------------------------------------------------------
MFS(R) World 46.460353 42.845163 3,284 1994
Governments Fund- -----------------------------------------------------------------------
Class A-NQS 39.760030 46.460353 3,684 1993
(81-225) -----------------------------------------------------------------------
39.749239 39.760030 4,274 1992
-----------------------------------------------------------------------
35.507853 39.749239 5,904 1991
-----------------------------------------------------------------------
30.513949 35.507853 7,450 1990
-----------------------------------------------------------------------
28.792251 30.513949 8,327 1989
-----------------------------------------------------------------------
27.945600 28.792251 16,716 1988
-----------------------------------------------------------------------
22.734095 27.945600 18,919 1987
-----------------------------------------------------------------------
17.694172 22.734095 27,003 1986
-----------------------------------------------------------------------
13.811316 17.694172 31,535 1985
-----------------------------------------------------------------------
13.674127 13.811316 39,917 1984
- -------------------------------------------------------------------------------------------------
</TABLE>
23
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<PAGE> 26
CONDENSED FINANCIAL INFORMATION, Continued
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION
AT BEGINNING AT END UNITS AT END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Separate 20.538004 21.058716 72,621 1994
Account Trust Money -----------------------------------------------------------------------
Market Fund-QS*** 20.250996 20.538004 98,132 1993
-----------------------------------------------------------------------
19.842272 20.250996 126,024 1992
-----------------------------------------------------------------------
18.996144 19.842272 148,883 1991
-----------------------------------------------------------------------
17.809654 18.996144 178,554 1990
-----------------------------------------------------------------------
16.542684 17.809654 219,694 1989
-----------------------------------------------------------------------
15.617124 16.542684 233,421 1988
-----------------------------------------------------------------------
14.865508 15.617124 279,386 1987
-----------------------------------------------------------------------
14.133753 14.865508 315,141 1986
-----------------------------------------------------------------------
13.229327 14.133753 345,667 1985
-----------------------------------------------------------------------
12.123820 13.229327 407,226 1984
- ----------------------------------------------------------------------------------------------------
Nationwide Separate 20.551361 21.072414 41,143 1994
Account Trust Money -----------------------------------------------------------------------
Market Fund-NQS*** 20.264167 20.551361 57,208 1993
-----------------------------------------------------------------------
19.855177 20.264167 63,453 1992
-----------------------------------------------------------------------
19.008499 19.855177 71,910 1991
-----------------------------------------------------------------------
17.821238 19.008499 92,012 1990
-----------------------------------------------------------------------
16.553443 17.821238 121,035 1989
-----------------------------------------------------------------------
15.627283 16.553443 150,709 1988
-----------------------------------------------------------------------
14.875184 15.627283 180,554 1987
-----------------------------------------------------------------------
14.142951 14.875184 221,685 1986
-----------------------------------------------------------------------
13.237946 14.142951 258,448 1985
-----------------------------------------------------------------------
12.131719 13.237946 335,085 1984
- ----------------------------------------------------------------------------------------------------
MFS(R) Emerging 20.977470 21.706658 400,564 1994
Growth Trust-Class A-QS -----------------------------------------------------------------------
16.755110 20.977490 285,804 1993
-----------------------------------------------------------------------
15.782125 16.755110 288,500 1992
-----------------------------------------------------------------------
9.396802 15.782125 222,326 1991
-----------------------------------------------------------------------
10.753988 9.396802 112,582 1990
-----------------------------------------------------------------------
8.662733 10.753988 172,308 1989
-----------------------------------------------------------------------
7.647091 8.662733 183,533 1988
-----------------------------------------------------------------------
10.000000 7.647091 149,255 1987
- ----------------------------------------------------------------------------------------------------
MFS(R) Emerging 20.977490 21.706658 474 1994
Growth Trust-Class A-NQS -----------------------------------------------------------------------
(81-225) 16.755110 20.977490 1,237 1993
-----------------------------------------------------------------------
15.782125 16.755110 762 1992
-----------------------------------------------------------------------
9.396802 15.782125 1,140 1991
-----------------------------------------------------------------------
10.753988 9.396802 0 1990
-----------------------------------------------------------------------
8.662733 10.753988 2,575 1989
-----------------------------------------------------------------------
7.647091 8.662733 775 1988
-----------------------------------------------------------------------
10.000000 7.647091 1,521 1987
- ----------------------------------------------------------------------------------------------------
</TABLE>
***The 7-day yield on the Nationwide Separate Account Trust-Money Market
Fund as of December 31, 1994, was 5.65%.
24
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<PAGE> 27
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 43216-6609. 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, and Puerto Rico.
The Company is 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 in sales literature from time to time.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on March 3, 1976,
pursuant to the provisions of Ohio law. The Company has caused the Variable
Account to be 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 Variable Account is a separate investment account of the Company and
as such, is not chargeable with liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. Obligations under the Contracts, however,
are obligations of the Company. Income, gains and losses, whether or not
realized, from the assets of the Variable Account are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard
to other income, gains, or losses of the Company.
Purchase payments are allocated within the Variable Account among one or
more sub-accounts made up of shares in the underlying Mutual Funds designated
by the Contract Owner. There are two or more sub-accounts within the Variable
Account for each of the underlying Mutual Fund options which may be designated
by the Contract Owner. Some of these sub-accounts contain the underlying Mutual
Fund shares attributable to Accumulation Units under Qualified Contracts and
other sub-accounts contain the underlying Mutual Fund shares attributable to
Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among the following underlying Mutual
Fund options under the Contracts.
A summary of investment objectives is contained in the description of
each underlying Mutual Fund option below. More detailed information may be
found in the current prospectus for each underlying Mutual Fund offered. Such a
prospectus for the underlying Mutual Fund option(s) being
25
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<PAGE> 28
considered must accompany this Prospectus and should be read in conjunction
herewith. You can obtain a copy of each prospectus without charge from
Nationwide Life Insurance Company by calling 1-800-848-7529, TDD 1-800-238-3035
or writing P.O. Box 16609, Columbus, Ohio 43216-6609.
- - MFS(R) BOND FUND-CLASS A (FORMERLY MASSACHUSETTS FINANCIAL BOND FUND)
Investment Objective: To provide a high level of current income for
distribution to investors as is believed to be consistent with prudent
investment risk. An additional objective is to seek protection of investor's
capital.
- - MFS(R) GROWTH OPPORTUNITIES FUND-CLASS A (FORMERLY MFS(R) CAPITAL DEVELOPMENT
FUND)
Investment Objective: To seek growth of capital. The selection of
securities is made solely on the basis of potential for capital appreciation.
Dividend income, if any, is incidental to the objective of growth capital.
- - MFS(R) EMERGING GROWTH FUND-CLASS A (FORMERLY MASSACHUSETTS FINANCIAL
EMERGING GROWTH TRUST)
Investment Objective: To seek long-term growth of capital. The selection
of securities is made solely on the basis of potential for growth of capital.
Dividend and interest income from portfolio securities, if any, is incidental
to the investment objective of long-term growth of capital.
The Contract Owner may allocate to the Fund either new purchase payments
or Contract Values attributable to purchase payments made on or after January
1, 1981.
- - MFS(R) HIGH INCOME FUND-CLASS A (FORMERLY MASSACHUSETTS FINANCIAL HIGH INCOME
TRUST-SERIES I)
Investment Objective: To seek 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 the 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
higher rating categories. Capital growth is a consideration incidental to the
investment objective of high current income.
- - MFS(R) RESEARCH FUND-CLASS A
Investment Objective: To provide long-term growth of capital and future
income. As a secondary objective the Fund will attempt to provide more current
dividend income than is normally obtainable from a portfolio of growth stocks
only.
- - MFS(R) TOTAL RETURN FUND-CLASS A (FORMERLY MASSACHUSETTS FINANCIAL TOTAL
RETURN TRUST)
Investment Objective: To obtain above-average income consistent with what
management believes to be prudent employment of capital. While current income
is the primary objective, the Fund believes that there also should be a
reasonable opportunity for growth of capital and income, since many securities
offering a better-than-average yield may possess growth potential.
26
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<PAGE> 29
- - MFS(R) WORLD GOVERNMENTS FUND-CLASS A (FORMERLY MFS(R) WORLDWIDE GOVERNMENTS
TRUST)
Investment Objective: To seek not only preservation, but also growth of
capital, together with moderate current income through a professionally managed
internationally diversified portfolio consisting primarily of debt securities
and, to a lesser extent, equity securities. The Fund is designed for investors
who wish to diversify their investments beyond the United States and who are
prepared to accept the risks entailed in such investments which may be higher
than those associated with certain U.S. investments. See "Special
Considerations" section in the MFI-B Prospectus.
- - MFS SERIES TRUST IV _ MFS(R) MONEY MARKET FUND (FORMERLY MASSACHUSETTS CASH
MANAGEMENT TRUST)
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity. The Fund
intends to invest in money market instruments, including United States
government securities, obligations of the larger banks, prime commercial paper
and high-grade, short-term corporate obligations.
- - MASSACHUSETTS INVESTORS GROWTH STOCK FUND-CLASS A
Investment Objective: To provide long-term growth of capital and future
income rather than current income return. To achieve this objective it is the
policy of the Fund to keep its assets invested, except for working cash
balances, in the common stocks, or securities convertible into common stocks,
of companies believed by the management to possess better-than-average
prospects for long-term growth. Emphasis is placed on the selection of
progressive, well-managed companies.
- - MASSACHUSETTS INVESTORS TRUST-CLASS A
Investment Objective: To provide reasonable current income and long-term
growth of capital and income. The Fund is believed to constitute a conservative
medium for that portion of an investor's capital which he wishes to have
invested in common stocks considered to be high or improving investment
quality.
Each of the above Mutual Funds receives investment advice from
Massachusetts Financial Services Company, which is paid for its services by the
Mutual Funds.
- - NATIONWIDE SEPARATE ACCOUNT TRUST-MONEY MARKET FUND
Nationwide Separate Account Trust is a diversified open-end management
investment company created under the laws of Massachusetts. The Fund offers
shares in four separate Mutual Funds, one being the Money Market Fund.
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
The Fund receives investment advice from Nationwide Financial Services,
Inc., which is paid for its services by the Fund.
27
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<PAGE> 30
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to purchase
payments or accumulated amounts allocated to the Variable Account.
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 the underlying Mutual Funds
in accordance with instructions received from persons whose Contract Value is
measured by units in the Variable Account. However, if the Investment Company
Act of 1940 or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares held in the Variable Account which is
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in the Variable Account by the net asset value of the
applicable share of the underlying Mutual Funds.
The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund and voting instructions will
be solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having the voting interest in the Variable Account will
receive periodic reports relating to the underlying Mutual Fund, proxy
material, and a form with which to give such voting instructions with respect
to the proportion of the underlying Mutual Fund shares held in the Variable
Account corresponding to his or her interest in the Variable Account.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" that variable annuity payments
will not be affected by the death rates of persons receiving such payments or
of the general population by virtue of annuity rates incorporated in the
Contract which cannot be changed.
For assuming this mortality risk, the Company assesses a Mortality Risk
Charge through the daily unit value calculation. This amount is equal to an
annual rate of 0.80% of the daily net asset value of the Variable Account. The
Company expects to generate a profit through assessing this charge.
28
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<PAGE> 31
EXPENSE RISK CHARGE
The Company will not increase charges for administration of the Contracts
regardless of its actual expenses. For assuming this expense risk, the Company
assesses an Expense Risk Charge through the daily unit value calculation. This
amount is equal to an annual rate of 0.50% of the daily net asset value of the
Variable Account. The Company expects to generate a profit through assessing
this charge.
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, referred to
below, 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. The Company
expects to recover most of its distribution costs relating to the sale of the
Contracts from the Contingent Deferred Sales Charge. Any shortfall will be
made up from the General Account of the Company, which may indirectly include
portions of the Mortality and Expense Risk since the Company expects to
generate a profit through these charges. Gross Distribution Allowances which
may be paid on the sale of these Contracts are not more than 5.11% of the
purchase payments.
If part or all of the Contract Value is surrendered, a Contingent
Deferred Sales Charge will be made by the Company. This charge will be equal
to 5% of the lesser of the total of all purchase payments made within 96 months
prior to the date of the request for surrender, or the amount surrendered. In
no event will any Contingent Deferred Sales Charge be made against any values
which have been held under the Contract for at least 96 months. The Contract
Owner may request certain partial surrenders of Contract Values for which no
Contingent Deferred Sales Charge will be assessed, as set forth below:
(a) For all purchase payments made after January 1, 1981, the Contract Owner
may, after the first year from the date of each such purchase payment,
withdraw without a Contingent Deferred Sales Charge up to 5% of that
purchase payment for each year that the purchase payment has remained on
deposit on a cumulative basis (less the amount of such purchase payment
previously surrendered free of charge).
(b) For Contracts issued prior to July 17, 1981, starting with the third
Contract Year, the Contract Owner may withdraw without a Contingent
Deferred Sales Charge up to 10% of cumulative purchase payments made
under the Contract within 96 months immediately prior to the date that
the request for surrender is received by the Company. Once surrenders
equal to 10% of cumulative purchase payments made within such 96-month
period have been made, the Contingent Deferred Sales Charge will apply to
all amounts surrendered in excess thereof.
For Contracts issued prior to July 17, 1981, the amount which may be
surrendered at any time without charge is the greater of the amounts determined
under (a) and (b) above. No sales charges are deducted on redemption proceeds
that are transferred to the Fixed Account option of this annuity.
29
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<PAGE> 32
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The amount of Contingent Deferred Sales Charges on the Contracts may be
eliminated when sales of the Contracts are made to a trustee, employer or
similar entity pursuant to a retirement plan or sales are made in a similar
arrangement where offering the Contracts to a group of individuals under such a
program results in savings of sales expenses. The entitlement to such an
elimination in Contingent Deferred Sales Charges will be determined by the
Company in the following manner:
1. The size of the group to which such sales are to be made will be
considered. Generally, the sales expenses for a larger group are smaller
than for a smaller group because of the ability to implement a larger
number of Contracts with fewer sales contacts.
2. The total amount of purchase payments to be received from a group and the
manner in which purchase payments are remitted will be considered. Per
Contract sales expenses are likely to be less on larger purchase payments
than on smaller ones. Likewise, sales expenses are usually lower when
purchase payments are remitted on a payroll deduction plan.
3. The purpose for which the Contracts are being purchased will be
considered. Certain types of Qualified Plans are more likely to be stable
than are others. Such stability reduces the number of sales contacts
required, reduces sales administration, and results in fewer Contract
terminations. As a result, sales expenses can be reduced.
4. The nature of the group for which the Contracts are being purchased will
be considered. Certain types of employee and professional groups are
more likely to continue Contract participation for longer periods than
are other groups with more mobile membership. If fewer Contracts are
surrendered in a given group, the Company's sales expenses are reduced.
5. The cost to the Company of the distribution effort will be considered.
Sales without commissions or other standard distribution expenses can
result in eliminated sales charge.
6. There may be other circumstances of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines
that a group purchase would result in reduced sales expenses, such a group
would be entitled an elimination of Contingent Deferred Sales Charges.
When a Contract described in this Prospectus is exchanged for another
Contract issued by the Company, of the type and class which the Company
determined is eligible for such exchange, the Company will waive the Contingent
Deferred Sales Charge on the first Contract.
The amount of Contingent Deferred Sales Charges will be eliminated when
the Contracts are issued to an officer, director, partner or employee of
Clarendon Insurance Agency, Inc., the general distributor of the Contracts, and
an affiliate of Massachusetts Financial Services Company, or an officer,
director, partner or employee of any firm affiliated with Clarendon Insurance
Agency, Inc.
In no event will the elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where it is prohibited by state law.
30
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<PAGE> 33
CONTRACT MAINTENANCE CHARGE
Each year on the Contract Anniversary, the Company deducts an annual
Contract Maintenance Charge of $30 from the Contract Value to reimburse it for
administrative expenses relating to the issuance and maintenance of the
Contract. This charge is designed only to reimburse the Company for
administrative expenses and it does not expect to recover from this charge any
amount in excess of accumulated expenses. In any Contract Year when a Contract
is surrendered for its full value on other than the Contract Anniversary, the
Contract Maintenance Charge will be deducted at the time of such surrender. The
amount of the Contract Maintenance Charge may not be increased by the Company.
The amount of the Contract Maintenance Charge may, however, be decreased by the
Company in accordance with the considerations set forth in the preceding
section entitled "Elimination of Contingent Deferred Sales Charge."
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon purchase
payments received by the Company. To the best of the Company's present
knowledge, premium taxes currently imposed by certain jurisdictions range from
0% to 3.5%. This range is subject to change. The method used to recoup
premium tax expense 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) in those states which
require, at the time purchase payments are made to the Contract.
EXPENSES OF VARIABLE ACCOUNT
Deductions from and expenses paid out of the assets of the underlying
Mutual Fund options are described in each of the underlying Mutual Fund
prospectuses. The Company deducts from the assets of the Variable Account the
types of expenses covered by the charges described above. These total expenses
for the fiscal year ended December 31, 1994, were 1.43% of average net assets.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have purchase
payments attributable to his participation in the Variable Account allocated
among one or more of the sub-accounts which consist of shares in the underlying
Mutual Funds. Shares of the respective underlying Mutual Funds specified by the
Contract Owner are purchased at net asset value for the respective sub-
account(s) and converted into Accumulation Units. At the time of Application,
the Contract Owner designates the underlying Mutual Fund options to which he
desires to have purchase payments attributable to his Contract allocated. Such
election is subject to any minimum purchase payment limitations which may be
imposed by the underlying Mutual Fund designated. The election as to allocation
of purchase payments or as to transfers of the Contract Value from one
sub-account to another may be changed by the Contract Owner pursuant to such
terms and conditions applicable to such transactions as may be imposed by each
of the underlying Mutual Funds, in addition to those set forth in the
Contracts.
31
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<PAGE> 34
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the
application date and the date 10 days after receipt of the Contract and receive
a refund of the Contract Value unless otherwise required by state and/or
federal law. All Individual Retirement Annuity refunds will be a return of
purchase payments. In order to revoke the Contract, it must be mailed or
delivered to the home office of the Company at the mailing address shown on
page 1 of this Prospectus. Mailing or delivery must occur on or before 10 days
after receipt of the Contract for revocation to be effective. In order to
revoke the Contract, if it has not been received, written notice must be mailed
or delivered to the home office of the Company at the mailing address shown on
page 1 of this Prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each sub-account on the date of revocation. Any
additional amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Contract Owner may, on written request, transfer up to 100% of the
Contract Value from the Variable Account Values to the Fixed Account, or part
or all of the Fixed Account Values to the Variable Account. Such transfers must
be made prior to the earlier of the Annuitization Date or the death of the
Designated Annuitant. For Contracts issued prior to May 1, 1981, no such
transfers will be permitted prior to the first Contract Anniversary, or within
6 months of any prior transfer. For Contracts issued on or after May 1, 1981,
no transfers will be allowed within 6 months of any prior transfer, and the
Company reserves the right to restrict transfers to 25% of the Contract Value
for any 12 month period. Owners who have entered into a Dollar Cost Averaging
Agreement with the Company (See "Dollar Cost Averaging") may transfer from the
Fixed Account to the Variable Account under the terms of that agreement.
Transfers among the sub-accounts may be made either in writing or, in
states allowing such transfers, by telephone. This telephone exchange
privilege is made available to Contract Owners automatically without their
having to elect the privilege. The Company will employ procedures reasonably
designed 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 both the Contract
Owner and any agent of record, at the last address of record. Although failure
to follow such procedures may result in the Company's liability for any losses
due to unauthorized or fraudulent telephone transfers, the Company will not be
liable for following instructions communicated by telephone which it reasonably
believes to be genuine. 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 Contract Owner. The Company may withdraw the telephone
exchange privilege upon 30 days' written notice to Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign the Contract at any time
during the lifetime of the Designated Annuitant. Such assignment will take
effect upon receipt by the Company of a written
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notice thereof executed by the Contract Owner. The Company assumes no
responsibility for the validity or sufficiency of any assignment. The Company
shall not be liable as to any payment or other settlement made by the Company
before receipt of the assignment. Qualified Contracts may not be assigned,
pledged or otherwise transferred except under such conditions as may be allowed
by applicable law.
If this Contract is a Non-Qualified Contract, any portion of Contract
Value attributable to purchase payments made after August 13, 1982, which is
pledged or assigned after August 13, 1982, shall be treated as a distribution
and shall be included in gross income to the extent that the cash value exceeds
the investment in the Contract, for the taxable year in which assigned or
pledged. In addition, any Contract Values assigned may, under certain
conditions, be subject to a tax penalty equal to 10% of the amount which is
included in gross income. Individual Retirement Annuities and Tax Sheltered
Annuities are not eligible for assignment.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity may receive a loan from the Contract Value, subject to the
terms of the Contract, the Plan, and the Internal Revenue Code ("Code"), which
impose restrictions on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000. In non-ERISA plans, for Contract Values up to $20,000, the
maximum loan balance which may be outstanding at any time is 80% of the
Contract Value, but not more than $10,000. If the Contract Value is $20,000 or
more, the maximum loan balance which may be outstanding at any time is 50% of
the Contract Value, but not more than $50,000. For ERISA plans, the maximum
loan balance which may be outstanding at any time is 50% of the Contract Value,
but not more than $50,000. The $50,000 limit will be reduced by the highest
loan balance owed during the prior one-year period. Additional loans are
subject to the contract minimum amount. The aggregate of all loans may not
exceed the Contract Value limitations stated above.
For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value. For loans from Qualified Contracts and other Tax
Sheltered Annuities, the Company reserves the right to limit a loan to 50% of
the Contract Value subject to the acceptance by the Contract Owner of the
Company's loan agreement. Where permitted, the Company may require other named
collateral where the loan from a Contract exceeds 50% of the Contract Value.
All loans are made from a collateral fixed account. An amount equal to
the principal amount of the loan will be transferred to the collateral fixed
account. Unless instructed to the contrary by the Contract Owner, the Company
will first transfer to the collateral fixed account the Variable Account units
from the Contract Owner's investment options in proportion to the assets in
each option until the required balance is reached or all such variable units
are exhausted. The remaining required collateral will next be transferred from
the Fixed Account. No withdrawal charges are deducted at the time of the loan,
or on the transfer from the Variable Account to the collateral fixed account.
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Until the loan has been repaid in full, that portion of the collateral
fixed account equal to the outstanding loan balance shall be credited with
interest at a rate 2.25% less than the loan interest rate fixed by the Company
for the term of the loan. However, the interest rate credited to the
collateral fixed account will never be less than 3.0%. Specific loan terms are
disclosed at the time of loan application or loan issuance.
Loans must be repaid in substantially level payments, not less frequently
than quarterly, within five years. Loans used to purchase the principal
residence of the Contract Owner must be repaid within 15 years. During the loan
term, the outstanding balance of the loan will continue to earn interest at an
annual rate as specified in the loan agreement. Loan repayments will consist of
principal and interest in amounts set forth in the loan agreement. Loan
repayments will be allocated between the Fixed and Variable Accounts in the
same proportion as when the loan was made.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If a Contract Owner who is not the
Annuitant dies prior to the Annuitization Date and while the loan is
outstanding, the distribution will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the
outstanding loan plus accrued interest. Until the loan is repaid, the Company
reserves the right to restrict any transfer of the Contract which would
otherwise qualify as a transfer as permitted in Section 1035 of the Internal
Revenue Code.
If a loan payment is not made when due, interest will continue to accrue.
The defaulted payment plus accrued interest will be deducted from any future
distribution under the Contract and paid to the Company. Any loan payment which
is not made when due, plus interest will be treated as a distribution, as
permitted by law, may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty.
Loans may also be limited or controlled by the provisions of the
employer's plan.
Loan repayments must be identified as such or else they will be treated
as purchase payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures of the loan in the event of a change in the laws or regulations
relating to the treatment of loans. The Company also reserves the right to
assess a loan processing fee. Individual Retirement Annuities, SEP-IRA accounts
and Non-Qualified Contracts are not eligible for loans.
BENEFICIARY PROVISIONS
Subject to the terms of any existing assignment, the Contract Owner may
change the Beneficiary from time to time during the lifetime of the Designated
Annuitant or Annuitant, by written notice to the Company. The change will, upon
receipt by the Company at its home office, take effect as of the time the
written notice was signed, whether or not the Designated Annuitant or the
Annuitant is living at the time of recording, but without further liability as
to any payment or settlement made by the Company before receipt of such change.
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Unless otherwise provided in the Contract or in an effective change of
Beneficiary designation, all rights and interests of any Beneficiary
predeceasing the Designated Annuitant or the Annuitant shall vest in the
Contingent Beneficiary if designated. If a Contingent Beneficiary is not
designated or predeceases the Beneficiary, all rights and interests of the
Beneficiary will vest in the Contract Owner or the Contract Owner's estate.
The Beneficiary will be the designated person or persons who survive the
Designated Annuitant, and if more than one survive, they will share equally
unless otherwise specified in the Beneficiary designation. In the event that
the Beneficiary dies before the Designated Annuitant or Annuitant, the
Contingent Beneficiary will become the Beneficiary.
OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF OR HERSELF AS
OWNER, THE PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT. The Annuitant may
become the Contract Owner on and after the Annuitization Date subject to the
terms elected at Annuitization. If the Owner dies prior to the Annuitization
Date, Contract Ownership will be determined in accordance with the "Death of
Contract Owner" provision. If the Designated Annuitant does not survive the
Contract Owner or if the Designated Annuitant and the Owner are the same
person, Contract Ownership will be determined in accordance with the "Death
Benefit At Death Of Designated Annuitant Prior To The Annuitization Date"
provision. After the Annuitization Date, Ownership will be determined based on
the Annuity Payment Option selected. Ownership rights under this Contract may
be restricted under the provisions of the retirement or deferred compensation
plan under which this Contract may be issued.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner at any time, but such change may be subject to state and federal
gift taxes. Any new choice of Contract Owner will automatically revoke any
prior choice of Contract Owner. Any request for change must be: (1) made in
writing; and (2) received by the Company at its home office. A request for
change of Contract Owner must be a "Proper Written Application" and may include
a signature guarantee as specified in the "Surrender" section. The change will
become effective as of the date the written request is signed. A new choice of
Contract Owner will not apply to any payment made or action taken by the
Company prior to the time it was received.
A change in the Designated Annuitant must comply with the following
conditions: (1) request for such change must be made by the Contract Owner; (2)
request must be made in writing on a form acceptable to the Company; (3)
request must be signed by the Contract Owner; and (4) such change is subject to
underwriting and approval by the Company.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Fund options 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
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underlying Mutual Fund shares already purchased or to be purchased in the
future with purchase payments under the Contract. No substitution of securities
in the Variable Account may take place without prior approval of the Securities
and Exchange Commission, and under such requirements as it may impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life Insurance
Company by writing P.O. Box 16609, Columbus, Ohio 43216- 6609, or calling
1-800-848-7529, TDD 1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date, the Variable Account Contract Value is applied
to the Annuity Payment Option elected in accordance with the Annuity Table in
the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month.
The dollar amount of each subsequent payment is determined by multiplying the
fixed number of Annuity Units by the Annuity Unit Value for the Valuation
Period in which the payment is due. The Company guarantees that the dollar
amount of each payment after the first will not be affected by variations in
mortality experience from mortality assumptions used to determine the first
payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an
Annuity Unit for a sub-account for any subsequent Valuation Period is
determined by multiplying the Annuity Unit Value for the immediately preceding
Valuation Period by the Net Investment Factor for the Valuation Period for
which the Annuity Unit Value is being calculated, and multiplying the result by
an interest factor to neutralize the assumed investment rate of 3.5% per annum
built into the Annuity Tables contained in the Contracts (See "Net Investment
Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables contained
in the Contracts. A higher assumption would mean a higher initial payment but
more slowly rising or more rapidly falling subsequent payments. A lower
assumption would have the opposite effect. If the actual investment rate is at
the annual rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Payment Option is less than
$500, the Company shall have the right to pay
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such amount in one lump sum in lieu of the payments otherwise provided for. In
addition, if the payments provided for would be or become less than $20, the
Company shall have the right to change the frequency of payments to such
intervals as will result in payments of at least $20.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
Application. Such date must be the first day of a calendar month and must be at
least 2 years after the Date of Issue.
Where the Contract is issued pursuant to the terms of a Qualified Plan,
Annuitization may occur during the first two years subject to approval by the
Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made
shall be the first day of a calendar month.
If the Contract Owner requests in writing (See "Ownership Provisions"),
and the Company approves the request, the Annuity Commencement Date may be
deferred. No further changes in the Designated Annuitant will be permitted
under the Contract. The amount of the Death Benefit will be limited to the
Contract Value if the Annuity Commencement Date is postponed beyond the first
day of the calendar month after the Designated Annuitant's 75th birthday or
such other Annuity Commencement Date provided under the Contract Owner's
Qualified Plan.
ANNUITY PAYMENT OPTIONS
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment Options.
Option 1 - Life Annuity - An annuity payable monthly during the lifetime
of the Annuitant, ceasing with the last payment due prior to the death of
the Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE ANNUITANT
TO RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED BEFORE THE
THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2 - Joint and Last Survivor Annuity - An annuity payable monthly
during the joint lifetimes of the Annuitant and designated second person
and continuing thereafter during the lifetime of the survivor. AS IS THE
CASE UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
Option 3 - Life Annuity With 120 or 240 Monthly Payments Guaranteed - An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been made
for fewer than 120 or 240 months, as selected, payments will be made as
follows:
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(1) Any guaranteed annuity payments will be continued during the
remainder of the selected period to the Beneficiary or the
Beneficiary may, at any time, elect to have the present value of
the guaranteed number of annuity payments remaining paid in a lump
sum as specified in (2) below.
(2) The present value, computed as of the date in which notice of
death is received by the Company at its home office, of the
guaranteed number of annuity payments remaining after receipt of
such notice and to which the deceased would have been entitled had
he or she not died, commuted at the Assumed Investment Rate
effective in determining the Annuity Tables, shall be paid in a
lump sum.
Some of the stated Annuity Options may not be available in all states.
The Owner may request an alternative non-guaranteed option by giving notice in
writing prior to annuitization. If such a request is approved by the Company,
it will be permitted under the Contract.
If the Owner of a Non-Qualified Contract fails to elect an Annuity
Payment Option, the Contract Value will continue to accumulate. Contracts
issued in connection with Qualified Plans, Individual Retirement Annuities, or
Tax Sheltered Annuities are subject to the minimum distribution requirements
set forth in the Plan, Contract or Internal Revenue Code.
DEATH OF CONTRACT OWNER
A. For Non-Qualified Contracts issued on or after January 19, 1985, in the
event the Contract Owner dies, the following rules will apply:
(1) In the event the Contract Owner dies prior to the Annuitization
Date, the entire interest in the Contract, less any applicable
deductions (which may include a Contingent Deferred Sales Charge),
must be distributed within 5 years after the Owner's death. In
the alternative, the Designated Annuitant or Contingent Owner
(where one is named) may elect to receive distribution in the form
of a life annuity or an annuity for a period certain not exceeding
his or her life expectancy and such annuity begins within one year
following the date of the Contract Owner's death. In the event the
Designated Annuitant or Contingent Owner is the Contract Owner's
spouse, the Contract may be continued by such Designated Annuitant
or Contingent Owner, treating the spouse as the Contract Owner. In
the event the Designated Annuitant does not survive the Contract
Owner, or if the Designated Annuitant and the Contract Owner are
the same person a distribution will be made in accordance with the
"Death Benefit At Death of Designated Annuitant Prior To The
Annuitization Date" provision. If the Contract Owner and the
Designated Annuitant are not the same, no Death Benefit is payable
upon the death of the Contract Owner.
(2) In the event the Contract Owner/Annuitant dies on or after the
Annuitization Date, distribution, if any, must be made to the
Beneficiary at least as rapidly as under the method of
distribution being used as of the date of the Contract
Owner/Annuitant's death.
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If the Contract Owner is not a natural person, the death of the Annuitant
(or a change of the Annuitant) will be treated like a death of the Contract
Owner and will result in a distribution pursuant to Section (1) above,
regardless of whether a Contingent Annuitant has also been named. The
distribution will take the form of either:
(a) the Death Benefit described below under "Death Benefit of
Designated Annuitant Prior to the Annuitization Date" (if the
Annuitant has died and there is no Contingent Annuitant), or in
all other cases,
(b) the benefit described in the "Death of Contract Owner" provision
except that in the event of a change of the Annuitant, the benefit
will be paid to the Contract Owner if the Annuitant is living, or
to the Beneficiary upon the death of the Annuitant (and the
Contingent Annuitant, if any) prior to the expiration of the
period described in the "Death of Contract Owner" provision.
B. Contracts issued in connection with Qualified Plans, Individual
Retirement Annuities or Tax Sheltered Annuities will be subject to
specific rules, set forth in the Plan, Contract, or Internal Revenue Code
concerning distributions upon the death of the Owner or Designated
Annuitant (See the "Required Distribution for Qualified Plans or Tax
Sheltered Annuities" provision).
DEATH BENEFIT AT DEATH OF DESIGNATED ANNUITANT PRIOR TO THE ANNUITIZATION DATE
The Death Benefit is payable to the Beneficiary unless the Owner has
named a Contingent Designated Annuitant. In such case, the Death Benefit is
payable to the Beneficiary upon the death of the last survivor of the
Designated Annuitant and Contingent Designated Annuitant. The value of the
Death Benefit will be determined as of the Valuation Date coincident with or
next following the date the Company receives both 1) due proof of death and 2)
an election for a) a single sum payment or b) Annuity Payment Option.
If a single sum settlement is requested, payment will be made in
accordance with any applicable laws and regulations governing the payment of
Death Benefits. If an Annuity Payment Option is desired, election may be made
by the Beneficiary during the 90-day period commencing with the date written
notice is received by the Company. If no election has been made by the end of
such 90-day period, the Death Benefit will be paid to the Beneficiary in a
single sum. The amount of the Death Benefit will be the greater of (i) the sum
of all purchase payments, less any amounts surrendered, or (ii) the Contract
Value.
The amount of the Death Benefit will be limited to the Contract Value if
the Annuitization Date is deferred beyond the Designated Annuitant's 75th
birthday.
DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, the Death Benefit
shall be as specified in the Annuity Payment Option elected.
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REQUIRED DISTRIBUTIONS FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution Incidental Benefit (MDIB) provisions of Section 401(a)(9)
of the Internal Revenue Code and regulations thereunder, as applicable, and
will be paid, notwithstanding anything else contained herein, to the
Owner/Annuitant under the Annuity Payments Option selected, over a period not
exceeding:
A. the life of the Owner/Annuitant or the lives of the
Owner/Annuitant and the Owner/Annuitant's designated Beneficiary;
or
B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and
the Owner/Annuitant's designated Beneficiary.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70 1/2 (the Required Beginning Date).
In the case of a governmental plan or church plan (as defined in Code Section
401(a)(9)(c)), the Required Beginning Date will be the later of the dates
determined under the preceding sentence or April 1 of the calendar year
following the calendar year in which the Annuitant retires.
If the Owner dies prior to the commencement of his or her
distribution, the interest in the Qualified Contract or Tax Sheltered Annuity
must be distributed by December 31 of the year during which the fifth
anniversary of his or her death occurs unless:
(a) In the case of a Tax Sheltered Annuity the Owner names his or her
surviving spouse as the Beneficiary and such spouse elects to (i) treat
the annuity as a Tax Sheltered Annuity established for his or her
benefit; or (ii) receive distribution of the account in nearly equal
payments over his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year in
which the Owner would have attained age 70 1/2; or
(b) In the case of a Tax Sheltered Annuity or a Qualified Contract the Owner
names a Beneficiary other than his or her surviving spouse and such
Beneficiary elects to receive a distribution of the account in nearly
equal payments over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or the joint and
last survivor expectancy of the Owner/Annuitant and the Owner/Annuitant's
designated Beneficiary (whichever is applicable under the applicable Minimum
Distribution or MDIB provisions). Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
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REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the
Owner attains age 70 1/2. Distribution may be accepted in a lump sum or in
nearly equal payments over: (a) the Owner's life or the lives of the Owner and
his or her spouse or designated Beneficiary, or (b) a period not exceeding the
Owner's life expectancy or the life expectancy of the Owner and the Owner's
spouse or designated Beneficiary.
If the Owner dies prior to the commencement of his or her distribution,
the interest in the Qualified Contract or Tax Sheltered Annuity must be
distributed by December 31 of the year during which the fifth anniversary of
his or her death occurs unless:
(a) The Owner names his or her surviving spouse as the Beneficiary and such
spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity established
for his or her benefit; or
(ii) receive distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70 1/2; or
(b) The Owner names a Beneficiary other than his or her surviving spouse and
such Beneficiary elects to receive a distribution of the account in
nearly equal payments over his or her life (or a period not exceeding his
or her life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except to the extent that a surviving spouse beneficiary may elect
to treat the contract as his or her own, in the same manner as described in
(a)(i) above.
If the amounts distributed do not satisfy the distribution rules
mentioned above, a penalty tax of 50% is levied on the amount that should have
been distributed for that year.
A pro-rata portion of all distributions will be included in the gross
income of the person receiving the distribution and taxed at ordinary income
tax rates. The portion of the distribution which is taxable is based on the
ratio between the amount by which non-deductible purchase payments exceed prior
non-taxable distributions and total account balances at the time of the
distribution. The Owner must annually report the amount of non-deductible
purchase payments, the amount of any distribution, the amount by which
non-deductible purchase payments for all years exceed non-taxable distributions
for all years, and the total balance of all Individual Retirement Accounts and
Annuities.
Individual Retirement Annuity Distributions will not receive the benefit
of the tax treatment of a lump sum distribution from a Qualified Plan. If the
Owner dies prior to the time distribution of his or her interest in the annuity
is completed, the balance will also be included in his or her gross estate.
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GENERATION-SKIPPING TRANSFERS
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the
Internal Revenue Code, and the amount of the tax on the generation-skipping
transfer resulting from such direct skip. If applicable, payment will be
reduced by any tax the Company is required to pay by Section 2603 of the
Internal Revenue Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING - The Contract Owner may direct the automatic
reallocation of contract values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the
three month period falls on a Saturday, Sunday, recognized holiday, or any
other day when the New York Stock Exchange is closed, the Asset Rebalancing
exchange will occur on the last business day before that day. Asset
Rebalancing will not affect future allocations of purchase payments. An Asset
Rebalancing request must be in writing on a form provided by the Company.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Internal Revenue Code may have superseding plan restrictions
with regard to the frequency of underlying Mutual Fund exchanges and underlying
Mutual Fund options. The Contract Owner may want to contact a financial
adviser in order to discuss a specific contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Contract Owner, however, any such
discontinuation would not affect Asset Rebalancing programs which have already
commenced. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING - The Contract Owner may direct the Company to
automatically transfer from the Money Market sub-account or the Fixed Account
to any other sub-account within the Variable Account on a monthly basis. This
service is intended to allow the Contract Owner to utilize Dollar Cost
Averaging, a long-term investment program which provides for regular, level
investments over time. The Company makes no guarantees that Dollar Cost
Averaging will result in a profit or protect against loss. To qualify for
Dollar Cost Averaging, there must be a minimum total Contract Value of $15,000.
Transfers for purposes of Dollar Cost Averaging can only be made from the Money
Market sub-account or the Fixed Account. The minimum monthly Dollar Cost
Averaging transfer is $100. In addition, Dollar Cost Averaging monthly
transfers from the Fixed Account must be equal to or less than 1/30th of the
Fixed Account value when the Dollar Cost Averaging program is requested.
Transfers out of the Fixed Account, other than for Dollar Cost Averaging, may
be subject to certain additional restrictions (See "Transfers"). A written
election of this service, on a form provided by the Company, must be completed
by the Contract Owner in order to begin transfers. Once elected,
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transfers from the Money Market sub-account or the Fixed Account will be
processed monthly until either the value in the Money Market sub-account or the
Fixed Account is completely depleted or the Contract Owner instructs the
Company in writing to cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice to Contract Owners however, any such
discontinuation would not affect Dollar Cost Averaging programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
SYSTEMATIC WITHDRAWALS - A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly,
semi-annual, or annual basis. The Company will process the withdrawals as
directed by surrendering on a pro-rata basis Accumulation Units from all
sub-accounts in which the Contract Owner has an interest, and the Fixed
Account. A Contingent Deferred Sales Charge may apply to Systematic Withdrawals
in accordance with the considerations set forth in the "Contingent Deferred
Sales Charge" section. Each Systematic Withdrawal is subject to federal income
taxes on the taxable portion. In addition, a 10% federal penalty tax may be
assessed on Systematic Withdrawals if the Contract Owner is under age 59 1/2.
If directed by the Contract Owner, the Company will withhold federal income
taxes from each Systematic Withdrawal. The Contract Owner may discontinue
Systematic Withdrawals at any time by notifying the Company in writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice to Contract Owners however, any such
discontinuation would not affect any Systematic Withdrawal programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give the Company prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional purchase payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a Dollar Cost Averaging program) or salary reduction arrangement,
the Contract Owner may receive confirmation of such transactions in their
quarterly statements. The Contract Owner should review the information in
these statements carefully. All errors or corrections must be reported to the
Company immediately to assure proper crediting to the Owner's Contract. The
Company will assume all transactions are accurate unless the Contract Owner
notifies the Company otherwise within 30 days after receipt of the statement.
The Company will also send to Contract Owners each year an annual report and a
semi-annual report containing financial statements for the Variable Account, as
of December 31 and June 30, respectively.
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ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase payments are allocated to one or more sub-accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Fund options by the Contract Owner, and converted into Accumulation Units.
The initial first year purchase payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by purchase payments
made on an annualized basis. Purchase payments, if any, after the first
Contract Year must be at least $10 each. The Contract Owner may increase or
decrease purchase payments or change the frequency of payment. The Contract
Owner is not obligated to continue purchase payments in the amount or at the
frequency elected. There are no penalties for failure to continue purchase
payments.
For Contracts issued on and after May 1, 1981, the cumulative total of
all purchase payments under Contracts issued on the life of any one Designated
Annuitant may not exceed $1,000,000 without prior consent of the Company.
THE PURCHASER IS CAUTIONED THAT INVESTMENT RETURN ON SMALL INITIAL AND
SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE COMPANY.
The initial purchase payment allocated to designated sub-accounts of the
Variable Account will be priced not later than 2 business days after receipt of
an order to purchase, if the Application and all information necessary for
processing the purchase order are complete upon receipt by the Company, and 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 days, the prospective purchaser will be informed of the
reasons for the delay and the purchase payment will be returned immediately
unless the prospective purchaser specifically consents to the Company retaining
the purchase payment until the Application is made complete. After the
application is complete, the purchase payment will be priced within 2 business
days.
Purchase payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each sub-account
was arbitrarily set initially at $10 when underlying Mutual Fund shares in that
sub-account were available for purchase. The value for any subsequent Valuation
Period is determined by multiplying the Accumulation Unit value for each
sub-account for the immediately preceding Valuation Period by the Net
Investment Factor for the sub-account during the subsequent Valuation Period.
The value of an Accumulation Unit may increase or decrease from Valuation
Period to Valuation Period. The number of Accumulation Units will not change as
a result of investment experience.
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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.
(b) is 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.
(c) is a factor representing the daily Mortality Risk Charge and Expense Risk
Charge deducted from the Variable Account. Such factor is equal to an
annual rate of 1.30% of the daily net asset value of the Variable
Account.
For underlying Mutual Fund options 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 these 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 Mortality Risk Charge and Expense Risk Charge, and any charge or
credit for tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited per each sub-account
is determined by dividing the net amount allocated to the sub-account by the
Accumulation Unit Value for the sub-account for the Valuation Period during
which the purchase payment is received by the Company. In the event part or all
of the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an appropriate amount from the Fixed Account will be
deducted in the same proportion that the Contract Owner's interest in the
Variable Account and Fixed Account bears to the total Contract Value.
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SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper Written Application" means that the surrender must be
requested in writing by the Contract Owner, and the Company may require that
the signature(s) be guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia, or Pacific Stock Exchange, or by a Commercial
Bank or a Savings and Loan, which is a member of the Federal Deposit Insurance
Corporation. In some cases (for example, requests by a corporation,
partnership, agent, fiduciary, or surviving joint owner), the Company will
require additional documentation of a customary nature.
The Company will, upon receipt of such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge (See "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all sub-accounts
in which the Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each sub-account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the sub-accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any underlying Mutual Funds applied for from the
Variable Account within 7 days of receipt of such application in the Company's
Home Office. However, the Company reserves the right to suspend or postpone the
date of any payment of any benefit or values for any Valuation Period (1) when
the New York Stock Exchange ("Exchange") or the Company's Home Office is
closed, (2) when trading on the Exchange is restricted, (3) when an emergency
exists as a result of which disposal of securities held in the Variable Account
is not reasonably practicable or it is not reasonably practicable to determine
the value of the Variable Account's net assets, or (4) during any other period
when the Securities and Exchange Commission, by order, so permits for the
protection of security holders; provided that applicable rules and regulations
of the Securities and Exchange Commission shall govern as to whether the
conditions prescribed in (2) and (3) exist. The Contract Value on surrender may
be more or less than the total of purchase payments made by a Contract Owner,
depending on the market value of the underlying Mutual Fund shares.
With respect to Contracts issued under the Texas Optional Retirement
Program, the Texas Attorney General has ruled that withdrawal benefits are
available only in the event of a participant's death, retirement, termination
of employment due to total disability, or other termination of employment in a
Texas public institution of higher education. A participant will not,
therefore, be entitled to receive the right of withdrawal in order to receive
the cash values credited to such participant under the Contract unless one of
the foregoing conditions has been satisfied. The value of such Contracts may,
however, be transferred to other contracts or other carriers during the period
of participation in the Optional Retirement Program. The Company issues this
Contract to participants in the Optional Retirement Program in reliance upon,
and in compliance with, Rule 6c-7 of the Investment Company Act of 1940.
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SURRENDERS UNDER QUALIFIED PLAN OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may Surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of
the Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Internal Revenue Code (403(b)(7)
Custodial Accounts), may be executed only -
1. when the Contract Owner attains age 59 1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case
of hardship may not include any income attributable to salary
reduction contributions.
B. The surrender limitations described in A. above for Tax Sheltered
Annuities apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts may be withdrawn in the case of
hardship).
C. Any distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties and/or retroactive
disqualification of a Qualified Contract or Tax Sheltered Annuity.
A premature distribution may not be eligible for rollover treatment. To
assist in preventing disqualification in the event of a ten-day free look, the
Company will agree to transfer the proceeds to another contract which meets the
requirements of Section 403(b) of the Internal Revenue Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding
of the withdrawal restrictions which are currently applicable under Section
403(b)(11) and Revenue Ruling 90-24. Such restrictions are subject to
legislative change and/or reinterpretation from time to time.
The contract surrender provisions may also be modified pursuant to the
plan terms and Internal Revenue Code tax provisions when the contract is issued
to fund a Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF
A PERSONAL TAX ADVISER.
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TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Internal Revenue Code (the "Code") governs taxation of
annuities in general. That section sets forth different rules for annuities
purchased by (1) Qualified Plans (corporate pension and profit sharing plans,
simplified employee pension-individual retirement account plans, and retirement
plans for self-employed individuals), Individual Retirement Annuities, and Tax
Sheltered Annuities and (2) annuities which are not purchased by such plans.
Each type of annuity is discussed separately below.
The Tax Reform Act of 1986 and subsequent legislation changed some of the
rules regarding the tax treatment of distributions from Qualified Plans and
annuities purchased by Qualified Plans. You should consult your financial
consultant or legal or tax advisor to discuss in detail your particular tax
situation and the use of the Contracts.
Generally the amount of any payment of items of interest to a nonresident
alien of the United States shall be subject to withholding of a tax equal to
thirty percent (30%) of such amount or, if applicable, a lower treaty rate. A
payment may not be subject to withholding where the recipient sufficiently
establishes that such payment is effectively connected to the recipient's
conduct of a trade or business in the United States and such payment is
includable in the recipient's gross income.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from
income the entire investment in the Contract, the Annuitant's final tax return
may reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are
taxable to the Contract Owner to the extent that the cash value of the Contract
exceeds the Contract Owner's investment at the time of the distribution.
Distributions, for this purpose, include partial surrenders, dividends, or any
portion of the Contract which is assigned or pledged; and for Contracts issued
after April 22, 1987, any portion of the Contract transferred by gift. For
these purposes, a transfer by gift may occur upon annuitization if the Contract
Owner and the Designated Annuitant are not the same individual. In determining
the taxable amount of a distribution, all annuity contracts issued after
October 21, 1988, by the same company to the same contract owner during any 12
month period, will be treated as one annuity contract. (Additional limitations
on the use of multiple contracts may be imposed by Treasury regulations).
Distributions prior to the Annuitization Date with respect to that portion of
the Contract invested prior to August 14, 1982, are treated first as a recovery
of the investment in the Contract as of that date. A distribution in excess of
the amount of the investment in the Contract as of August 14, 1982, will be
treated as taxable income.
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The Tax Reform Act of 1986 changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are
exceptions for Contracts used to fund Qualified Plans, Individual Retirement
Annuities and Tax Sheltered Annuities, immediate annuities, and certain
Contracts owned for the benefit of an individual. An immediate annuity, for
purposes of this discussion, is a single premium Contract on which payments
begin within one year of purchase.
Internal Revenue Code Section 72 also provides for a penalty, equal to
10% of any distribution which is includable in gross income, if such
distribution is made prior to attaining age 59 1/2, the death or disability of
the Contract Owner. The penalty does not apply if the distribution is one of a
series of substantially equal periodic payments made over the life or life
expectancy (or joint lives or life expectancies) of the Annuitant (and the
Annuitant's Beneficiary), or is made from an immediate annuity, or is allocable
to an investment in the Contract before August 14, 1982. A Contract Owner
wishing to begin taking distributions to which the 10% tax penalty does not
apply should forward a written request to the Company. Upon receipt of a
written request from the Contract Owner, the Company will inform the Contract
Owner of the procedures pursuant to Company Policy and subject to limitations
of the Contract including but not limited to first year withdrawals. If the
Annuitant selects an annuity for life or life expectancy and changes the method
of payment before the expiration of 5 years and the attainment of age 59 1/2,
the early withdrawal penalty will apply. The penalty will be equal to that
which would have been imposed had no exception applied from the outset, and the
Annuitant will also pay interest on the amount of the penalty from the date it
would have originally applied until it is actually paid.
In order to qualify as an Annuity Contract under Section 72 of the Code,
the Contract must provide for distribution to be made upon the death of the
Contract Owner. In such case the Designated Annuitant, Beneficiary or other
named recipient must receive the distribution within 5 years of the Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy if such payments begin within one year following the
death of the Contract Owner. If the Contract Owner's Beneficiary is the
surviving spouse, such spouse may be treated as the Contract Owner and the
Contract may be continued throughout the life of the surviving spouse (See
"Required Distribution for Qualified Plans or Tax Sheltered Annuities"). In
the event the Contract Owner dies on or after the Annuity Commencement Date and
before the entire interest has been distributed, the remaining portion must be
distributed at least as rapidly as under the method of distribution being used
as of the date of the Contract Owner's death.
The Company is required to withhold tax from certain distributions to the
extent that such distribution would constitute income to the Contract Owner.
The Contract Owner is entitled to elect not to have federal income tax withheld
from any such distribution, but may be subject to penalties in the event
insufficient federal income tax is withheld during a calendar year.
Payment of a benefit or transfer of any property to an individual two or
more generations younger than the Contract Owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et seq. of
the Internal Revenue Code.
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DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Internal Revenue Code ("Code") relating to diversification
standards for the investments underlying a variable annuity contract. The
regulations provide that a variable annuity contract which does not satisfy the
diversification standards will not be treated as an annuity contract, unless
the failure to satisfy the regulations was inadvertent, the failure is
corrected, and the Owner or the Company pays an amount to the Internal Revenue
Service. The amount will be based on the tax that would have been paid by the
Owner if the income, for the period the contract was not diversified, had been
received by the Owner. If the failure to diversify is not corrected in this
manner, the Owner of an annuity contract will be deemed the Owner of the
underlying securities and will be taxed on the earnings of his account. The
Company believes, under its interpretation of the Code and regulations
thereunder, that the investments underlying this Contract meet these
diversification standards.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to
the Company. However, the Company reserves the right to implement and adjust
the tax charge in the future, if the tax laws change.
QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT
ACCOUNTS AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding
eligibility, limitations on permissible amounts of purchase payments, and tax
consequences on distribution from such plans, the purchasers of such Contracts
should seek competent advice. The terms of such plans may limit the rights
available under the Contracts.
The Internal Revenue Code of 1986, as amended, permit the rollover of
most distributions from Qualified Plans to other QualifiedPlans, Individual
Retirement Accounts, or Individual Retirement Annuities. Most distributions
from Tax Sheltered Annuities may be rolled into another Tax Sheltered Annuity,
to an Individual Retirement Account, or an Individual Retirement Annuity.
Distributions which may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the
employee, b) the joint lives (or joint life expectancies) of the
employee and the employee's designated beneficiary, or c) for a
specified period of ten years or more, or;
2. a required minimum distribution.
Any distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the distribution is transferred
directly to an appropriate plan as described above.
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The Contract is available for Qualified Plans electing to comply with
section 404(c) of the Employee Retirement Income Security Act (ERISA). It is
the responsibility of the plan and its fiduciaries to determine and satisfy
section 404(c) requirements.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company and the Variable
Account are parties or to which any of their property is the subject.
The General Distributor, Clarendon Insurance Agency, Inc., is not engaged
in any litigation of any material nature.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculation of Yield Quotations of Money Market Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY THE MFS VARIABLE ACCOUNT 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, 1995. The
Prospectus may be obtained from Nationwide Life Insurance Company by writing P.
O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-848-7529, TDD 1-800-
238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calculation of Yield Quotations of Money Market Sub-Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 2
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
GENERAL INFORMATION AND HISTORY
The MFS Variable Account is a separate investment account of Nationwide
Life Insurance Company ("Company"). The Company is a member of the Nationwide
Insurance Enterprise and all of the Company's common stock is owned by
Nationwide Corporation. Nationwide Corporation is a holding company. All of its
common stock is held by Nationwide Mutual Insurance Company (95.3%) and
Nationwide Mutual Fire Insurance Company (4.7%).
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 Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of
the underlying Mutual Funds.
The financial statements and schedule have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the
authority of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may, on written request, transfer part or all of the
Variable Account Values to the Fixed Account, or part or all of the Fixed
Account Values to the Variable Account. Such transfers must be made prior to
the earlier of the Annuitization Date or the death of the Designated Annuitant.
However, no such transfers will be permitted prior to the first Contract
Anniversary, or within 6 months of any prior transfer, for Contracts issued
prior to May 1, 1981. For Contracts issued on or after May 1, 1981, no
transfers will be allowed within 6 months of any prior transfer, and the
Company reserves the right to limit the amount transferred from the Fixed
Account to the Variable Account within any 12-month period to 25% of the total
Contract Value. Owners who have entered into a Dollar Cost Averaging Agreement
with the Company may transfer from the Fixed Account to the Variable Account
under the terms of that agreement.
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UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Clarendon Insurance Agency, Inc. ("CIA"), 200 Berkeley Street, Boston,
Massachusetts 02116, an affiliate of Massachusetts Financial Services Company.
During the fiscal years ended December 31, 1994, 1993 and 1992, no underwriting
commissions were paid by the Company to CIA.
CALCULATIONS OF YIELD QUOTATIONS OF MONEY MARKET SUB-ACCOUNTS
MFS(R) Series Trust IV-MFS(R) Money Market Fund
Any current yield quotation of the Money Market Fund which is used in
such a manner as to be subject to the provisions of Rule 482 under the
Securities Act of 1933, as amended, shall consist of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a
specific seven calendar day period and shall be calculated by dividing the net
change in the value of an account having a balance of one share at the
beginning of the period by the value of the account at the beginning of the
period and multiplying the quotient by 365/7 (366/7 in a leap year). For this
purpose the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any realized gains or losses from the sale of securities or any
unrealized appreciation or depreciation on portfolio securities. In addition,
any effective yield quotation of the Fund so used shall be calculated by
compounding the current yield quotation for such period by multiplying such
quotation by 7/365, adding 1 to the product, raising the sum to a power equal
to 365/7 (366/7 in a leap year), and subtracting 1 from the result.
Nationwide Separate Account Trust-Money Market Fund
Any current Money Market Fund yield quotations, subject to Rule 482 under
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, excluding realized and unrealized
gains and losses, in value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, dividing the net change in
account value by the value of the account at the beginning of the base period
to obtain the base period return, and multiplying the base period return by
365/7 (366/7 in a leap year). For purposes of this calculation, the net change
in account value reflects the value of additional shares purchased with
dividends from the original share, and dividends declared on both the original
share and any such additional shares. The Fund's effective yield represents an
annualization of the current seven day return with all dividends reinvested.
The Money Market Fund's yield will fluctuate daily. Actual yield will
depend on factors such as the type of instruments in the Money Market Fund's
portfolio, portfolio quality and average maturity, changes in interest rates,
and the Money Market Fund's expenses. There is no assurance that the yield
quoted on any given occasion will remain in effect for any period of time and
there is no guarantee that the net asset value will remain constant. An
investment in the Money Market Fund is not guaranteed or insured. Yields of
other money market funds may not be comparable if a different base period or
another method of calculation is used.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the Prospectus.
2
55 of 112
<PAGE> 56
================================================================================
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Contract Owners of
MFS Variable Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of MFS Variable Account as of December 31, 1994, and
the related statements of operations and changes in contract owners' equity for
each of the years in the three year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedure included confirmation of securities owned as of December 31, 1994, by
correspondence with the custodian and the transfer agents of the underlying
mutual funds. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of MFS Variable
Account as of December 31, 1994, and the results of its operations and its
changes in contract owners' equity for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included
in Schedule I is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
KPMG Peat Marwick LLP
Columbus, Ohio
February 3, 1995
================================================================================
3
56 of 112
<PAGE> 57
MFS VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1994
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
MFS Series Trust IV --MFS(R) Money Market Fund (MFSMyMkt)
80,373,483 shares (cost $80,373,483) . . . . . . . . . . . . . . . . . . . . . . . . $ 80,373,483
Massachusetts Investors Growth Stock Fund -- Class A (MFSGrStk)
3,274,108 shares (cost $36,870,889) . . . . . . . . . . . . . . . . . . . . . . . . 31,267,732
Massachusetts Investors Trust -- Class A (MFSInvTr)
2,695,151 shares (cost $34,013,196) . . . . . . . . . . . . . . . . . . . . . . . . 27,140,166
MFS(R) Bond Fund -- Class A (MFSBdFd)
3,068,504 shares (cost $41,996,451) . . . . . . . . . . . . . . . . . . . . . . . . 37,220,951
MFS(R) Emerging Growth Fund -- Class A (MFSEmGro)
460,113 shares (cost $7,583,009) . . . . . . . . . . . . . . . . . . . . . . . . . . 8,705,331
MFS(R) Growth Opportunities Fund -- Class A (MFSGrOpp)
8,873,231 shares (cost $97,594,619) . . . . . . . . . . . . . . . . . . . . . . . . 90,240,759
MFS(R) High Income Fund -- Class A (MFSHiInc)
7,100,114 shares (cost $35,955,690) . . . . . . . . . . . . . . . . . . . . . . . . 34,222,549
MFS(R) Research Fund -- Class A (MFSRsrch)
2,280,726 shares (cost $27,687,938) . . . . . . . . . . . . . . . . . . . . . . . . 27,437,132
MFS(R) Total Return Fund -- Class A (MFSTotRe)
5,307,553 shares (cost $63,710,065) . . . . . . . . . . . . . . . . . . . . . . . . 66,025,957
MFS(R) World Governments Fund -- Class A (MFSWdGvt)
1,090,479 shares (cost $13,592,333) . . . . . . . . . . . . . . . . . . . . . . . . 11,897,123
Nationwide Separate Account Trust--Money Market Fund (NWMyMkt)
2,396,295 shares (cost $2,396,295) . . . . . . . . . . . . . . . . . . . . . . . . . 2,396,295
-----------
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 416,927,478
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
-----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416,927,629
ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,064
-----------
CONTRACT OWNERS' EQUITY (NOTE 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 416,902,565
===========
</TABLE>
See accompanying notes to financial statements.
57 of 112
<PAGE> 58
MFS VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends . . . . . . . . . . . . . . . $ 29,599,574 44,895,760 32,598,930
------------- ----------- -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares . . . . . . . . . 115,051,876 135,937,570 165,211,483
Cost of mutual fund shares sold . . . . . . . . . . . . . . . . . (112,843,920) (127,686,637) (159,085,460)
------------- ----------- -----------
Realized gain on investments . . . . . . . . . . . . . . . . . . 2,207,956 8,250,933 6,126,023
Change in unrealized gain (loss) on investments . . . . . . . . . (41,633,519) 5,833,974 (3,555,868)
------------- ----------- -----------
Net gain (loss) on investments . . . . . . . . . . . . . . . . (39,425,563) 14,084,907 2,570,155
------------- ----------- -----------
Net investment activity . . . . . . . . . . . . . . . (9,825,989) 58,980,667 35,169,085
------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners . . . . . . . . . . . . . . . . . . . . . . . . . . 15,834,294 23,563,502 25,622,706
Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . (73,513,222) (84,574,552) (98,476,049)
Annuity benefits . . . . . . . . . . . . . . . . . . . . . . . . . . (569,906) (626,861) (639,831)
Adjustments to maintain reserves . . . . . . . . . . . . . . . . . . (3,929) 31,765 (467,329)
------------- ----------- -----------
Net equity transactions . . . . . . . . . . . . . . . (58,252,763) (61,606,146) (73,960,503)
------------- ----------- -----------
EXPENSES (NOTE 2):
Contract charges . . . . . . . . . . . . . . . . . . . . . . . . . . (6,313,115) (7,015,249) (7,456,266)
Contingent deferred sales charges . . . . . . . . . . . . . . . . . (201,021) (310,571) (392,846)
------------- ----------- -----------
Total expenses . . . . . . . . . . . . . . . . . . . (6,514,136) (7,325,820) (7,849,112)
------------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY . . . . . . . . . . . . . . . . . (74,592,888) (9,951,299) (46,640,530)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD . . . . . . . . . . . . . . 491,495,453 501,446,752 548,087,282
------------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD . . . . . . . . . . . . . . . . . $ 416,902,565 491,495,453 501,446,752
============= =========== ===========
</TABLE>
See accompanying notes to financial statements.
58 of 112
<PAGE> 59
MFS VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
MFS Variable Account (the Account) was established by resolution of the
Board of Directors of Nationwide Life Insurance Company (the Company) on March
3, 1976. The Account has been registered as a unit investment trust under the
Investment Company Act of 1940.
(b) The Contracts
Prior to February 12, 1979, the contracts purchased (both flexible
purchase payments and single purchase payment) provided for a front-end sales
charge and certain other fees. Beginning February 12, 1979, only flexible
purchase payment contracts (Spectrum) without a front-end sales charge but with
a contingent deferred sales charge and certain other fees were offered for
purchase. See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
payout phase may invest in any of the following funds:
MFS Series Trust IV --MFS(R) Money Market Fund (MFSMyMkt)
(formerly Massachusetts Cash Management Trust -- MFS(R) Money
Market Fund)
Massachusetts Investors Growth Stock Fund -- Class A (MFSGrStk)
Massachusetts Investors Trust -- Class A (MFSInvTr)
MFS(R) Bond Fund -- Class A (MFSBdFd)
MFS(R) Emerging Growth Fund -- Class A (MFSEmGro)
MFS(R) Growth Opportunities Fund -- Class A (MFSGrOpp)
(formerly MFS(R) Capital Development Fund)
MFS(R) High Income Fund -- Class A (MFSHiInc)
(formerly Massachusetts Financial High Income Trust--Series I)
MFS(R) Research Fund --Class A (MFSRsrch)
MFS(R) Total Return Fund -- Class A (MFSTotRe)
MFS(R) World Governments Fund -- Class A (MFSWdGvt)
Nationwide Separate Account Trust--Money Market Fund (NWMyMkt)
(managed for a fee by an affiliated investment advisor)
At December 31, 1994, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of
each fund and certain contract expenses (see note 2). The accompanying
financial statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts of the
Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of investments is based on the closing bid prices at
December 31, 1994. The cost of investments sold is determined on a specific
identification basis. Investment transactions are accounted for on the trade
date (date the order to buy or sell is executed) and dividend income is
recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the Internal
Revenue Code.
The Internal Revenue Service issued Rev. Rul. 81-225 on September 25,
1981 and IR-82-19 on February 3,1982. The effect of Rev. Rul. 81-225 was to
treat non-tax qualified contract holders, who purchased contracts
59 of 112
<PAGE> 60
or made purchase payments after December 31, 1980, as the owners of the
underlying mutual fund shares for Federal income tax purposes. However, for
1981, IR-82-19 did provide limited relief from the ruling. Therefore, the
Company maintained a capital gain reserve liability, for all realized and
unrealized capital gains existing on or before December 31, 1981.
During 1982 and most of 1983, the Company continued to maintain contract
values which reflected a capital gain reserve liability for those contracts and
contract values affected by Rev. Rul. 81-225. On December 16, 1983, the Company
adjusted the affected (81-225) contract values in order to treat the respective
contract owners as the owners of the underlying shares for Federal income tax
purposes, as intended by the ruling. As a result of this adjustment, contract
owners equity was restored with amounts previously deducted to maintain the
capital gain reserve liability.
Because of the aforementioned, the Company no longer provides for income
taxes within the Account. Presently, taxes are the responsibility of the
contract owner upon termination or withdrawal.
(2) EXPENSES
Net purchase payments received on contracts issued before February 12,
1979 represent gross contributions by the contract owners less a charge of
7.75% by the Company to cover sales expenses.The Company does not deduct a
sales charge from purchase payments made for contracts issued beginning
February 12, 1979. However, if any part of the contract value of such contracts
is surrendered the Company will, with certain exceptions, deduct from the
owner's contract value a contingent deferred sales charge equal to 5% of the
lesser of the total of all purchase payments made within 96 months prior to the
date of the request for surrender, or the amount surrendered; no sales charges
are deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The following administrative charges are deducted by the Company on each
contract issued prior to February 12, 1979: (a) a contract issue charge of $15
assessed against the initial purchase payment and a $15 annual contract
maintenance charge assessed against each contract by surrendering units; and
(b) a charge for mortality and expense risk assessed through the daily unit
value calculation equal to an annual rate of 0.80% and 0.20%, respectively.
Administrative charges on contracts issued beginning February 12, 1979 include:
(a) an annual contract maintenance charge of $30 which is satisfied by
surrendering units; and (b) a charge for mortality and expense risk assessed
through the daily unit value calculation equal to an annual rate of 0.80% and
0.50%, respectively.
(3) SCHEDULE I
Schedule I presents the components of the change in the unit values,
which are the basis for contract owners' equity. This schedule is presented for
each series, as applicable, in the following format:
* Beginning unit value - Jan. 1
* Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gains and dividend distributions from the underlying
mutual funds.)
* Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit
value resulting from the market appreciation (depreciation)
of the fund.)
* Contract charges
(This amount reflects the decrease in the unit value due to
the mortality and expense risk fee discussed in note 2.)
* Ending unit value - Dec. 31
* Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
60 of 112
<PAGE> 61
(4) Components of Contract Owners' Equity
The following is a summary of contract owners' equity at December 31,
1994, for each series, in both the accumulation and payout phases. Due to the
nature of money market funds, an 81-225 adjustment (See note 1(d)) was not
required for either the MFS Series Trust IV --MFS(R) Money Market Fund or the
Nationwide Separate Account Trust--Money Market Fund.
Contract owners' equity represented by:
<TABLE>
<CAPTION>
Contracts in accumulation phase: Units Unit Value
----- ----------
<S> <C> <C> <C>
MFS Series Trust IV --
MFS(R) Money Market Fund:
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 8,788 $ 32.595660 $ 286,451
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 2,012,165 27.967294 56,274,810
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 823,383 27.986728 23,043,796
Massachusetts Investors Growth Stock Fund -- Class A:
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 1,043 61.261465 63,896
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 375,617 65.227303 24,500,484
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 116,628 55.348697 6,455,208
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 2,505 60.295273 151,040
Massachusetts Investors Trust -- Class A:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 17 73.217470 1,245
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 373,587 59.116939 22,085,320
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 87,519 53.042089 4,642,191
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 4,013 56.351973 226,140
MFS(R) Bond Fund -- Class A:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 254 40.103391 10,186
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 450 42.342529 19,054
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 715,452 36.536936 26,140,424
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 278,445 36.507070 10,165,211
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 4,892 36.649839 179,291
MFS(R) Emerging Growth Fund -- Class A:
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 400,564 21.706658 8,694,906
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 474 21.706658 10,289
MFS(R) Growth Opportunities Fund -- Class A:
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 2,807 77.773322 218,310
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 1,029,309 72.767772 74,900,523
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 214,829 61.812074 13,279,026
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 16,083 68.202665 1,096,903
MFS(R) High Income Fund -- Class A:
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 359 49.895862 17,913
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 561,209 44.007083 24,697,171
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 200,368 43.339456 8,683,840
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 6,622 44.007083 291,415
MFS(R) Research Fund -- Class A:
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 599 73.593263 44,082
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 285,624 73.111959 20,882,530
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 97,012 63.882963 6,197,414
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 1,727 72.258548 124,791
MFS(R) Total Return Fund -- Class A:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 132 63.581031 8,393
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 87 62.479885 5,436
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 902,191 58.638949 52,903,532
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 224,713 56.760546 12,754,833
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 2,258 58.068470 131,119
MFS(R) World Governments Fund -- Class A:
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 229,107 42.911877 9,831,411
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 44,619 41.836304 1,866,694
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 3,284 42.845163 140,704
Nationwide Separate Account Trust--
Money Market Fund:
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 72,621 21.058716 1,529,305
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 41,143 21.072414 866,982
========= =========
Reserves for annuity contracts in payout phase:
Tax qualified . . . . . . . . . . . . . . . . . . . . . . . 11,393
Non-tax qualified . . . . . . . . . . . . . . . . . . . . . 81,128
Tax qualified spectrum . . . . . . . . . . . . . . . . . . . 2,394,301
Non-tax qualified spectrum . . . . . . . . . . . . . . . . . 982,607
Non-tax qualified spectrum (81-225) . . . . . . . . . . . . 10,867
-----------
$416,902,565
===========
</TABLE>
61 of 112
<PAGE> 62
SCHEDULE I
MFS VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
MFSGrStk MFSInvTr MFSBdFd MFSGrOpp MFSTotRe
<S> <C> <C> <C> <C> <C>
1994***
Beginning unit value - Jan. 1 ** $74.716077 42.399834 ** 65.964662
- --------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 8.586372 2.862666 2.763915
- --------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (9.338645) (4.752106) (4.502426)
- --------------------------------------------------------------------------------------------------------------------------
Contract charges (.746334) (.407003) (.645120)
- --------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $73.217470 40.103391 63.581031
- --------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* (2)% (5)% (4)%
==========================================================================================================================
1993***
Beginning unit value - Jan. 1 ** $68.591640 37.614804 ** 57.871052
- --------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 11.498973 5.808619 3.732170
- --------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (4.655404) (.614467) 5.026580
- --------------------------------------------------------------------------------------------------------------------------
Contract charges (.719132) (.409122) (.665140)
- --------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $74.716077 42.399834 65.964662
- --------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 9% 13% 14%
==========================================================================================================================
1992***
Beginning unit value - Jan. 1 $72.701980 64.520969 35.745806 90.866062 53.108093
- --------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 4.449809 12.069131 2.892271 3.373405 4.327193
- --------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .165659 (7.352200) (.654423) 3.557566 .990427
- --------------------------------------------------------------------------------------------------------------------------
Contract charges (.705969) (.646260) (.368850) (.910316) (.554661)
- --------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $76.611479 68.591640 37.614804 96.886717 57.871052
- --------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 5% 6% 5% 7% 9%
==========================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do
not include the annual contract maintenance charge discussed in note 2.
** This investment option was not being utilized.
*** No other investment options were being utilized.
62 of 112
<PAGE> 63
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
MFSMyMkt MFSGrStk MFSInvTr MFSBdFd MFSGrOpp MFSHiInc MFSRsrch
-------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $31.804010 66.343035 ** 44.767184 81.961605 51.758789 74.327082
- ---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 1.114091 6.245985 3.022499 6.380267 4.381074 7.237361
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (10.708702) (5.017439) (9.773345) (5.737464) (7.223674)
- ---------------------------------------------------------------------------------------------------------------------------
Contract charges (.322441) (.618853) (.429715) (.795205) (.506537) (.747506)
- ---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $32.595660 61.261465 42.342529 77.773322 49.895862 73.593263
- ---------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 2% (8)% (5)% (5)% (4)% (1)%
===========================================================================================================================
1993
Beginning unit value - Jan. 1 $31.374016 58.545028 64.725197 39.714988 71.251149 43.789729 61.704356
- ---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .743804 9.875063 10.850787 6.132938 8.954754 4.151571 8.244049
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (1.468495) (4.392986) (.648781) 2.525050 4.305712 5.051213
- ---------------------------------------------------------------------------------------------------------------------------
Contract charges (.313810) (.608561) (.678600) (.431961) (.769348) (.488223) (.672536)
- ---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $31.804010 66.343035 70.504398 44.767184 81.961605 51.758789 74.327082
- ---------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 1% 13% 9% 13% 15% 18% 20%
===========================================================================================================================
1992
Beginning unit value - Jan. 1 $30.757355 55.557463 60.883987 37.741633 66.823526 37.791286 56.084333
- ---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .929646 3.400459 11.388806 3.053759 2.480825 4.481054 4.491971
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .126597 (6.937763) (.690962) 2.616252 1.936545 1.696176
- ---------------------------------------------------------------------------------------------------------------------------
Contract charges (.312985) (.539491) (.609833) (.389442) (.669454) (.419156) (.568124)
- ---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $31.374016 58.545028 64.725197 39.714988 71.251149 43.789729 61.704356
- ---------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 2% 5% 6% 5% 7% 16% 10%
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSTotRe
--------
<S> <C>
1994
Beginning unit value - Jan. 1 64.822235
- -----------------------------------------------------
Reinvested capital gains and dividends 2.716055
- -----------------------------------------------------
Unrealized gain (loss) (4.424461)
- -----------------------------------------------------
Contract charges (.633944)
- -----------------------------------------------------
Ending unit value - Dec. 31 62.479885
- -----------------------------------------------------
Percentage increase (decrease) in
unit value* (4)%
=====================================================
1993
Beginning unit value - Jan. 1 56.868802
- -----------------------------------------------------
Reinvested capital gains and dividends 3.667543
- -----------------------------------------------------
Unrealized gain (loss) 4.939512
- -----------------------------------------------------
Contract charges (.653622)
- -----------------------------------------------------
Ending unit value - Dec. 31 64.822235
- -----------------------------------------------------
Percentage increase (decrease) in
unit value* 14%
=====================================================
1992
Beginning unit value - Jan. 1 52.188320
- -----------------------------------------------------
Reinvested capital gains and dividends 4.252251
- -----------------------------------------------------
Unrealized gain (loss) .973290
- -----------------------------------------------------
Contract charges (.545059)
- -----------------------------------------------------
Ending unit value - Dec. 31 56.868802
- -----------------------------------------------------
Percentage increase (decrease) in
unit value* 9%
=====================================================
</TABLE>
* An annualized rate of return cannot be determined as contract
charges do not include the annual contract maintenance charge
discussed in note 2.
** This investment option was not being utilized.
63 of 112
<PAGE> 64
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
TAX QUALIFIED SPECTRUM
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
MFSMyMkt MFSGrStk MFSInvTr MFSBdFd MFSEmGro MFSGrOpp MFSHiInc MFSRsrch
-------- -------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan.1 $27.370768 70.852048 60.509797 38.746280 20.977490 76.918993 45.788518 74.064821
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .957264 6.650437 6.934388 2.612018 .436556 5.969728 3.870377 7.195425
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (11.415978) (7.541473) (4.337835) .566606 (9.150770) (5.069261) (7.179946)
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.360738) (.859204) (.785773) (.483527) (.273994) (.970179) (.582551) (.968341)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.967294 65.227303 59.116939 36.536936 21.706658 72.767772 44.007083 73.111959
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 2% (8)% (2)% (6)% 3% (5)% (4)% (1)%
=================================================================================================================================
1993
Beginning unit value - Jan.1 $27.082782 62.713932 55.718475 34.477915 16.755110 67.070484 38.856280 61.673295
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .641181 10.546573 9.314340 5.312013 1.987303 8.404559 3.678274 8.215232
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (1.561022) (3.763614) (.556158) 2.468986 2.385396 3.817129 5.050110
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.353195) (.847435) (.759404) (.487490) (.233909) (.941446) (.563165) (.873816)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.370768 70.852048 60.509797 38.746280 20.977490 76.918993 45.788518 74.064821
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 1% 13% 9% 12% 25% 15% 18% 20%
=================================================================================================================================
1992
Beginning unit value - Jan.1 $26.631168 59.694705 52.571200 32.864457 15.782125 63.094003 33.635599 56.226647
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .803905 3.642811 9.806049 2.654728 1.521521 2.336086 3.981696 4.489970
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .129894 (5.974322) (.600476) (.354209) 2.462010 1.723891 1.697019
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.352291) (.753478) (.684452) (.440794) (.194327) (.821615) (.484906) (.740341)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.082782 62.713932 55.718475 34.477915 16.755110 67.070484 38.856280 61.673295
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 2% 5% 6% 5% 6% 6% 16% 10%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSTotRe MFSWdGvt NWMyMkt
-------- -------- -------
<S> <C> <C> <C>
1994
Beginning unit value - Jan.1 61.021714 46.532702 20.538004
- ---------------------------------------------------------------------
Reinvested capital
gains and
dividends 2.553354 2.288468 .791945
- ---------------------------------------------------------------------
Unrealized gain (loss) (4.160311) (5.345421) .000000
- ---------------------------------------------------------------------
Contract charges (.775808) (.563872) (.271233)
- ---------------------------------------------------------------------
Ending unit value - Dec. 31 58.638949 42.911877 21.058716
- ---------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (4)% (8)% 3%
=====================================================================
1993
Beginning unit value - Jan.1 53.697197 39.821939 20.250996
- ---------------------------------------------------------------------
Reinvested capital
gains and
dividends 3.457510 4.402242 .554187
- ---------------------------------------------------------------------
Unrealized gain (loss) 4.662688 2.874170 .000000
- ---------------------------------------------------------------------
Contract charges (.795681) (.565649) (.267179)
- ---------------------------------------------------------------------
Ending unit value - Dec. 31 61.021714 46.532702 20.538004
- ---------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 14% 17% 1%
=====================================================================
1992
Beginning unit value - Jan.1 49.427627 39.811131 19.842272
- ---------------------------------------------------------------------
Reinvested capital
gains and
dividends 4.018262 4.044561 .671702
- ---------------------------------------------------------------------
Unrealized gain (loss) .922322 (3.509825) .000000
- ---------------------------------------------------------------------
Contract charges (.671014) (.523928) (.262978)
- ---------------------------------------------------------------------
Ending unit value - Dec. 31 53.697197 39.821939 20.250996
- ---------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 9% 0% 2%
=====================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do
not include the annual contract maintenance charge discussed in note 2.
64 of 112
<PAGE> 65
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED SPECTRUM
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
MFSMyMkt MFSGrStk MFSInvTr MFSBdFd MFSGrOpp MFSHiInc MFSRsrch MFSTotRe
-------- -------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $27.389788 60.121583 54.291825 38.714601 65.338300 45.093866 64.715547 59.066983
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .957927 5.643236 6.221811 2.609884 5.070943 3.811643 6.287139 2.471571
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (9.687046) (6.766521) (4.334289) (7.773057) (4.992348) (6.273621) (4.027043)
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.360987) (.729076) (.705026) (.483126) (.824112) (.573705) (.846102) (.750965)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.986728 55.348697 53.042089 36.507070 61.812074 43.339456 63.882963 56.760546
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 2% (8)% (2)% (6)% (5)% (4)% (1)% (4)%
=================================================================================================================================
1993
Beginning unit value - Jan. 1 $27.101602 53.215976 49.992851 34.449725 56.972537 38.266802 53.888228 51.977095
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .641629 8.949306 8.357200 5.307666 7.139194 3.622473 7.178215 3.346744
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (1.324606) (3.376852) (.555693) 2.026262 3.759218 4.412613 4.513320
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.353443) (.719093) (.681374) (.487097) (.799693) (.554627) (.763509) (.770176)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.389788 60.121583 54.291825 38.714601 65.338300 45.093866 64.715547 59.066983
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 1% 13% 9% 12% 15% 18% 20% 14%
=================================================================================================================================
1992
Beginning unit value - Jan. 1 $26.649674 50.654002 47.168983 32.837584 53.594751 33.125330 49.129110 47.844295
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .804468 3.091111 8.798380 2.652557 1.984371 3.921291 3.923197 3.889542
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .110242 (5.360408) (.599986) 2.091331 1.697737 1.482816 .892765
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.352540) (.639379) (.614104) (.440430) (.697916) (.477556) (.646895) (.649507)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.101602 53.215976 49.992851 34.449725 56.972537 38.266802 53.888228 51.977095
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 2% 5% 6% 5% 6% 16% 10% 9%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSWdGvt NWMyMkt
-------- -------
<S> <C> <C>
1994
Beginning unit value - Jan. 1 45.366368 20.551361
- ---------------------------------------------------------
Reinvested capital gains
and dividends 2.231109 .792462
- ---------------------------------------------------------
Unrealized gain (loss) (5.211428) .000000
- ---------------------------------------------------------
Contract charges (.549745) (.271409)
- ---------------------------------------------------------
Ending unit value - Dec. 31 41.836304 21.072414
- ---------------------------------------------------------
Percentage increase (decrease)
in unit value* (8)% 3%
=========================================================
1993
Beginning unit value - Jan. 1 38.823817 20.264167
- ---------------------------------------------------------
Reinvested capital gains
and dividends 4.291901 .554548
- ---------------------------------------------------------
Unrealized gain (loss) 2.802117 .000000
- ---------------------------------------------------------
Contract charges (.551467) (.267354)
- ---------------------------------------------------------
Ending unit value - Dec. 31 45.366368 20.551361
- ---------------------------------------------------------
Percentage increase (decrease)
in unit value* 17% 1%
=========================================================
1992
Beginning unit value - Jan. 1 38.813287 19.855177
- ---------------------------------------------------------
Reinvested capital gains
and dividends 3.943185 .672129
- ---------------------------------------------------------
Unrealized gain (loss) (3.421861) .000000
- ---------------------------------------------------------
Contract charges (.510794) (.263139)
- ---------------------------------------------------------
Ending unit value - Dec. 31 38.823817 20.264167
- ---------------------------------------------------------
Percentage increase (decrease)
in unit value* 0% 2%
=========================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do
not include the annual contract maintenance charge discussed in note 2.
65 of 112
<PAGE> 66
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED SPECTRUM (81-225)
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
MFSGrStk MFSInvTr MFSBdFd MFSEmGro MFSGrOpp MFSHiInc MFSRsrch MFSTotRe
-------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $65.494712 57.679687 38.865999 20.977490 72.093454 45.788518 73.200301 60.428053
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 6.147578 6.610058 2.620091 .436556 5.595215 3.870377 7.111436 2.528526
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (10.552777) (7.188748) (4.351232) .566606 (8.576687) (5.069261) (7.096145) (4.119853)
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.794240) (.749024) (.485019) (.273994) (.909317) (.582551) (.957044) (.768256)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $60.295273 56.351973 36.649839 21.706658 68.202665 44.007083 72.258548 58.068470
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (8)% (2)% (6)% 3% (5)% (4)% (1)% (4)%
=================================================================================================================================
1993
Beginning unit value - Jan. 1 $57.971950 53.112457 34.584435 16.755110 62.862782 38.856280 60.953415 53.174791
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 9.749115 8.878698 5.328424 1.987303 7.877296 3.678274 8.119340 3.423916
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.442991) (3.587588) (.557863) 2.468986 2.235756 3.817130 4.991162 4.617284
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.783362) (.723880) (.488997) (.233909) (.882380) (.563166) (.863616) (.787938)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $65.494712 57.679687 38.865999 20.977490 72.093454 45.788518 73.200301 60.428053
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 13% 9% 12% 25% 15% 18% 20% 14%
=================================================================================================================================
1992
Beginning unit value - Jan. 1 $55.181022 50.112374 32.965982 15.782125 59.135771 33.635599 55.570339 48.946754
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.367367 9.347409 2.662929 1.521521 2.189531 3.981696 4.437561 3.979168
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .120072 (5.694893) (.602328) (.354209) 2.307547 1.723891 1.677219 .913344
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.696511) (.652433) (.442148) (.194327) (.770067) (.484906) (.731704) (.664475)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $57.971950 53.112457 34.584435 16.755110 62.862782 38.856280 60.953415 53.174791
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 5% 6% 5% 6% 6% 16% 10% 9%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSWdGvt
--------
<S> <C>
1994
Beginning unit value - Jan. 1 46.460353
- ----------------------------------------------
Reinvested capital gains
and dividends 2.284911
- ----------------------------------------------
Unrealized gain (loss) (5.337099)
- ----------------------------------------------
Contract charges (.563002)
- ----------------------------------------------
Ending unit value - Dec. 31 42.845163
- ----------------------------------------------
Percentage increase (decrease)
in unit value* (8)%
==============================================
1993
Beginning unit value - Jan. 1 39.760030
- ----------------------------------------------
Reinvested capital gains
and dividends 4.395398
- ----------------------------------------------
Unrealized gain (loss) 2.869703
- ----------------------------------------------
Contract charges (.564778)
- ----------------------------------------------
Ending unit value - Dec. 31 46.460353
- ----------------------------------------------
Percentage increase (decrease)
in unit value* 17%
===============================================
1992
Beginning unit value - Jan. 1 39.749239
- ----------------------------------------------
Reinvested capital gains
and dividends 4.038273
- ----------------------------------------------
Unrealized gain (loss) (3.504369)
- ----------------------------------------------
Contract charges (.523113)
- ----------------------------------------------
Ending unit value - Dec. 31 39.760030
- ----------------------------------------------
Percentage increase (decrease)
in unit value* 0%
==============================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do
not include the annual contract maintenance charge discussed in note 2.
See accompanying independent auditors' report.
66 of 112
<PAGE> 67
Independent Auditors' Report
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as of December 31, 1994, and 1993, 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, 1994. 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.
Participating insurance and the related surplus are discussed in note 13. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in note 2 to the consolidated financial statements, in 1994 the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employer's Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 27, 1995
67 of 112
<PAGE> 68
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Assets 1994 1993
------ ----------- ----------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $8,318,865 in 1994) $ 8,045,906 -
Equity securities (cost $18,373 in 1994; $8,263 in 1993) 24,713 16,593
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310
in 1994; $10,886,820 in 1993) 3,688,787 10,120,978
Mortgage loans on real estate 4,222,284 3,871,560
Real estate 252,681 253,831
Policy loans 340,491 315,898
Other long-term investments 63,914 118,490
Short-term investments (note 14) 131,643 41,797
----------- -----------
16,770,419 14,739,147
----------- -----------
Cash 7,436 21,835
Accrued investment income 220,540 190,886
Deferred policy acquisition costs 1,064,159 811,944
Deferred Federal income tax 36,515 -
Other assets 790,603 636,161
Assets held in Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
$31,112,133 25,406,361
=========== ===========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 16,321,461 14,092,255
Policyholders' dividend accumulations 338,058 322,686
Other policyholder funds 72,770 71,959
Accrued Federal income tax (note 7):
Current 13,126 12,294
Deferred - 31,659
----------- -----------
13,126 43,953
----------- -----------
Other liabilities 235,778 217,952
Liabilities related to Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
29,203,654 23,755,193
----------- -----------
Shareholder's equity (notes 3, 4, 7 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Paid-in additional capital 622,753 422,753
Unrealized gains (losses) on securities available-for-sale, net of adjustment
to deferred policy acquisition costs of $82,525 ($0 in 1993) and net of
deferred Federal income tax benefit of $64,425 ($1,583 expense in 1993) (119,668) 6,747
Retained earnings 1,401,579 1,217,853
----------- -----------
1,908,479 1,651,168
----------- -----------
Commitments and contingencies (notes 9 and 16)
$31,112,133 25,406,361
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
68 of 112
<PAGE> 69
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues (note 17):
Traditional life insurance premiums $ 209,538 215,715 226,888
Accident and health insurance premiums 324,524 312,655 430,009
Universal life and investment product policy charges 239,021 188,057 148,464
Net investment income (note 5) 1,289,501 1,204,426 1,120,157
Net ceded commissions from disposition of credit life and
credit accident and health business (note 12) - - 27,115
Realized gains (losses) on investments (notes 5 and 14) (16,384) 113,673 (19,315)
---------- ---------- ----------
2,046,200 2,034,526 1,933,318
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,279,763 1,236,906 1,319,735
Provision for policyholders' dividends on participating
policies (note 13) 46,061 53,189 61,834
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Other operating costs and expenses 352,402 329,396 321,993
---------- ---------- ----------
1,772,970 1,721,625 1,802,759
---------- ---------- ----------
Income before Federal income tax and cumulative
effect of changes in accounting principles 273,230 312,901 130,559
---------- ---------- ----------
Federal income tax (note 7):
Current expense 79,847 75,124 47,402
Deferred expense (benefit) 9,657 31,634 (13,660)
---------- ---------- ----------
89,504 106,758 33,742
---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles 183,726 206,143 96,817
Cumulative effect of changes in accounting principles,
net of tax (note 3) - 5,365 -
---------- ---------- ----------
Net income $ 183,726 211,508 96,817
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
69 of 112
<PAGE> 70
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Paid-in on securities Total
Capital additional available-for- Retained shareholder's
shares capital sale, net earnings equity
--------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1992:
Balance, beginning of year $ 3,815 311,753 96,048 933,179 1,344,795
Dividends paid to shareholder - - - (5,846) (5,846)
Net income - - - 96,817 96,817
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (5,524) - (5,524)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 311,753 90,524 1,024,150 1,430,242
========= =========== ============== ========== =============
1993:
Balance, beginning of year 3,815 311,753 90,524 1,024,150 1,430,242
Capital contributions - 111,000 - - 111,000
Dividends paid to shareholder - - - (17,805) (17,805)
Net income - - - 211,508 211,508
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (83,777) - (83,777)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 422,753 6,747 1,217,853 1,651,168
========= =========== ============== ========== =============
1994:
Balance, beginning of year 3,815 422,753 6,747 1,217,853 1,651,168
Capital contribution - 200,000 - - 200,000
Net income - - - 183,726 183,726
Adjustment for change in
accounting for certain
investments in debt and
equity securities, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax (note 3) - - 216,915 - 216,915
Unrealized losses on securities
available-for-sale, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax - - (343,330) - (343,330)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 622,753 (119,668) 1,401,579 1,908,479
========= =========== ============== ========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
70 of 112
<PAGE> 71
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 183,726 211,508 96,817
Adjustments to reconcile net income to net cash provided by
operating activities:
Capitalization of deferred policy acquisition costs (264,434) (191,994) (177,928)
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Amortization and depreciation 6,207 11,156 5,607
Realized losses (gains) on invested assets, net 15,949 (113,648) 19,092
Deferred Federal income tax benefit (2,166) (6,006) (13,105)
Increase in accrued investment income (29,654) (4,218) (11,518)
(Increase) decrease in other assets (112,566) (549,277) 6,132
Increase in policyholder account balances 1,038,641 509,370 19,087
Increase in policyholders' dividend accumulations 15,372 17,316 18,708
Increase (decrease) in accrued Federal income tax payable 832 16,838 (15,723)
Increase in other liabilities 17,826 26,958 73,512
Other, net (19,303) (11,745) (10,586)
---------- ---------- ----------
Net cash provided by operating activities 945,174 18,392 109,292
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 579,067 - -
Proceeds from sale of securities available-for-sale 247,876 247,502 27,844
Proceeds from maturity of fixed maturities held-to-maturity 516,003 1,192,093 1,030,397
Proceeds from sale of fixed maturities - 33,959 123,422
Proceeds from repayments of mortgage loans on real estate 220,744 146,047 259,659
Proceeds from sale of real estate 46,713 23,587 22,682
Proceeds from repayments of policy loans and
sale of other invested assets 134,998 59,643 99,189
Cost of securities available-for-sale acquired (2,569,672) (12,550) (12,718)
Cost of fixed maturities held-to-maturity acquired (675,835) (2,016,831) (2,687,975)
Cost of mortgage loans on real estate acquired (627,025) (475,336) (654,403)
Cost of real estate acquired (15,962) (8,827) (137,843)
Policy loans issued and other invested assets acquired (118,012) (76,491) (97,491)
---------- ---------- ----------
Net cash used in investing activities (2,261,105) (887,204) (2,027,620)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from capital contributions 200,000 111,000 -
Dividends paid to shareholder - (17,805) (5,846)
Increase in universal life and investment product account balances 3,640,958 2,249,740 2,468,236
Decrease in universal life and investment product account balances (2,449,580) (1,458,504) (575,180)
---------- ---------- ----------
Net cash provided by financing activities 1,391,378 884,431 1,887,210
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 75,447 15,619 (31,118)
Cash and cash equivalents, beginning of year 63,632 48,013 79,131
---------- ---------- ----------
Cash and cash equivalents, end of year $ 139,079 63,632 48,013
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
71 of 112
<PAGE> 72
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(000 s omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned
subsidiary of Nationwide Corporation (Corp.). Wholly-owned
subsidiaries of NLIC include Financial Horizons Life Insurance
Company (FHLIC), West Coast Life Insurance Company (WCLIC), National
Casualty Company and subsidiaries (NCC), Nationwide Financial
Services, Inc. (NFS), and effective December 31, 1994, Employers Life
Insurance Company of Wausau and subsidiary (ELICW). NLIC and its
subsidiaries are collectively referred to as "the Company".
NLIC, FHLIC, WCLIC and ELICW are life and accident and health
insurers and NCC is a property and casualty insurer. The Company is
licensed in all 50 states, the District of Columbia, the Virgin
Islands and Puerto Rico. The Company offers a full range of life,
health and annuity products through exclusive agents and other
distribution channels and is subject to competition from other
insurers throughout the United States. The Company is subject to
regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal
or regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing
its products. That is, regulatory initiatives designed to
reduce insurer profits, new legal theories or insurance
company insolvencies through guaranty fund assessments may create
costs for the insurer beyond those recorded in the consolidated
financial statements. The Company mitigates this risk by offering
a wide range of products and by operating throughout the United
States, thus reducing its exposure to any single product or
jurisdiction, and also by employing underwriting practices
which identify and minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy, by
maintaining sound reinsurance and credit and collection policies
and by providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change
and cause a decrease in the value of an insurer's investments.
This change in rates may cause certain interest-sensitive
products to become uncompetitive or may cause disintermediation.
The Company mitigates this risk by charging fees for
non-conformance with certain policy provisions, by offering
products that transfer this risk to the purchaser, and/or by
attempting to match the maturity schedule of its assets with the
expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the consolidated
financial statements and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims and
those used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent in
these estimates, management believes the amounts provided are adequate.
72 of 112
<PAGE> 73
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(a) Consolidation Policy
--------------------
The December 31, 1994, 1993 and 1992 consolidated
financial statements include the accounts of NLIC and its
wholly owned subsidiaries FHLIC, WCLIC, NCC and NFS. The
December 31, 1994 consolidated balance sheet also
includes the accounts of ELICW, which was acquired by
NLIC effective December 31, 1994. See Note 14. All
significant intercompany balances and transactions have
been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
Prior to January 1, 1994, the Company classified fixed
maturities in accordance with the then existing accounting
standards, and accordingly, fixed maturity securities were
carried at amortized cost, adjusted for amortization of
premium or discount, since the Company had both the
ability and intent to hold those securities until
maturity. Equity securities were carried at fair value
with the unrealized gains and losses, net of deferred
Federal income tax, reported as a separate component of
shareholder's equity.
In May 1993, the Financial Accounting Standards Board
(FASB) issued STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES (SFAS 115). SFAS 115
requires fixed maturities and equity securities to be
classified as either held-to-maturity, available-for-sale,
or trading. The Company has no trading securities. The
Company adopted SFAS 115 as of January 1, 1994, with no
effect on consolidated net income. See note 3 regarding
the effect on consolidated shareholder's equity.
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.
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. Loans in foreclosure and loans
considered in-substance foreclosed as of the balance
sheet date are placed on non-accrual status and written
down to the fair value of the existing property to
derive a new cost basis. Real estate is carried at
cost less accumulated depreciation and valuation
allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances.
Realized gains and losses on the sale of investments are
determined on the basis of specific security
identification. Estimates for valuation allowances and
other than temporary declines are included in realized
gains and losses on investments.
In May, 1993, the FASB issued STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 114 - ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN (SFAS 114). SFAS 114, which
was amended by STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 118 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND
DISCLOSURE in October, 1994, requires the measurement of
impaired loans be 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
loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The
impact on the consolidated financial statements of
adopting SFAS 114 as amended is not expected to be
material. Previously issued consolidated financial
statements shall not be restated. The Company will adopt
SFAS 114 as amended in 1995.
73 of 112
<PAGE> 74
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life
insurance products include those products with fixed and
guaranteed premiums and benefits and consist primarily of
whole life, limited-payment life, term life and certain
annuities with life contingencies. Premiums for
traditional life insurance products are recognized as
revenue when due and collected. Benefits and expenses
are associated with earned premiums so as to result in
recognition of profits over the life of the contract.
This association is accomplished by the provision for
future policy benefits and the deferral and amortization
of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life
products include universal life, variable universal life
and other interest-sensitive life insurance policies.
Investment products consist primarily of individual and
group deferred annuities, annuities without life
contingencies and guaranteed investment contracts.
Revenues for universal life and investment products
consist of cost of insurance, policy administration and
surrender charges that have been earned and assessed
against policy account balances during the period.
Policy benefits and claims that are charged to expense
include benefits and claims incurred in the period in
excess of related policy account balances and interest
credited to policy account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health
insurance premiums are recognized as revenue over the
terms of the policies. Policy claims are charged to
expense in the period that the claims are incurred.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally
commissions, certain expenses of the policy issue
and underwriting department and certain variable
agency expenses have been deferred. For traditional
life and individual health insurance products, these
deferred acquisition costs are predominantly being
amortized with interest over the premium paying period
of the related policies in proportion to the ratio of
actual annual premium revenue to the anticipated total
premium revenue. Such anticipated premium revenue was
estimated using the same assumptions as were used for
computing liabilities for future policy benefits. For
universal life and investment products, deferred policy
acquisition costs are being amortized with interest over
the lives of the policies in relation to the present
value of estimated future gross profits from projected
interest margins, 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. Beginning January 1, 1994,
deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on
fixed maturity securities available-for-sale. See note
2(b).
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent
contractholders' funds which have been segregated into
accounts with specific investment objectives. The
investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except
for the fees the Company receives for administrative
services and risks assumed.
(f) Future Policy Benefits
----------------------
Future policy benefits for traditional life and individual
health policies have been calculated using a net level
premium method based on estimates of mortality,
morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the
policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits for annuity policies in the
accumulation phase, universal life and variable universal
life policies have been calculated based on participants'
contributions plus interest credited less applicable
contract charges.
Future policy benefits and claims for group long-term
disability policies are the present value (primarily
discounted at 5.5%) 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 policies are not discounted.
74 of 112
<PAGE> 75
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 45%
(48% in 1993 and 1992) of the Company's ordinary
life insurance in force, 72% (72% in 1993; 71% in 1992)
of the number of policies in force, and 41% (45% in 1993
and 1992) of life insurance premiums. The provision for
policyholder dividends is based on current dividend
scales. Future dividends are provided for ratably in
future policy benefits based on dividend scales in effect
at the time the policies were issued. Dividend scales are
approved by the Board of Directors.
Income attributable to participating policies in excess
of policyholder dividends is accounted for as belonging to
the shareholder. See note 13.
(h) Federal Income Tax
------------------
NLIC, FHLIC, WCLIC and NCC file a consolidated Federal
income tax return with Nationwide Mutual Insurance Company
(NMIC), the majority shareholder of Corp. Through 1994,
ELICW filed a consolidated Federal income tax return with
Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW will file a separate Federal
income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109 - ACCOUNTING FOR INCOME
TAXES, which required a change from the deferred method
of accounting for income tax of APB Opinion 11 to the
asset and liability method of accounting for income tax.
Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future
tax consequences attributable to differences between
the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are
expected to be recovered or settled. Under this
method, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to
be realized.
Prior to 1993, the Company applied the deferred method
of accounting for income tax which recognized deferred
income tax for income and expense items that are reported
in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for
the year of calculation. Under the deferred method,
deferred tax is not adjusted for subsequent changes in tax
rates. See note 7.
The Company has reported the cumulative effect of the
change in method of accounting for income tax in the
1993 consolidated statement of income. See note 3.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries
on benefits and claims incurred are deducted from the
respective income and expense accounts. Assets and
liabilities related to reinsurance ceded are reported on
a gross basis.
(j) Cash Equivalents
----------------
For purposes of the consolidated statements of cash
flows, the Company considers all short-term investments
with original maturities of three months or less to be
cash equivalents.
(k) Reclassification
----------------
Certain items in the 1993 and 1992 consolidated financial
statements have been reclassified to conform to the 1994
presentation.
75 of 112
<PAGE> 76
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(3) Changes in Accounting Principles
--------------------------------
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of a new accounting standard by the FASB
as described in Note 2(b). As of January 1, 1994, the company
classified fixed maturity securities with amortized cost and fair value
of $6,593,844 and $7,024,736, respectively, as available-for-sale
and recorded the securities at fair value. Previously, these
securities were recorded at amortized cost. The effect as of January
1, 1994 has been recorded as a direct credit to shareholder's equity
as follows:
<TABLE>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
--------
$216,915
========
</TABLE>
During 1993, the Company adopted accounting principles in
connection with the issuance of two accounting standards by the FASB.
The effect as of January 1, 1993, the date of adoption, has been
recognized in the 1993 consolidated statement of income as the
cumulative effect of changes in accounting principles, as follows:
<TABLE>
<S> <C>
Asset/liability method of recognizing income tax (note 7) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296), (note 11) (20,979)
--------
Net cumulative effect of changes in accounting principles $ 5,365
========
</TABLE>
(4) Basis of Presentation
---------------------
The consolidated financial statements have been prepared in
accordance with GAAP. Annual Statements for NLIC and FHLIC, WCLIC,
ELICW and NCC, filed with the Department ofInsurance of the State of
Ohio, California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by
such regulatory authorities. Prescribed statutory accounting
practices include a variety of publications of the National Association
of Insurance Commissioners (NAIC), as well as state laws, regulations
and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed. The
Company has no material permitted statutory accounting practices.
The following reconciles the statutory net income of NLIC as
reported to regulatory authorities to the net income as shown
in the accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Statutory net income $ 76,532 185,943 33,812
Adjustments to restate to the basis of GAAP:
Consolidating statutory net income of subsidiaries 14,350 19,545 21,519
Increase in deferred policy acquisition costs, net 167,166 89,860 78,731
Future policy benefits (76,310) (70,640) (63,355)
Deferred Federal income tax (expense) benefit (9,657) (31,634) 13,660
Equity in earnings of affiliates 1,013 7,121 4,618
Valuation allowances and other than temporary
declines accounted for directly in surplus 6,275 (6,638) 3,402
Interest maintenance reserve (7,332) 13,754 7,588
Cumulative effect of changes in accounting principles,
net of tax - 5,365 -
Other, net 11,689 (1,168) (3,158)
-------- ------- -------
Net income per accompanying consolidated
statements of income $183,726 211,508 96,817
======== ======= =======
</TABLE>
76 of 112
<PAGE> 77
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The following reconciles the statutory capital shares and
surplus of NLIC as reported to regulatory authorities to the
shareholder's equity as shown in the accompanying consolidated
financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Statutory capital shares and surplus $1,262,861 992,631 647,307
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 1,064,159 811,944 722,084
Nonadmitted assets and furniture and equipment charged to
income in the year of acquisition, net of accumulated
depreciation 16,120 22,573 15,712
Asset valuation reserve 153,387 105,596 138,727
Interest maintenance reserve 18,843 21,069 7,315
Future policy benefits (310,302) (238,231) (167,591)
Deferred Federal income tax, including effect of changes in
accounting principles in 1993 36,515 (31,659) (82,724)
Cumulative effect of change in accounting principles for
postretirement benefits other than pensions, gross - (32,275) -
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross (272,959) - -
Other, net (60,145) (480) 149,412
---------- ---------- ----------
Shareholder's equity per accompanying consolidated
balance sheets $1,908,479 1,651,168 1,430,242
========== ========== ==========
</TABLE>
(5) Investments
-----------
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 674,346 - -
Equity securities 550 7,230 6,949
Fixed maturities held-to-maturity 193,009 800,255 754,876
Mortgage loans on real estate 376,783 364,810 334,769
Real estate 40,280 39,684 27,410
Short-term 6,990 5,080 7,298
Other 42,831 33,832 30,717
---------- -------- --------
Total investment income 1,334,789 1,250,891 1,162,019
Less investment expenses 45,288 46,465 41,862
---------- ---------- ----------
Net investment income $1,289,501 1,204,426 1,120,157
========== ========== ==========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ (703,851) - -
Equity securities (1,990) (128,837) (9,195)
Fixed maturities held-to-maturity (421,427) 223,392 17,774
----------- -------- --------
$(1,127,268) 94,555 8,579
=========== ======== ========
</TABLE>
77 of 112
<PAGE> 78
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
An analysis of realized gains (losses) on investments by investment
type follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Realized on disposition of investments:
Securities available-for-sale:
Fixed maturities $(13,720) - -
Equity securities 1,427 129,728 7,215
Fixed maturities - 21,159 13,399
Mortgage loans on real estate (16,130) (17,763) (30,334)
Real estate and other 5,765 (12,813) (12,997)
---------- -------- --------
(22,658) 120,311 (22,717)
---------- -------- --------
Valuation allowances:
Securities available-for-sale:
Fixed maturities 6,600 - -
Fixed maturities - (934) 1,792
Mortgage loans on real estate (4,332) (10,478) (5,969)
Real estate and other 4,006 4,774 7,579
---------- -------- --------
6,274 (6,638) 3,402
---------- -------- --------
$(16,384) 113,673 (19,315)
========== ======== ========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale and fixed maturities held-to-maturity were as
follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities:
US Treasury securities and obligations of US
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political
subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
----------- ---------- ---------- ----------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,373 6,636 (296) 24,713
----------- ---------- ---------- ----------
$8,337,238 77,887 (344,506) 8,070,619
=========== ========== ========== ==========
Fixed maturity securities held-to-maturity
------------------------------------------
Obligations of states and political
subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
----------- ---------- ---------- ----------
$3,688,787 34,383 (120,860) 3,602,310
=========== ========== ========== ==========
</TABLE>
78 of 112
<PAGE> 79
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of investments of fixed
maturity securities were as follows as of December 31, 1993:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 287,738 18,204 (392) 305,550
Obligations of states and political
subdivisions 16,519 2,700 (5) 19,214
Debt securities issued by foreign governments 137,092 7,719 (1,213) 143,598
Corporate securities 6,819,355 647,778 (15,648) 7,451,485
Mortgage-backed securities 2,860,274 121,721 (15,022) 2,966,973
----------- ---------- ---------- ----------
$10,120,978 798,122 (32,280) 10,886,820
=========== ========== ========== ==========
</TABLE>
As of December 31, 1993 the net unrealized gain on equity
securities, before providing for deferred Federal income tax, was
$8,330, comprised of gross unrealized gains of $8,345 and gross
unrealized losses of $15.
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale and fixed maturity securities
held-to-maturity as of December 31, 1994, 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 $ 294,779 294,778
Due after one year through five years 2,553,825 2,490,886
Due after five years through ten years 1,382,311 1,327,089
Due after ten years 544,091 558,514
---------- -----------
4,775,006 4,671,267
Mortgage-backed securities 3,543,859 3,374,639
---------- -----------
$8,318,865 8,045,906
========== ===========
Fixed maturity securities held-to-maturity
------------------------------------------
Due in one year or less $ 333,517 333,000
Due after one year through five years 1,953,179 1,942,260
Due after five years through ten years 1,080,069 1,013,083
Due after ten years 322,022 313,967
---------- -----------
$3,688,787 3,602,310
========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during
1994 were $247,876, while proceeds from sales of investments in
fixed maturity securities during 1993 were $33,959 ($123,422 during
1992). Gross gains of $3,406 ($2,413 in 1993 and $3,194 in 1992) and
gross losses of $21,866 ($39 in 1993 and $513 in 1992) were realized
on those sales.
Investments that were non-income producing for the twelve month
period preceding December 31, 1994 amounted to $11,513 ($13,158 for
1993) and consisted of $11,111 ($10,907 in 1993) in real estate and
$402 ($2,251 in 1993) in other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$29,275 in 1994 ($24,717 in 1993) and valuation allowances of $27,330
in 1994 ($31,357 in 1993). Other valuation allowances are $0 in 1994
($6,680 in 1993) on fixed maturities and $47,892 in 1994 ($42,350 in
1993) on mortgage loans on real estate.
79 of 112
<PAGE> 80
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company generally initiates foreclosure proceedings on all
mortgage loans on real estate delinquent sixty days. Foreclosures
of mortgage loans on real estate were $37,187 in 1994 ($39,281 in
1993) and mortgage loans on real estate in process of foreclosure or
in-substance foreclosed as of December 31, 1994 totaled $19,878
($24,658 as of December 31, 1993), which approximates fair value.
Investments with an amortized cost of $11,137 and $11,383 as of
December 31, 1994 and 1993, 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 traditional life and
individual health policies has been established based upon the
following assumptions:
Interest rates: Interest rates vary as follows:
<TABLE>
<CAPTION>
Year of issue Life Health
------------- ---- ------
<S> <C> <C>
1994 7.2 %, not graded - permanent contracts with loan provisions; 5.0%
6.0%, not graded - all other contracts
1984-1993 7.4% to 10.5%, not graded 5.0% to 6%
1966-1983 6% to 8.1%, graded over 20 years to 4% to 6.6% 3.5% to 6%
1965 and prior generally lower than post 1965 issues 3.5% to 4%
</TABLE>
Withdrawals: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
Mortality: Mortality and morbidity rates are based on
published tables, modified for the Company's actual experience.
The liability for future policy benefits for investment contracts
(approximately 81% and 80% of the total liability for future policy
benefits as of December 31, 1994 and 1993, respectively) has been
established based on policy term, interest rates and various contract
provisions. The average interest rate credited on investment product
policies was 6.5%, 7.0% and 7.5% for the years ended December 31, 1994,
1993 and 1992, respectively.
Future policy benefits and claims for group long-term disability
policies are the present value (primarily discounted at 5.5%) 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 policies are not discounted.
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Balance as of January 1 $591,258 760,312 672,581
Less reinsurance recoverables 429,798 547,786 445,934
--------- -------- --------
Net balance as of January 1 161,460 212,526 226,647
--------- -------- --------
Incurred related to:
Current year 273,299 309,721 360,545
Prior years (26,156) (26,248) (17,433)
--------- -------- --------
Total incurred 247,143 283,473 343,112
--------- -------- --------
Paid related to:
Current year 175,700 208,978 226,886
Prior years 73,889 125,561 130,347
--------- -------- --------
Total paid 249,589 334,539 357,233
--------- -------- --------
Unpaid claims of ELICW (note 14) 40,223 - -
--------- -------- --------
Net balance as of December 31 199,237 161,460 212,526
Plus reinsurance recoverables 457,694 429,798 547,786
--------- -------- --------
Balance as of December 31 $656,931 591,258 760,312
======== ======== ========
</TABLE>
80 of 112
<PAGE> 81
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
As a result of changes in estimates for insured events of prior
years, the provision for claims and claim adjustment expenses
decreased in each of the three years ended December 31, 1994 due to
lower-than-anticipated costs to settle accident and health claims.
(7) Federal Income Tax
------------------
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the
deferral from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was
accumulated in the Policyholders' Surplus Account (PSA). Management
considers the likelihood of distributions from the PSA to be remote;
therefore, no Federal income tax has been provided for such
distributions in the consolidated financial statements. The DRA
eliminated any additional deferrals to the PSA. Any distributions
from the PSA, however, will continue to be taxable at the then current
tax rate. The balance of the PSA is approximately $35,344 as of
December 31, 1994.
The Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
109 - ACCOUNTING FOR INCOME TAXES (SFAS 109), as of January 1, 1993.
See note 3. The 1992 consolidated financial statements have not
been restated to apply the provisions of SFAS 109.
The significant components of deferred income tax expense for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Deferred income tax expense (exclusive of the
effects of other components listed below) $9,657 29,930
Adjustments to deferred income tax assets and
liabilities for enacted changes in tax laws
and rates - 1,704
------ ------
$9,657 31,634
====== ======
</TABLE>
For the year ended December 31, 1992, the deferred income tax
benefit results from timing differences in the recognition of
income and expense for income tax and financial reporting purposes.
The primary sources of those timing differences were deferred policy
acquisition costs (deferred expense of $16,457) and reserves for future
policy benefits (deferred benefit of $32,045).
Total Federal income tax expense for the years ended December 31,
1994, 1993 and 1992 differs from the amount computed by applying the
U.S. Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Amount % Amount % Amount %
------- ---- -------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $95,631 35.0 $109,515 35.0 $44,390 34.0
Tax exempt interest and dividends
received deduction (194) (0.1) (2,322) (0.7) (4,172) (3.2)
Current year increase in U.S. Federal
income tax rate - - 1,704 0.5 - -
Real estate valuation allowance
adjustment - - - - (3,463) (2.7)
Other, net (5,933) (2.1) (2,139) (0.7) (3,013) (2.3)
------- ---- -------- ---- ------- ----
Total (effective rate of each
year) $89,504 32.8 $106,758 34.1 $33,742 25.8
======= ==== ======== ==== ======= ====
</TABLE>
Total Federal income tax paid was $87,576, $58,286 and $63,124 during
the years ended December 31, 1994, 1993 and 1992, respectively.
81 of 112
<PAGE> 82
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $124,044 129,995
Fixed maturity securities available-for-sale 95,536 -
Liabilities in Separate Accounts 94,783 64,722
Mortgage loans on real estate and real estate 25,632 24,020
Other policyholder funds 7,137 7,759
Other assets and other liabilities 57,528 41,390
-------- ---------
Total gross deferred tax assets 404,660 267,886
-------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 317,224 243,731
Fixed maturities, equity securities and other
long-term investments 3,620 11,137
Other 47,301 44,677
-------- ---------
Total gross deferred tax liabilities 368,145 299,545
-------- ---------
Net deferred tax asset (liability) $ 36,515 (31,659)
======== =========
</TABLE>
The Company has determined that valuation allowances are not
necessary as of December 31, 1994 and 1993 and January 1, 1993 (date of
adoption of SFAS 109) based on its analysis of future deductible
amounts. All future deductible amounts can be offset by future
taxable amounts or recovery of Federal income tax paid within the
statutory carryback period. In addition, for future deductible
amounts for securities available-for-sale, affiliates of the Company
which are included in the same consolidated Federal income tax return
hold investments that could be sold for capital gains that could offset
capital losses realized by the Company should securities
available-for-sale be sold at a loss.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of
fair value information about existing on and off-balance sheet financial
instruments. 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
insurance contracts are provided to make the fair value disclosures more
meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the balance sheets for these instruments
approximate their fair value.
82 of 112
<PAGE> 83
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
INVESTMENT SECURITIES: Fair value for fixed maturity
securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services
or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on quoted
market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices.
The fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on
real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans
to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is valued at the estimated fair
value of the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value
is the amount payable on demand. For investment contracts with
known or determined maturities, fair value is estimated using
discounted cash flow analysis. Interest rates used are similar
to currently offered contracts with maturities consistent with
those remaining for the contracts being valued.
POLICY RESERVES ON INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the
amount payable on demand. Also included are disclosures for the
Company's limited payment policies, which the Company has used
discounted cash flow analyses similar to those used for investment
contracts with known maturities to estimate fair value.
POLICYHOLDERS DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated
balance sheets for these instruments approximates their fair value.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on insurance contracts were as
follows as of December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $ 8,045,906 8,045,906 - -
Equity securities 24,713 24,713 16,593 16,593
Fixed maturities held-to-maturity 3,688,787 3,602,310 10,120,978 10,886,820
Mortgage loans on real estate 4,222,284 4,173,284 3,871,560 4,175,271
Policy loans 340,491 340,491 315,898 315,898
Short-term investments 131,643 131,643 41,797 41,797
Cash 7,436 7,436 21,835 21,835
Assets held in Separate Accounts 12,222,461 12,222,461 9,006,388 9,006,388
Liabilities
-----------
Investment contracts 12,189,894 11,657,556 10,332,661 10,117,288
Policy reserves on insurance contracts 3,170,085 2,934,384 2,945,120 2,873,503
Policyholders' dividend accumulations 338,058 338,058 322,686 322,686
Other policyholder funds 72,770 72,770 71,959 71,959
Liabilities related to Separate Accounts 12,222,461 11,807,331 9,006,388 8,714,586
</TABLE>
83 of 112
<PAGE> 84
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to
extend credit in the form of loans. These instruments involve, to
varying degrees, elements of credit risk in excess of amounts
recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and
the borrower's loan collateral. The underlying mortgage property
represents the collateral if the commitment is funded. The Company's
policy for new mortgage loans on real estate is to lend no more than
80% of collateral value. Should the commitment be funded, the
Company's exposure to credit loss in the event of nonperformance by
the borrower is represented by the contractual amounts of these
commitments less the net realizable value of the collateral. The
contractual amounts also represent the cash requirements for all
unfunded commitments. Commitments on mortgage loans on real estate
of $243,200 extending into 1995 were outstanding as of December 31,
1994.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (23% in 1993) in any geographic area and no more than 2%
(2% in 1993) with any one borrower. The summary below depicts loans
by remaining principal balance as of each December 31:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
-------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
-------- --------- --------- --------- ----------
$669,832 613,707 2,176,705 816,831 4,277,075
======== ========= ========= =========
Less valuation allowances
and unamortized discount 54,791
----------
Total mortgage loans
on real estate, net $4,222,284
==========
1993:
East North Central $109,208 108,478 470,755 158,964 847,405
East South Central 27,562 1,460 117,341 69,991 216,354
Mountain 3,228 4,742 105,560 23,065 136,595
Middle Atlantic 56,664 52,766 132,821 15,414 257,665
New England 10,565 48,398 142,530 8 201,501
Pacific 174,409 185,116 389,428 65,497 814,450
South Atlantic 112,640 58,165 391,102 238,337 800,244
West North Central 104,933 13,458 78,408 3,917 200,716
West South Central 50,955 47,103 183,420 161,033 442,511
-------- --------- ------- --------- ----------
$650,164 519,686 2,011,365 736,226 3,917,441
======== ========= ========= =========
Less valuation allowances
and unamortized discount 45,881
----------
Total mortgage loans
on real estate, net $3,871,560
==========
</TABLE>
84 of 112
<PAGE> 85
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
NLIC, FHLIC, WCLIC, NCC, and NFS participate 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. Plan
contributions are invested in a group annuity contract of NLIC.
Benefits are based upon the highest average annual salary of any
three 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.
Pension costs charged to operations by the Company during the years
ended December 31, 1994, 1993 and 1992 were $10,451, $6,702 and
$4,613, respectively.
The Company's net accrued pension expense as of December 31, 1994
and 1993 was $1,836 and $1,472, respectively.
The net periodic pension cost for the plan as a whole for the years
ended December 31, 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $64,740 47,694 44,343
Interest cost on projected benefit obligation 73,951 70,543 68,215
Actual return on plan assets (21,495) (105,002) (62,307)
Net amortization and deferral (62,150) 20,832 (24,281)
-------- -------- --------
Net periodic pension cost $55,046 34,067 25,970
======== ======== ========
Basis for measurements, net periodic pension cost:
Weighted average discount rate 5.75% 6.75% 7.25%
Rate of increase in future compensation levels 4.50% 4.75% 5.25%
Expected long-term rate of return on plan assets 7.00% 7.50% 8.00%
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 914,850 972,475
Nonvested 7,570 10,227
---------- ----------
$ 922,420 982,702
========== ==========
Projected benefit obligation for
services rendered to date 1,305,547 1,292,477
Plan assets at fair value 1,241,771 1,208,007
---------- ----------
Plan assets less than projected benefit
obligation (63,776) (84,470)
Unrecognized prior service cost 46,201 49,551
Unrecognized net losses 39,408 55,936
Unrecognized net assets at January 1, 1987 (21,994) (24,146)
---------- ----------
Net accrued pension expense $ (161) (3,129)
========== ==========
Basis for measurements, funded status of plan:
Weighted average discount rate 7.50% 5.75%
Rate of increase in future compensation levels 6.75% 4.50%
</TABLE>
85 of 112
<PAGE> 86
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, NLIC, FHLIC, WCLIC,
NCC and NFS participate with other affiliated companies in life and
health care defined benefit plans for qualifying retirees.
Postretirement life and health care benefits are contributory and
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 life insurance contributions are based on age
and coverage amount of each retiree. Postretirement health care
benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. The accounting for the
health care plan anticipates future cost-sharing changes to the
written plan that are consistent with the Company's expressed intent
to increase the retiree contribution amount annually for expected
health care inflation. The Company's policy is to fund the cost of
health care benefits in amounts determined at the discretion of
management. The Company began funding in 1994. Plan assets are
invested in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106),
which requires the accrual method of accounting for postretirement
life and health care insurance benefits based on actuarially
determined costs to be recognized over the period from the date of
hire to the full eligibility date of employees who are expected to
qualify for such benefits. Postretirement benefit cost for 1992, which
was recorded on a cash basis, has not been restated.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly,
a noncash charge of $32,275 ($20,979 net of related income tax
benefit) was recorded in the consolidated statement of income as a
cumulative effect of a change in accounting principle. See note 3.
The adoption of SFAS 106, including the cumulative effect of the
change in accounting principle, increased the expense for
postretirement benefits by $35,277 to $36,544 in 1993. Net periodic
postretirement benefit cost for 1994 was $4,627. The Company's
accrued postretirement benefit obligation as of December 31, 1994 and
1993 was $36,001 and $35,277, respectively.
Actuarial assumptions for the measurement of the December 31, 1994
accumulated postretirement benefit obligation include a discount rate
of 8% and an assumed health care cost trend rate of 11%, uniformly
declining to an ultimate rate of 6% over 12 years.
Actuarial assumptions for the measurement of the December 31, 1993
accumulated postretirement benefit obligation and the 1994 net
periodic postretirement benefit cost include a discount rate of 7% and
an assumed health care cost trend rate of 12%, uniformly declining to
an ultimate rate of 6% over 12 years.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation as of January 1, 1993 and the 1993 net periodic
postretirement benefit cost include a discount rate of 8% and an
assumed health care cost trend rate of 14%, uniformly declining to an
ultimate rate of 6% over 12 years.
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 76,677 90,312
Fully eligible, active plan participants 22,013 24,833
Other active plan participants 59,089 84,103
--------- ---------
Accumulated postretirement benefit obligation 157,779 199,248
Plan assets at fair value 49,012 -
--------- ---------
Plan assets less than accumulated postretirement benefit
obligation (108,767) (199,248)
Unrecognized net (gains) losses (41,497) 15,128
--------- ---------
Accrued postretirement benefit obligation $(150,264) (184,120)
========= =========
</TABLE>
86 of 112
<PAGE> 87
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amount of net periodic postretirement benefit cost for the plan as
a whole for the years ended December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to employee service during the year $ 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,011 13,928
Actual return on plan assets (1,622) -
Net amortization and deferral 1,622 -
------- ------
Net periodic postretirement benefit cost $22,597 21,018
======= ======
</TABLE>
The health care cost trend rate assumption has a significant effect
on the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 by
$8,109 and $15,621, respectively, and the net periodic postretirement
benefit cost for the years ended December 31, 1994 and 1993 by $866 and
$2,377, respectively.
(12) Portfolio Transfer of Credit Life and Credit Accident and Health
----------------------------------------------------------------
On March 13, 1992, WCLIC entered into an assignment and assumption
agreement with American Bankers Life Assurance Company of Florida
(ABLAC) under which ABLAC assumed, by portfolio transfer, substantially
all of WCLIC's credit life and accident and health policies in force as
of January 1, 1992. A pre-tax loss of approximately $15,000 was
recognized from this transaction in 1992. The loss represents
approximately $34,000 of amortization of deferred policy acquisition
costs, less approximately $27,000 in ceded commissions earned, plus
death benefits incurred and other expenses. Under the terms defined in
the assignment and assumption agreement, WCLIC is contingently liable
for adverse development of claims activity up to a defined limit. As
of December 31, 1994, WCLIC has provided for a contingent liability
based on the development of claims experience through December 31,
1994. As of December 31, 1993, WCLIC had provided for the maximum
contingent liability in the absence of conclusive claims experience
development.
(13) Regulatory Risk-Based Capital, Retained Earnings and Dividend
-------------------------------------------------------------
Restrictions
------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The
formulas for determining the amount of risk-based capital specify
various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk.
Regulatory compliance is determined by a ratio of the company's
regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level risk-based capital, as defined by the NAIC.
Companies below specific trigger points or ratios are classified
within certain levels, each of which requires specified corrective
action. NLIC and each of its insurance subsidiaries exceed the minimum
risk-based capital requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, at the year-end shall
inure to the benefit of the shareholders. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall be
used only for the payment or apportionment of dividends to participating
policyholders at least to the extent required by statute or for the
purpose of making up any loss on participating policies.
In the opinion of counsel for the Company, the ultimate ownership of
the entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
87 of 112
<PAGE> 88
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable
to participating policies in excess of the amounts paid as dividends
to policyholders belong to the shareholder rather than the
policyholders, and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares
was $1,904,664, $1,647,353, and $1,426,427 as of December 31,
1994, 1993 and 1992, respectively. The amount thereof not
presently available for dividends to the shareholder due to the New
York restrictions and to adjustments relating to GAAP was $929,934,
$954,037 and $841,583 as of December 31, 1994, 1993 and 1992,
respectively.
Ohio law limits the payment of dividends to shareholders. The
maximum dividend that may be paid by the Company without prior
approval of the Director of the Department of Insurance of the State
of Ohio is limited to the greater of statutory gain from operations of
the preceding calendar year or 10% of statutory shareholder's surplus
as of the prior December 31. Therefore, $1,707,110, of shareholder's
equity, as presented in the accompanying consolidated financial
statements, is restricted as to dividend payments in 1995.
California law limits the payment of dividends to shareholders of
WCLIC. The maximum dividend that may be paid by WCLIC without
prior approval of the Commissioner of the State of California
Department of Insurance is limited to the greater of WCLIC's
statutory net income of the preceding calendar year or 10% of
WCLIC's statutory shareholder's surplus as of the prior December 31.
Therefore, $126,489 of WCLIC's shareholder's equity is restricted as
to dividend payments in 1995.
Wisconsin law limits the payment of dividends to shareholders of ELICW.
The maximum dividend that may be paid by ELICW without prior approval
of the Commissioner of the State of Wisconsin is limited to the greater
of ELICW's statutory net income of the preceding calendar year or 10%
of ELICW s statutory surplus as of the prior December 31, Therefore,
$135,369 of ELICW's shareholder's equity is restricted as to dividend
payments in 1995.
Michigan law limits the payment of dividends to shareholders of NCC.
The maximum dividend that may be paid by NCC without prior approval
of the Commissioner of the State of Michigan Bureau of Insurance is
limited to the greater of NCC's statutory net income, not including
realized capital gains, of the preceding calendar year or 10% of
NCC's statutory shareholder's surplus as of the prior December 31.
Therefore, $66,564 of NCC's shareholder's equity is restricted as to
dividend payments in 1995. In addition, prior approval is not required
for a dividend which does not increase gross leverage to a point in
excess of the United States consolidated industry average for the most
recent available year.
(14) Transactions With Affiliates
----------------------------
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of ELICW from Wausau Service Corporation (WSC) for an
amount approximating $165,000, subject to specified adjustments, if
any, subsequent to year end. 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. An accrual approximating $10,000
is reflected in the accompanying consolidated balance sheet. 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.
The deferred compensation annuity line of business of the Company
is primarily sold through Public Employees Benefit Services
Corporation (PEBSCO). The Company paid PEBSCO commissions and
administrative fees of $26,699, $22,681 and $20,146 in 1994, 1993 and
1992, respectively. PEBSCO is a wholly owned subsidiary of Corp.
The Company and NEA Valuebuilder Investor Services, Inc. (NEAVIS) have
contracted with the National Education Association (NEA) to provide
individual annuity contracts to be marketed exclusively to members of
the NEA. The Company paid NEAVIS a marketing development fee of
$11,095, $9,229 and $6,426 in 1994, 1993 and 1992, respectively.
NEAVIS is a wholly owned subsidiary of Corp.
The Company shares home office, other facilities, equipment and
common management and administrative services with affiliates.
88 of 112
<PAGE> 89
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the
securities will be repurchased by the seller at the original sales
price plus a price differential. Transactions under the agreements
during 1994 and 1993 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC,
NLIC and WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and
ELICW as of December 31, 1994. These contracts are immaterial to
the consolidated financial statements.
NCC participates in several 100% quota share reinsurance agreements
with NMIC. NCC serves as the licensed insurer as required for an
affiliated excess and surplus lines company and cedes 100% of direct
written premiums to NMIC. In 1989, NCC transferred 100% of assets and
unearned premiums and loss reserves related to a discontinued block of
assumed reinsurance to NMIC (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%). Effective January 1, 1993, NCC entered into
a 100% quota share reinsurance agreement to cede to NMIC 100% of all
written premiums not subject to any other reinsurance agreements.
As a result of these agreements, and in accordance with STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 113 - ACCOUNTING AND REPORTING FOR
REINSURANCE OF SHORT-DURATION AND LONG-DURATION CONTRACTS, the
following amounts are included in the consolidated financial statements
as of December 31, 1994 and 1993 for reinsurance ceded:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Reinsurance recoverable $575,721 533,401
Unearned premium reserves (118,092) (102,644)
Loss and claim reserves (371,974) (352,303)
Loss and expense reserves (85,655) (78,454)
-------- --------
$ 0 0
======== ========
</TABLE>
The ceding of reinsurance does not discharge the original insurer
from primary liability to its policyholder. The insurer which assumes
the coverage assumes the related liability and it is the practice of
insurers to treat insured risks, to the extent of reinsurance ceded,
as though they were risks for which the original insurer is not liable.
Management believes the financial strength of NMIC reduces to an
acceptable level any risk to NCC under these intercompany reinsurance
agreements.
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 $92,531 and $28,683 at December 31,
1994 and 1993, respectively, and are included in short-term
investments on the accompanying consolidated balance sheets.
(15) Bank Lines of Credit
--------------------
As of December 31, 1994 and 1993, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization. Additionally, NFS had $27,000 of confirmed
but unused bank lines of credit.
89 of 112
<PAGE> 90
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) 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.
(17) Major Lines of Business
-----------------------
The Company operates in the life and accident and health lines of
business in the life insurance and property and casualty insurance
industries. Life insurance operations include whole life, universal
life, variable universal life, endowment and term life insurance and
annuity contracts issued to individuals and groups. Accident and
health operations also provide coverage to individuals and groups.
The following table summarizes the revenues and income before Federal
income tax and cumulative effect of changes in accounting principles
for the years ended December 31, 1994, 1993 and 1992 and assets as of
December 31, 1994, 1993 and 1992, by line of business.
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Life insurance $ 1,577,809 1,479,956 1,406,417
Accident and health 345,544 339,764 475,290
Investment income allocated to capital and surplus 122,847 214,806 51,611
----------- --------- ---------
Total $ 2,046,200 2,034,526 1,933,318
=========== ========= =========
Income before Federal income tax and cumulative
effect of changes in accounting principles:
Life insurance 141,650 83,917 78,627
Accident and health 13,220 15,043 436
Investment income allocated to capital and surplus 118,360 213,941 51,496
----------- --------- ---------
Total $ 273,230 312,901 130,559
=========== ========= =========
Assets:
Life insurance 28,351,628 22,982,186 19,180,561
Accident and health 852,026 773,007 343,535
Capital and surplus 1,908,479 1,651,168 1,430,242
----------- --------- ---------
Total $31,112,133 25,406,361 20,954,338
=========== ========= =========
</TABLE>
Included in life insurance revenues are premiums from certain annuities
with life contingencies of $20,134 ($35,341 and $54,066 for the years
ended December 31, 1993 and 1992, respectively) as well as universal
life and investment product policy charges of $239,021 ($188,057 and
$148,464 for the years ended December 31, 1993 and 1992 respectively)
for the year ended December 31, 1994.
Allocations of investment income and certain general expenses were
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
Investment income and realized gains allocable to policyholders in 1994
were $1,193,292 and $1,775, respectively.
(18) Subsequent Event
----------------
On January 30, 1995, FHLIC received approval from the Ohio Secretary of
State to change its name to Nationwide Life and Annuity Insurance
Company.
90 of 112
<PAGE> 91
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
(a) Financial Statements:
<S> <C>
(1) Financial statements and schedule included PAGE
in Prospectus
(Part A):
Condensed Financial Information for each of 12
the years in the ten year period ended
December 31, 1994.
(2) Financial statements and schedule included
in Part B:
Those financial statements and schedule 56
required by Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
MFS Variable Account:
Independent Auditors' Report. 56
Statement of Assets, Liabilities and Contract 57
Owners' Equity as of December 31, 1994.
Statements of Operations and Changes in 58
Contract Owners' Equity for the years ended
December 31, 1994, 1993 and 1992.
Notes to Financial Statements. 59
Schedule 1. 62
Nationwide Life Insurance Company:
Independent Auditors' Report. 67
Consolidated Balance Sheets as of December 68
31, 1994 and 1993.
Consolidated Statements of Income for the 69
years ended December 31, 1994, 1993 and
1992.
Consolidated Statements of Shareholder's 70
Equity for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for 71
the years ended December 31, 1994, 1993
and 1992.
Notes to Consolidated Financial Statements. 72
</TABLE>
91 of 112
<PAGE> 92
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with the
Registration Statement, and hereby
incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts
between the Registrant and Principal
Underwriter - Filed previously with the
Registration Statement, and hereby
incorporated by reference.
(4) The form of the variable annuity contract -
Filed previously with Post-Effective
Amendment No. 19 to the Registration
Statement and hereby incorporated by
reference.
(5) Variable Annuity Application - Filed
previously with the Registration Statement, and
hereby incorporated by reference.
(6) Articles of Incorporation of Depositor -
Filed previously with the Registration
Statement, and hereby incorporated by
reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
the Registration Statement, and hereby
incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
92 of 112
<PAGE> 93
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 Olivet, NC 28365
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Peter F. Frenzer President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson President and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
</TABLE>
93 of 112
<PAGE> 94
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
2724 West Lebanon 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
James E. Brock Senior Vice President -
One Nationwide Plaza Investment Product 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
Robert A. Oakley Senior Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
Carl J. Santillo Senior Vice President
One Nationwide Plaza Life and Health Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
Joseph F. Ciminero Vice President-
One Nationwide Plaza Financial Operations
Columbus, OH 43215
</TABLE>
94 of 112
<PAGE> 95
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic
One Nationwide Plaza Planning/Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
95 of 112
<PAGE> 96
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C>
Nationwide Mutual Insurance Company Ohio Insurance Company
(Casualty)
Nationwide Mutual Fire Insurance Company Ohio Insurance Company
Nationwide Investing Foundation Michigan Investment Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit
Inc. Corporation
Farmland Mutual Insurance Company Iowa Insurance Company
F & B, Inc. Iowa Insurance Agency
Farmland Life Insurance Company Iowa Life Insurance Company
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Colonial Insurance Company of California California Insurance Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Property & Casualty Insurance Ohio Insurance Company
Company
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Indemnity Company Ohio Insurance Company
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Neckura General Insurance Company Germany Insurance Company
Columbus Service, GMBH Germany Insurance Broker
Auto-Direkt Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative service for
Neckura Insurance Group
SVM Sales GMBH, Neckura Insurance Group Germany Sales support for Neckura
Insurance Group
</TABLE>
96 of 112
<PAGE> 97
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
Colonial County Mutual Insurance Company Texas Insurance Company
Nationwide Communications Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Redevelopment Ohio Redevelopment of blighted
Corporation areas within the City of
Columbus, Ohio
Insurance Intermediaries, Inc. Ohio Insurance Broker and
Insurance Agency
Nationwide Cash Management Company Ohio Investment Securities Agent
California Cash Management Company California Investment Securities Agent
Nationwide Development Company Ohio Owns, leases and manages
commercial real estate
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
Gates, McDonald & Company of New York New York Workers Compensation Claims
Administration
Nationwide Indemnity Company Ohio Reinsurance Company
NWE, Inc. Ohio Special Investments
</TABLE>
97 of 112
<PAGE> 98
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <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 Health Care Corporation Ohio Develops and operates
Managed Care Delivery
System
InHealth, Inc. Ohio Health Maintenance
Organization (HMO)
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates
Managed Care Delivery
System
** West Coast Life Insurance Company California Life Insurance Company
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance
Administration, Claims
Examining, and Data
Processing Services
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
Leber Direkt Insurance Company Germany Life Insurance Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
</TABLE>
98 of 112
<PAGE> 99
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C>
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and
deals in Real Property.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and
Administrator
* Nationwide Separate Account Trust Massachusetts Investment Company
* Nationwide Investing Foundation II Massachusetts Investment Company
* Financial Horizons Investment Trust Massachusetts Investment Company
PEBSCO Securities Corp. Oklahoma Registered Broker-Dealer in
Deferred Compensation
Market
** National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Public Employees Benefit Services Delaware Marketing and
Corporation Administration of Deferred
Employee Compensation Plans
for Public Employees
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers
Agency, Inc. Deferred Compensation Plans
for Public Employees
</TABLE>
99 of 112
<PAGE> 100
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C>
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation Plans
for Public Employees
Wausau Lloyds Texas Texas Lloyds Company
Wausau Service Corporation Wisconsin Holding Company
American Marine Underwriters, Inc. Florida Underwriting Manager
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health
and Medicare Supplement
Insurance
Wausau Business Insurance Company Illinois Insurance Company
Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
Wausau Insurance Co. Limited (U.K.) United Kingdom Insurance and Reinsurance
Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
</TABLE>
100 of 112
<PAGE> 101
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C>
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
Wausau General Insurance Company Illinois Insurance Company
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
Wausau International Underwriters California Special Risks, Excess and
Surplus Lines Insurance
Underwriting Manager
Companies Agency, Inc. (Wisconsin) Wisconsin Insurance Broker
Companies Agency Insurance Services of California Insurance Broker
California, Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Key Health Plan, Inc. California Pre-paid health plans
Pension Associates of Wausau, Inc. Wisconsin Pension plan
administration, record
keeping and consulting and
compensation consulting
Companies Agency of Phoenix, Inc. Arizona 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 Alabama, Inc. Alabama Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Massachusetts, Inc. Massachusetts Insurance Broker
</TABLE>
101 of 112
<PAGE> 102
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C>
Companies Agency of New York, Inc. New York Insurance Broker
Financial Horizons Distributors Agency Oklahoma Life Insurance Agency
of Oklahoma, Inc.
Financial Horizons Distributors Agency, Delaware Insurance Agency
Inc.
Financial Horizons Distributors Agency Ohio Insurance Agency
of Ohio, Inc.
Landmark Financial Services of New York, New York Life Insurance Agency
Inc.
Financial Horizons Distributors Agency Alabama Life Insurance Agency
of Alabama, Inc.
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
Financial Horizons Distributors Agency Texas Life Insurance Agency
of Texas, Inc.
Colonial General Insurance Agency, Inc. Arizona Insurance Agency
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Video Eagle, Inc. Ohio Operates Several Video
Cable Systems
</TABLE>
102 of 112
<PAGE> 103
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
STATE OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account-II Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide DC Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Separate Account No. 1 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide Variable Account-3 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VA Separate Account-A Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account-5 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* NACo Variable Account Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Issuer of Life Insurance
Separate Account Contracts
* Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Contracts
Account
* Nationwide Variable Account-6 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Issuer of Annuity Contracts
Account Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate
Account
</TABLE>
103 of 112
<PAGE> 104
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| |=================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | |
| | | | | WAUSAU LLOYDS |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | |
| ------------- Shares | | ------------- Shares |=============| |
| | | | | |
| Cost | | Cost | | |
| ---- | | ---- | | A TEXAS LLOYDS |
| Employers-- | | Employers-- | | |
| 100% $15,683,300 | | 100% $106,763,000 | | |
|_______________________________| |________________________________| |_____________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 5,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $11,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $24,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. (AMU) |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | (WISCONSIN) | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| NATIONWIDE ENTERPRISE INSURANCE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
===| NATIONWIDE MUTUAL |=============================================| NATIONWIDE MUTUAL |
| (CASUALTY) | | FIRE |
|_________________________________________| |___________________________|
| | | |__________________________________________________________________ :
| | | | | :
______________|__________ | | | _____________________________ _____________|_:____________________
| ALLNATIONS | | | | | NATIONWIDE | | NATIONWIDE |
| | | | | | GENERAL | | CORPORATION |
| Common Stock: 2,939 | | | | | | | |
| ------------- Shares | | | | | Common Stock: 20,000 Shares | | Common Stock: Control |
| | | | |___| ------------- | | ------------- ------- |
| Cost | | | | | | | $13,092,790 100% |
| ---- | | | | | Cost | | |
| Casualty-26% $88,320 | | | | | ---- | | Shares Cost |
| Fire-26% $88,463 | | | | | Casualty-100% $5,944,422 | | ----- ---- |
|_________________________| | | | |_____________________________| | Casualty $12,443,280 $710,293,557 |
| | | | Fire 649,510 24,007,936 |
_________________________ | | | _____________________________ | |
| FARMLAND MUTUAL | | | | | NATIONWIDE PROPERTY | | (See Page 2) |
| INSURANCE COMPANY | | | | | AND CASUALTY | |____________________________________|
| | | | | | |
| Guaranty Fund |____| | | | Common Stock: 60,000 Shares |
| ------------- |______| |___| ------------- |
| Certificate | | | |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | COLONIAL INS. CO. |
_______________|___________ | | OF CALIFORNIA |
| F & B, INC. | | | |
| | | | Common Stock: 1,750 Shares |
| Common Stock: 1 Share | |___| ------------- |
| ------------- | | | |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | SCOTTSDALE | | COLONIAL GENERAL |
| FARMLAND LIFE | | | INSURANCE COMPANY | | INSURANCE AGENCY, INC. |
| INSURANCE COMPANY | | | | | |
| | | | Common Stock: 30,136 Shares | | Common Stock: 1 Share |
| Common Stock: 1,000,000 |___|___| ------------- |______| ------------ |
| ------------- Shares | | | | | |
| | | | Cost | | Cost |
| Cost | | | ---- | | ---- |
| ---- | | | Casualty-100% $150,000,000 | | Scottsdale- $1,082,336 |
| Casualty-100% $23,826,196 | | |_____________________________| | 100% |
|____________________________| | |__________________________|
| _____________________________
| | NATIONWIDE AGRIBUSINESS |
| | INS. CO. |
| | |
| | Common Stock: 1,000,000 |
| | ------------- Shares |
| | |
|___| Casualty- Cost |
| | 99.9% ---- |
| | $26,300,981 |
| | Other Capital: |
| | Casualty- |
| | Ptd. $713,567 |
| |_____________________________|
|
| _____________________________ ______________________________
| | NECKURA HOLDING CO. | | NECKURA |
| | (NECKURA) | | INSURANCE CO. |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | AUTO INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIRECT |
| | | INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE INDEMNITY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares | | Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | |______| |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty $5,000,000 | | Colonial $500,000 |
| | 100% | | Lone Star 150,000 |
| |_____________________________| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | CASH MANAGEMENT |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________ __________________________
| | CALIFORNIA | | VIDEO EAGLE INC. |
| | CASH MANAGEMENT | | |
| | | | Common Stock: 750 Shares |
| | Common Stock: 90 Shares | | ------------- |
|___| ------------- | ____| |
| | | | | Cost |
| | Cost | | | ---- |
| | ---- | | | NW Comm.- $0 |
| | Casualty-100% $9,000 | | | 100% |
| |_____________________________| | |__________________________|
| |
| |
| |
| _____________________________ | __________________________
| | NATIONWIDE | | | THE BEAK AND |
| | COMMUNICATIONS INC. | | | WIRE CORPORATION |
| | | | | |
| | Common Stock: 14,750 Shares | | | Common Stock: 750 Shares |
|___| ------------- |__|___| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Associated Companies - Dotted Line
Contractural Association - Double Line
December 31, 1994
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|__________________
| NATIONWIDE LIFE |
| Common Stock: 3,814,779 |
| ------------- Shares |
| |
| NW Corp.- Cost |
| 100% ---- |
| $909,179,664 |
|______________________________|
|
_________________________________________________________________________________|
| | |
____________|____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | FINANCIAL HORIZONS |
| FINANCIAL SERVICES | | Common Stock: 100 Shares | | | LIFE |
| Common Stock: 7,676 | | ------------- | | | Common Stock: 66,000 |
______| ------------- Shares | _____| | |_______| ------------- Shares |
| ____| Cost | | | Cost | | | NW Life- Cost |
| | | ---- | | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |_________________________| | |___________________________| | |______________________________|
| | | | | |
| | _________________________ | ___________|_|_____________ |
| | | NATIONWIDE | | | | |
| | | INVESTOR SERVICES | | | | |
| | | Common Stock: 5 Shares | | | NCC OF AMERICA, | |
| |____| ------------- | | | INC. (INACTIVE) | | ______________________________
| | | | | | | | | WEST COAST LIFE |
| | | NW Fin. Serv.- Cost | | | | | | Common Stock: 1,000,000 |
| | | 100% ---- | | | | | | ------------- Shares |
| | | $5,000 | | | | |_______| Cost |
| | |_________________________| | |___________________________| | | ---- |
| | | | | NW Life-100% $92,762,014 |
| | _________________________ | ___________________________ | |______________________________|
| | | NATIONWIDE | | | HICKEY-MITCHELL | |
| | | INVESTING | | | INSURANCE AGENCY | |
| | | FOUNDATION | | | Common Stock: 101 Shares | |
| |____| | |_____| ----------- | |
| ____| | | | | ______________________________
| | | | | Cost | | | EMPLOYERS LIFE INSURANCE CO. |
| | | | | ---- | | | OF WAUSAU (EL) |
| | | COMMON LAW TRUST | | Nat. Cas.-100% $4,701,200 | | | |
| | |_________________________| |___________________________| | | Common Stock: 250,000 Shares |
| | | |_______| ------------- |
| | _________________________ ____________|______________ | | ---- |
| | | NATIONWIDE | | NATIONAL PREMIUM & | | | NW Life-100% $165,627,416 |
| | | INVESTING | | BENEFIT ADMINISTRATION | | |______________________________|
| |____| FOUNDATION II | | Common Stock: 10,000 | | |
| ____| | | ------------ Shares | | |
| | | | | Cost | | |
| | | | | Hickey- ---- | | ___________|_________________
| | | COMMON LAW TRUST | | Mitchell-100% $1,319,469 | | | WAUSAU PREFERRED |
| | |_________________________| |___________________________| | | HEALTH INS. CO. |
| | | | |
| | | | Common Stock: 200 Shares |
| | _________________________ | | ------------- |
| | | NATIONWIDE | | | EL -- 100% Cost |
| |____| SEPARATE ACCOUNT | | | ---- |
| ____| TRUST | | | $51,413,193 |
| | | COMMON LAW TRUST | | |_____________________________|
| | |_________________________| |
| | |
| | |
| | _________________________ |
| | | FINANCIAL HORIZONS | | ______________________________
| |____| INVESTMENT TRUST | | | NATIONWIDE |
|______| TRUST | | | PROPERTY MANAGEMENT |
| COMMON LAW TRUST | | | Common Stock: 59 Shares |
|_________________________| |_______| ------------- |
| | |
| | Cost |
| | ---- |
| | NW Life-100% $1,907,896 |
| |______________________________|
| |
| |
| |
| |
| ____________|_________________
| | MRM INVESTMENTS, INC. |
| | Common Stock: 1 Share |
| | ------------ |
| | |
| | Cost |
| | Nat. Prop. ---- |
| | Mgmt.-100% $550,000 |
| |______________________________|
|
|
| ___________________________
| | NWE, INC. |
| | |
| | Common Stock: 100 Shares |
|_______| |
| NW Life-100% Cost |
| ---- |
| $35,971,375 |
|___________________________|
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| (CASUALTY) |___________________________________________________________
| |
|_______________________________________|
| _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
__________________|______________|___
| NATIONWIDE CORPORATION |
| Common Stock: Control: |
| ------------- ------- |
| 13,092,790 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty $12,443,280 $710,293,557 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_______________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES | | GATES, McDONALD | | FINANCIAL HORIZONS |
| BENEFIT SERV. CORP. | | & COMPANY (GATES) | | DISTRIBUTORS AGY., INC. |
______| Common Stock: 236,494 | | Common Stock: 254 Shares | | Common Stock: 1,000 Shares|
| ____| ------------- Shares | | ------------- |___ _____| ------------- |
| | | Cost | | | | | ___| |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $12,830,936 | | ---- | | | | | NW Corp. ---- |
| | |___________________________| | MW Corp.- $22,126,323 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- Shares | | | | | |___| Common Stock: 10,000 |
| | | Cost | | Cost | | | | | ----------- Shares |
| | | Pub. Emp. Ben. ---- | | ---- | | | | | Cost |
| | | Serv.Corp.-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |___________________________| | | | | | | FHDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | NEW MEXICO | | | | | | | LANDMARK FINANCIAL |
| | | Common Stock: 1,000 | | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____| ------------- Shares | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | ---- | | | | ------------- Shares |
| | | Serv.Corp.-100% $1,000 | | $93,750 | | | | Cost |
| | |___________________________| |___________________________| | | | ---- |
| | | | | FHDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 | | | | FINANCIAL HORIZONS |
| |____| ------------- Shares | | | | SECURITIES CORP. |
| | | Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | | | ------------- Shares |
| | | Serv.Corp. 100% $500 | | | | Cost |
| | |___________________________| | | | ---- |
| | | | | FHDAI-100% $153,000 |
| | | | |___________________________|
| | | |
| | ___________________________ | |
| | | PEBSCO OF | ___________________________ | |
| | | MONTANA | | AFFILIATE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 500 | | | | | | |
| | | ------------- Shares | | Common Stock: 100 Shares |__ | | | FINANCIAL HORIZONS |
| | | Cost | | | | |___| DISTRIBUTORS |
| | | Pub. Emp. Ben. ---- | | FHDAI-100% Cost | | ___| AGENCY OF TEXAS, |
| | | Serv.Corp.-100% $500 | | ---- | | | | INC. |
| | |___________________________| | $100 | | | |___________________________|
| | |___________________________| | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | ALABAMA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 100,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OHIO, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ---- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | MASSACHUSETTS | | | | |
| | | INSURANCE AGENCY, INC. | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 1,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ----- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____ AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 108
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE (FIRE) |
| |
|_______________________________________|
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | INHEALTH, INC. |
| INVESTOR SERVICES, INC. | | | Common Stock: 100 |
_______| Common Stock: 500 | | | ------------ Shares |
| _____| ------------- Shares | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $12,046,413 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | NATIONWIDE |
| | | INVESTOR SERVICES | | | HEALTH CARE |
| |_____| OF ALABAMA, INC. | |_____| Common Stock: 15 Shares |
| | | Common Stock: 500 | _____| ------------ |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW Corp.- ---- |
| | | NEA-100% $5,000 | | | 100% $16,850,000 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MGT. |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| | | OF OHIO, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 100 | |_____| ------------- |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ----- | | | NW Health ---- |
| | | NEA-91% $5,000 | | | Care-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | | | | INHEALTH |
| | | | | | AGENCY, INC. |
| | | NEA VALUEBUILDER | | | Common Stock: 99 Shares |
| |_____| INVESTOR SERVICES | |_____| ------------- |
| | | OF TEXAS, INC. | | Cost |
| | | | | NW Health ---- |
| | | | | Corp.-99% $116,077 |
| | |___________________________| |___________________________|
| |
| | ___________________________
| | | |
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
<FN>
Subsidiary Companies -- Solid Line
Associated Companies -- Dotted Line
Contractual Association -- Double Line
December 31, 1994
</TABLE>
Page 2
<PAGE> 109
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of February 28, 1995 was 10,682 and 2,090,
respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State
of Ohio, for indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or
employee of the Company, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Clarendon Insurance Agency, Inc. acts as general distributor
for the MFS Variable Account, a separate account of the
Company, and for certain Sun Life (US) and Sun Life (N.Y.)
Annuity Contracts.
106 of 112
<PAGE> 110
(b) CLARENDON INSURANCE AGENCY, INC.
DIRECTORS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
A. Keith Brodkin Director
500 Boylston Street
Boston, MA 02116
Arnold D. Scott Director
500 Boylston Street
Boston, MA 02116
Jeffrey L. Shames Director
500 Boylston Street
Boston, MA 02116
</TABLE>
CLARENDON INSURANCE AGENCY, INC.
OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
A. Keith Brodkin Chairman
500 Boylston Street
Boston, MA 02116
Cynthia Orcutt President
One Sun Life Executive Park
Wellesley Hills, MA 02181
Stephen E. Cavan Secretary
500 Boylston Street and Clerk
Boston, MA 02116
</TABLE>
107 of 112
<PAGE> 111
(b) CLARENDON INSURANCE AGENCY, INC.
OFFICERS (CONTINUED)
<TABLE>
<S> <C>
James E. Russell Treasurer
500 Boylston Street
Boston, MA 02116
Bruce C. Avery Vice President
500 Boylston Street
Boston, MA 02116
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Clarendon N/A N/A N/A N/A
Insurance
Agency,
Inc.
</TABLE>
108 of 112
<PAGE> 112
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Joseph F. Ciminero
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Internal Revenue Code of 1986, as amended, 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).
109 of 112
<PAGE> 113
Offered by
NATIONWIDE
LIFE INSURANCE COMPANY
and its
MFS VARIABLE ACCOUNT
INDIVIDUAL DEFERRED
VARIABLE ANNUITY CONTRACTS
PROSPECTUS
MAY 1, 1995
110 of 112
<PAGE> 114
ACCOUNTANTS' CONSENT
The Board Of Directors
Nationwide Life Insurance Company and
Contract Owners of MFS Variable Account:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Services" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1995
111 of 112
<PAGE> 115
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, MFS VARIABLE ACCOUNT, certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment and has caused this Post-Effective Amendment to be
signed on its behalf in the City of Columbus, and State of Ohio, on this 26th
day of April 1995.
MFS VARIABLE ACCOUNT
---------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------
(Depositor)
BY /s/ JOSEPH P. RATH
---------------------------------
Joseph P. Rath
Vice President And
Associate General Counsel
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 26th
day of April, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- -----------------------------
Lewis J. Alphin
WILLARD J. ENGEL Director
- -----------------------------
Willard J. Engel
FRED C. FINNEY Director
- -----------------------------
Fred C. Finney
President/Chief Operating
PETER F. FRENZER Officer and Director
- -----------------------------
Peter F. Frenzer
CHARLES L. FUELLGRAF, JR. Director
- -----------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman Of The Board
- ----------------------------- And Director
Henry S. Holloway
D. RICHARD MCFERSON Chief Executive Officer
- ----------------------------- And Director
D. Richard Mcferson
DAVID O. MILLER Director
- -----------------------------
David O. Miller
C. RAY NOECKER Director
- -----------------------------
C. Ray Noecker
ROBERT A. OAKLEY Senior Vice President-
- ----------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director BY /s/JOSEPH P. RATH
- ----------------------------- -----------------------------
James F. Patterson Joseph P. Rath
Attorney-in-fact
ROBERT H. RICKEL Director
- -----------------------------
Robert H. Rickel
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>
112 of 112
<PAGE> 116
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio
corporation, which has filed or will file with the 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 the 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 and Nationwide Multi-Flex Variable Account;
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 the Nationwide Multiple Maturity Separate
Account; and the registration of Group Flexible Fund Retirement Contracts in
connection with the Nationwide DC Variable Account and the 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 the Nationwide VU Separate Account,
Nationwide VU Separate Account-2 and Nationwide VU Separate Account-3 of
Nationwide Life Insurance Company, hereby constitutes and appoints D. Richard
McFerson, Peter F. Frenzer, Gordon E. McCutchan, 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 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 fifth day of April, 1995.
/s/ Lewis J. Alphin /s/ C. Ray Noecker
- ------------------------------------- --------------------------------------
Lewis J. Alphin, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------- --------------------------------------
Willard J. Engel, Director Robert A. Oakley, Senior Vice
President and Chief Financial Officer
/s/ Fred C. Finney
- ------------------------------------- /s/ James F. Patterson
Fred C. Finney, Director --------------------------------------
James F. Patterson, Director
/s/ Peter F. Frenzer
- ------------------------------------- /s/ Robert H. Rickel
Peter F. Frenzer, President/Chief -------------------------------------
Operating Officer and Director Robert H. Rickel, Director
/s/ Charles L. Fuellgraf, Jr. /s/ Arden L. Shisler
- ------------------------------------- --------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Henry S. Holloway /s/ Robert L. Stewart
- ------------------------------------- --------------------------------------
Henry S. Holloway, Chairman of the Robert L. Stewart, Director
Board, Director
/s/ Nancy C. Thomas
/s/ D. Richard McFerson --------------------------------------
- ------------------------------------- Nancy C. Thomas, Director
D. Richard McFerson, Chief Executive
Officer and Director /s/ Harold W. Weihl
-------------------------------------
/s/ David O. Miller Harold W. Weihl, Director
- -------------------------------------
David O. Miller, Director
