<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. 21 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 [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 1,1996 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, 1995, on February 15, 1996.
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<PAGE> 2
MFS VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page............................................................ 3
Item 2. Definitions........................................................... 4
Item 3. Synopsis or Highlights................................................ 9
Item 4. Condensed Financial Information....................................... 10
Item 5. General Description of Registrant, Depositor, and Portfolio Companies. 25
Item 6. Deductions and Expenses............................................... 27
Item 7. General Description of Variable Annuity Contracts..................... 30
Item 8. Annuity Period........................................................ 33
Item 9. Death Benefit and Distributions....................................... 35
Item 10. Purchases and Contract Value.......................................... 39
Item 11. Redemptions........................................................... 40
Item 12. Taxes................................................................. 42
Item 13. Legal Proceedings..................................................... 44
Item 14. Table of Contents of the Statement of Additional Information.......... 45
<CAPTION>
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page............................................................ 46
Item 16. Table of Contents..................................................... 46
Item 17. General Information and History....................................... 46
Item 18. Services.............................................................. 46
Item 19. Purchase of Securities Being Offered.................................. 46
Item 20. Underwriters.......................................................... 47
Item 21. Calculation of Performance Data....................................... 47
Item 22. Annuity Payments...................................................... 47
Item 23. Financial Statements.................................................. 48
<CAPTION>
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits..................................... 89
Item 25. Directors and Officers of the Depositor............................... 91
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant............................................................ 93
Item 27. Number of Contract Owners............................................. 102
Item 28. Indemnification....................................................... 102
Item 29. Principal Underwriter................................................. 102
Item 30. Location of Accounts and Records...................................... 105
Item 31. Management Services................................................... 105
Item 32. Undertakings.......................................................... 105
</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 (the "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
Massachusetts Financial Bond Fund) (Formerly 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 MFS(R)Series Trust IV
(Formerly Massachusetts Financial Emerging MFS(R) Money Market Fund
Growth Trust) (Formerly Massachusetts Cash
Management Trust - MFS(R) Money
Market Fund)
MFS(R) High Income Fund - Class A (Formerly Massachusetts Investors Growth Stock
Massachusetts Financial High Income Trust- Fund - 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, 1996, 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.
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, 1996, IS
INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION APPEARS ON PAGE 43 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1996.
1
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<PAGE> 4
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 designated to receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
The Annuitant is named on the Data Page of the Contract unless changed. No
change of Annuitant may be made without the prior consent of the Company. This
person must be age 78 or younger at the time of contract issuance.
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE-The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract and is subject to change by the Owner.
ANNUITY PAYMENT OPTION-The chosen form of annuity payments. Several options are
available under this Contract. The Annuity Payment Option is named in the
application, unless changed.
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 prior to the
Annuitization Date. The Beneficiary can be changed by the Contract Owner as set
forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
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
one is 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. A Contingent Designated Annuitant may not be
named for Contracts issued as Individual Retirement Annuities or Tax Sheltered
Annuities.
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. A Contingent Owner may not be named for Contracts issued as
Individual Retirement Annuities or Tax Sheltered Annuities.
CONTRACT- The Individual Deferred Variable Annuity Contract described in this
prospectus.
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 Owner, Contingent Owner, Designated Annuitant, Contingent Designated
Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment Option, and the
Annuity Commencement Date. If a Joint Owner is named, references to "Contract
Owner" or "Owner" in this prospectus, unless otherwise indicated, will apply to
both the Owner and Joint Owner. The Contract Owner is the person named on the
application, unless changed.
CONTRACT VALUE-The sum of the value of all Accumulation Units attributable to
the Contract plus any amount held under the Contract in the Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
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
(or the Contingent Designated Annuitant, if applicable). The benefit does not
apply upon the death of the Contract Owner when the Owner
2
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<PAGE> 5
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.
DISTRIBUTION-Any payment of part or all of the Contract Value.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in the Variable Account or in any other segregated asset account.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA)-An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.
MUTUAL FUND (FUND)-A registered management investment company in which the
assets of the Sub-Accounts of the variable account will be invested.
NON-QUALIFIED CONTRACT -A Contract which does not qualify for favorable tax
treatment under Sections 401, 408, or 403(b) of the Code.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and the Fixed
Account, or among the Sub-Accounts.
QUALIFIED CONTRACT- A Contract which receives favorable tax treatment under the
provisions of the Code, including those described in Section 401 and 403(a).
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY-An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
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-The MFS Variable Account, a separate investment account of the
Company into which Variable Account Purchase Payments are allocated. The
Variable Account is divided into Sub-Accounts, each of which invests in shares
of a separate underlying Mutual Fund.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
3
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS............................................................. 2
SUMMARY OF CONTRACT EXPENSES.......................................................... 5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES................................................ 5
SYNOPSIS.............................................................................. 7
CONDENSED FINANCIAL INFORMATION....................................................... 8
NATIONWIDE LIFE INSURANCE COMPANY..................................................... 23
THE VARIABLE ACCOUNT.................................................................. 23
Underlying Mutual Fund Options................................................ 23
Voting Rights................................................................. 25
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS..................... 25
Mortality Risk Charge......................................................... 25
Expense Risk Charge........................................................... 25
Contingent Deferred Sales Charge.............................................. 25
Elimination of Contingent Deferred Sales Charge............................... 26
Contract Maintenance Charge and Administration Charge......................... 27
Premium Taxes................................................................. 27
Expenses of Variable Account.................................................. 27
Investments of the Variable Account........................................... 28
Right to Revoke............................................................... 28
Transfers..................................................................... 28
Assignment.................................................................... 28
Loan Privilege................................................................ 29
Beneficiary Provisions........................................................ 30
Ownership Provisions.......................................................... 30
Substitution of Securities.................................................... 31
Contract Owner Inquiries...................................................... 31
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT............................................... 31
Value of an Annuity Unit...................................................... 31
Assumed Investment Rate....................................................... 32
Frequency and Amount of Annuity Payments...................................... 32
Annuity Commencement Date..................................................... 32
Change in Annuity Commencement Date........................................... 32
Annuity Payment Options....................................................... 32
Death of Contract Owner....................................................... 33
Death Benefit at Death of Designated Annuitant Prior to the Annuitization Date 33
Death Benefit After the Annuitization Date.................................... 34
Required Distribution for Qualified Plans or Tax Sheltered Annuities.......... 34
Required Distributions for Individual Retirement Annuities.................... 35
Generation-Skipping Transfers................................................. 35
GENERAL INFORMATION................................................................... 36
Contract Owner Services....................................................... 36
Statements and Reports........................................................ 37
Allocation of Purchase Payments and Contract Value............................ 37
Value of an Accumulation Unit................................................. 37
Net Investment Factor......................................................... 38
Valuation of Assets........................................................... 38
Determining the Contract Value................................................ 38
Surrender (Redemption)........................................................ 38
Surrenders Under a Qualified Plan or Tax Sheltered Annuity Contract........... 39
Taxes......................................................................... 40
Non-Qualified Contracts....................................................... 40
Diversification............................................................... 41
Charge for Tax Provision...................................................... 42
Qualified Plans, Individual Retirement Annuities, Individual Retirement
Accounts and Tax Sheltered Annuities....................................... 42
LEGAL PROCEEDINGS..................................................................... 42
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.............................. 43
</TABLE>
4
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<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
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%
(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").
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 0.43% 0.67% 1.10%
- -------------------------------------------------------------------------------------------
MFS(R)GROWTH OPPORTUNITIES FUND - CLASS A 0.43% 0.54% 0.97%
- -------------------------------------------------------------------------------------------
MFS(R)EMERGING GROWTH FUND - CLASS A 0.75% 0.63% 1.38%
- -------------------------------------------------------------------------------------------
MFS(R)HIGH INCOME FUND - CLASS A 0.45% 0.65% 1.10%
- -------------------------------------------------------------------------------------------
MFS(R)RESEARCH FUND - CLASS A 0.41% 0.64% 1.05%
- -------------------------------------------------------------------------------------------
MFS(R)TOTAL RETURN FUND - CLASS A 0.39% 0.58% 0.97%
- -------------------------------------------------------------------------------------------
MFS(R)WORLD GOVERNMENTS FUND - CLASS A 0.90% 0.71% 1.61%
- -------------------------------------------------------------------------------------------
MFS(R) SERIES TRUST IV
MFS(R)MONEY MARKET FUND 0.48% 0.28% 0.76%
- -------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS GROWTH STOCK
FUND - CLASS A 0.31% 0.52% 0.83%
- -------------------------------------------------------------------------------------------
MASSACHUSETTS INVESTORS TRUST - CLASS A 0.26% 0.55% 0.81%
- -------------------------------------------------------------------------------------------
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. The management fees and other expenses, some of which
may be subject to fee waivers or expense reimbursements, are more fully
described in the prospectus for each individual underlying Mutual Fund. The
information relating to the underlying Mutual Fund expenses was provided by
the underlying Mutual Fund and was not independently verified by the
Company.
5
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<PAGE> 8
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 CONTRACT IF YOU DO NOT SURRENDER YOUR IF YOU ANNUITIZE YOUR CONTRACT AT
AT THE END OF THE APPLICABLE TIME CONTRACT AT THE END OF THE THE END OF THE APPLICABLE TIME
PERIOD APPLICABLE TIME PERIOD 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 76 125 177 291 26 80 137 291 * 80 137 291
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
MFS(R) Growth
Opportunities 75 121 170 278 25 76 130 278 * 76 130 278
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
MFS(R) Emerging
Growth 79 134 192 320 29 89 152 320 * 88 152 320
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
MFS(R) High
Income 76 125 177 291 26 80 137 291 * 80 137 291
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
MFS(R)Research 76 124 175 286 26 79 135 286 * 79 135 286
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
MFS(R) Total
Return 75 121 170 278 25 76 130 278 * 76 130 278
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
MFS(R) World
Governments 82 141 203 343 32 96 163 343 * 96 163 343
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
MFS(R) Series
Trust IV -
MFS(R)Money 73 115 159 256 23 70 119 256 * 70 119 256
Market Fund
- ------------------------------------------------------------------------------------------------------------------------
Mass.
Investors 73 117 163 263 23 72 123 263 * 72 123 263
Growth Stock
Fund-Class A
- ------------------------------------------------------------------------------------------------------------------------
Mass. 73 116 162 261 23 71 122 261 * 71 122 261
Investors
Trust-Class A
- ------------------------------------------------------------------------------------------------------------------------
NSAT Money 70 107 146 230 20 62 106 230 * 62 106 230
Market Fund
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract years.
The purpose of the Summary of Contract Expenses and Example are to assist the
Contract Owner in understanding the various costs and expenses that will be
borne 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
complete descriptions of the expenses of the Variable Account, see "Variable
Account Charges, Purchase Payments, and Other Deductions." For more 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").
6
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<PAGE> 9
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 in 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
Contracts issued on the life of any one Designated Annuitant 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 In no event, however, will annuity payments be made less
frequently than annually (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 by the Company at the time
Purchase Payments are made, an equal premium tax deduction may be made from the
Contract prior to the allocation of any Purchase Payment 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").
7
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<PAGE> 10
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 31.765828 33.101565 0 1995
- - MFS(R)Money Market -----------------------------------------------------------
Fund-Q* 30.994333 31.765828 0 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS Series Trust IV 32.595660 33.966291 5,703 1995
- - MFS(R)Money Market -----------------------------------------------------------
Fund-NQ* 31.804010 32.595660 8,788 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS Series Trust IV 27.967294 29.055232 1,630,393 1995
- - MFS(R)Money Market -----------------------------------------------------------
Fund-QS* 27.370768 27.967294 2,012,165 1994
-----------------------------------------------------------
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
- -------------------------------------------------------------------------------
</TABLE>
*The 7-day yield on the MFS Series Trust IV - MFS(R)Money Market Fund as of
December 29, 1995 was 3.79%.
8
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<PAGE> 11
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 27.986728 29.075421 597,925 1995
- - MFS(R)Money Market -----------------------------------------------------------
Fund-NQS* 27.389788 27.986728 823,383 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R)Bond 40.103391 48.229836 0 1995
Fund-Class-Q -----------------------------------------------------------
42.399834 40.103391 254 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R)Bond 42.342529 50.922705 596 1995
Fund-Class -----------------------------------------------------------
A-NQ 44.767184 42.342529 450 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
9
11 of 111
<PAGE> 12
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 36.536936 43.808005 613,426 1995
Fund-Class -----------------------------------------------------------
A-QS 38.746280 36.536936 715,452 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) 36.507070 43.772192 267,129 1995
Bond Fund-Class -----------------------------------------------------------
A-NQS 38.714601 36.507070 278,445 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R)Bond 36.649839 43.943375 4,145 1995
Fund-Class A-NQS -----------------------------------------------------------
(81-225) 38.865999 36.649839 4,892 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
10
12 of 111
<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>
Massachusetts 73.217470 101.007177 16 1995
Investors -----------------------------------------------------------
Trust-Class A-Q 74.716077 73.217470 17 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
Massachusetts 69.090265 95.313498 0 1995
Investors -----------------------------------------------------------
Trust-Class A-NQ 70.504398 69.090265 0 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
Massachusetts 59.116939 81.308640 350,277 1995
Investors -----------------------------------------------------------
Trust-Class A-QS 60.509797 59.116939 373,587 1994
-----------------------------------------------------------
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 447,641 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
- --------------------------------------------------------------------------------
</TABLE>
11
13 of 111
<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>
Massachusetts 53.042089 72.953374 100,239 1995
Investors -----------------------------------------------------------
Trust-Class A-NQS 54.291825 53.042089 87,519 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
Massachusetts 56.351973 77.505736 2,696 1995
Investors -----------------------------------------------------------
Trust-Class A-NQS 57.679687 56.351973 4,013 1994
(81-225) -----------------------------------------------------------
53.112457 57.679687 7,320 1993
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
Massachusetts 80.166185 101.860531 0 1995
Investors -----------------------------------------------------------
Growth Stock 86.815888 80.166185 0 1994
Fund-Class -----------------------------------------------------------
A-Q 76.611479 86.815888 0 1993
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
12
14 of 111
<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 61.261465 77.839871 1,043 1995
Investors -----------------------------------------------------------
Growth Stock 66.343035 61.261465 1,043 1994
Fund-Class -----------------------------------------------------------
A-NQ 58.545028 66.343035 2,615 1993
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
Massachusetts 65.227303 82.628565 333,893 1995
Investors -----------------------------------------------------------
Growth Stock 70.852048 65.227303 375,617 1994
Fund-Class -----------------------------------------------------------
A-QS 62.713932 70.852048 411,227 1993
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
Massachusetts 55.348697 70.114570 102,114 1995
Investors -----------------------------------------------------------
Growth Stock 60.121583 55.348697 116,628 1994
Fund-Class -----------------------------------------------------------
A-NQS 53.215976 60.121583 132,123 1993
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
13
15 of 111
<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 60.295273 76.380777 5,945 1995
Investors -----------------------------------------------------------
Growth Stock 65.494712 60.295273 2,505 1994
Fund-Class -----------------------------------------------------------
A-NQS 57.971950 65.494712 3,382 1993
(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
- --------------------------------------------------------------------------------
MFS(R) Research 91.844201 126.019031 0 1995
Fund-Class A-Q -----------------------------------------------------------
92.760008 91.844201 0 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) Research 73.593263 100.977005 599 1995
Fund-Class A-NQ -----------------------------------------------------------
74.327082 73.593263 599 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
14
16 of 111
<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>
MFS(R) Research Fund 73.111959 100.013750 270,229 1995
Class A-QS -----------------------------------------------------------
74.064821 73.111959 285,624 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) Research 63.882963 87.388917 100,973 1995
Fund-Class A-NQS -----------------------------------------------------------
64.715547 63.882963 97,012 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) Research 72.258548 98.846334 1,591 1995
Fund-Class A-NQS -----------------------------------------------------------
(81-225) 73.200301 72.258548 1,727 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
15
17 of 111
<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>
MFS(R) Total Return 63.581031 79.840336 131 1995
Fund-Class A-Q ---------------------------------------------------------------
65.964662 63.581031 132 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
MFS(R) Total Return 62.479885 78.457598 87 1995
Fund-Class A-NQ ---------------------------------------------------------------
64.822235 62.479885 87 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
MFS(R) Total Return 58.638949 73.411912 782,272 1995
Fund-Class A-QS ---------------------------------------------------------------
61.021714 58.638949 902,191 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
</TABLE>
16
18 of 111
<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) Total Return 56.760546 71.060281 199,257 1995
Fund-Class A-NQS ----------------------------------------------------------
59.066983 56.760546 224,713 1994
----------------------------------------------------------
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
- -------------------------------------------------------------------------------
MFS(R) Total Return 58.068470 72.697711 1,863 1995
Fund-Class A-NQS ----------------------------------------------------------
(81-225) 60.428053 58.068470 2,258 1994
----------------------------------------------------------
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
- -------------------------------------------------------------------------------
MFS(R) Growth 105.450698 140.810582 0 1995
Opportunities Fund- ----------------------------------------------------------
Class A-Q 111.450698 105.450698 0 1994
----------------------------------------------------------
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
- -------------------------------------------------------------------------------
</TABLE>
17
19 of 111
<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) Growth 77.773322 103.553065 2,642 1995
Opportunities Fund- ---------------------------------------------------------------
Class A-NQ 81.961605 77.773322 2,807 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
MFS(R) Growth 72.767772 96.595726 920,477 1995
Opportunities Fund- ---------------------------------------------------------------
Class A-QS 76.918993 72.767772 1,029,309 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
MFS(R) Growth 61.812074 82.052560 206,611 1995
Opportunities Fund- ---------------------------------------------------------------
Class A-NQS 65.338300 61.812074 214,829 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
</TABLE>
18
20 of 111
<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) Growth 68.202665 90.535764 15,064 1995
Opportunities Fund- -----------------------------------------------------------
Class A-NQS 72.093454 68.202665 16,083 1994
(81-225) -----------------------------------------------------------
62.862782 72.093454 20,590 1993
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) High Income 49.574586 57.498253 0 1995
Fund-Class A-Q -----------------------------------------------------------
51.425517 49.574586 0 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) High Income 49.895862 57.870879 359 1995
Fund-Class A-NQ -----------------------------------------------------------
51.758789 49.895862 359 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</TABLE>
19
21 of 111
<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) High Income 44.007083 50.886631 488,470 1995
Fund-Class A-QS ---------------------------------------------------------------
45.788518 44.007083 561,209 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
MFS(R) High Income 43.339456 50.114634 188,820 1995
Fund-Class A-NQS ---------------------------------------------------------------
45.093866 43.339456 200,368 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
MFS(R) High Income 44.007083 50.886631 6,442 1995
Fund-Class A-NQS ---------------------------------------------------------------
(81-225) 45.788518 44.007083 6,622 1994
---------------------------------------------------------------
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
- ------------------------------------------------------------------------------------
</TABLE>
20
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<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) World 42.911877 48.914346 184,796 1995
Governments Fund- -----------------------------------------------------------
Class A-QS 46.532702 42.911877 229,107 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) World 41.836304 47.688325 36,927 1995
Governments Fund- -----------------------------------------------------------
Class A-NQS 45.366368 41.836304 44,619 1994
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
MFS(R) World 42.845163 48.838310 2,763 1995
Governments Fund- -----------------------------------------------------------
Class A-NQS 46.460353 42.845163 3,284 1994
(81-225) -----------------------------------------------------------
39.760030 46.460353 3,684 1993
-----------------------------------------------------------
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
- --------------------------------------------------------------------------------
</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>
Nationwide Separate 21.058716 21.961256 60,928 1995
Account Trust Money ----------------------------------------------------------
Market Fund-QS*** 20.538004 21.058716 72,621 1994
----------------------------------------------------------
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
- -------------------------------------------------------------------------------
Nationwide Separate 21.072414 21.975540 36,289 1995
Account Trust Money ----------------------------------------------------------
Market Fund-NQS*** 20.551361 21.072414 41,143 1994
----------------------------------------------------------
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
- -------------------------------------------------------------------------------
MFS(R) Emerging 21.706658 30.247061 424,049 1995
Growth Trust- ----------------------------------------------------------
Class A-QS 20.977470 21.706658 400,564 1994
----------------------------------------------------------
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 21.706658 30.247061 474 1995
Growth Trust-Class ----------------------------------------------------------
A-NQS (81-225) 20.977490 21.706658 474 1994
----------------------------------------------------------
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 29, 1995, was 3.78%.
22
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<PAGE> 25
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, as
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 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.
The Investment Adviser for all of the underlying Mutual Funds, except the
Nationwide Separate Account Trust Money Market Fund, is Massachusetts Financial
Service Company, 500 Boylston Street, Boston, Massachusetts 02116.
- - 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.
23
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<PAGE> 26
- - 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.
- - 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 o 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 Nationwide
Separate Account Trust Money Market Fund is managed by
26 of 111
<PAGE> 27
Nationwide Financial Services, Inc. of One Nationwide Plaza, Columbus, Ohio
43215, a wholly-owned subsidiary of the Company. 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.
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.
These shares will be voted in accordance with instructions received from
Contract Owners who have an interest in the Variable Account. 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 are
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in each respective Sub-Account of the Variable Account by the
net asset value of the underlying Mutual Fund corresponding to the Sub-Account.
The number of shares which a Contract Owner has the right to vote will be
determined as of a date 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 a 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.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated into the Contract which cannot be changed regardless of the death
rates of persons receiving annuity payments or of the general population.
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.
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, if any part of the Contract Value of such Contracts is
surrendered, the Company will, with certain exceptions (see "Elimination of
Contingent Deferred Sales Charge" section), deduct a Contingent Deferred Sales
Charge not to exceed 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. The Contingent Deferred Sales Charge, when it is applicable,
25
27 of 111
<PAGE> 28
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 deducted by the Company. For purposes of the Contingent
Deferred Sales Charge, surrenders under a Contract come first from the Purchase
Payments which have been on deposit under the Contract for the longest time
periods. For tax purposes, a surrender is usually treated as a withdrawal of
earnings first. 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. The Contract
Owner may be subject to a tax penalty if the Contract Owner withdraws Purchase
Payments prior to age 59 1/2; please refer to "Non-Qualified Contracts" to
determine when the penalty will apply.
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 when 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.
26
28 of 111
<PAGE> 29
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.
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
Contract Maintenance Charge will be allocated to the Fixed and Variable Account
in the same percentages as the Purchase Payment allocations are made. 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. 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
The Variable Account is responsible for the following types of expenses:
(1) administrative expenses relating to the issuance and maintenance of the
contracts; (2) mortality risk charge associated with guaranteeing the annuity
purchase rates at issue for the life of the Contracts; and (3) expense risk
charge associated with guaranteeing that the Mortality Risk, Expense Risk,
Contract Maintenance and Administration Charges described in this prospectus
will not be changed regardless of actual expenses. If these charges are
insufficient to cover these expenses, the loss will be borne by the Company.
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, 1995, were 1.44% of average net assets.
27
29 of 111
<PAGE> 30
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have Purchase
Payments attributable to his or her 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. 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.
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 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 the Owner's election. 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 some or all of the rights
under 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 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. Where necessary for the proper administration of the terms of
the Contract, an assignment will not be recorded until the Company has received
sufficient direction from the Contract Owner and assignee as to the proper
allocation of Contract rights under
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the assignment.
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. Assignments of the entire Contract Value may cause
amounts to be included in gross income each year that the assignment is in
effect. Individual Retirement Annuities, Qualified Contracts 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 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 charges are deducted at the time of the loan, or on the
transfer from the Variable Account to the collateral fixed account.
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
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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 Code.
If a loan payment is not made when due, interest will continue to
accrue. A grace period may be available under the terms of the loan agreement.
If a loan payment is not made when due, or by the end of the applicable grace
period, then that payment, which may be a single periodic payment or payment of
the entire loan, will be treated as a deemed Distribution, as permitted by law,
may be taxable to the borrower, and may be subject to the early withdrawal tax
penalty. Interest which subsequently accrues on defaulted amounts may also be
treated as additional deemed Distributions each year. Any defaulted amounts,
plus accrued interest, will be deducted from the Contract when the participant
becomes eligible for a Distribution of at least that amount, and this amount may
again be treated as a Distribution where required by law. Additional loans may
not be available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions
under the terms of the employer's plan. Loans permitted under this Contract may
still be taxable in whole or part if the participant has additional loans from
other plans or contracts. The Company will calculate the maximum nontaxable loan
based on the information provided by the participant or the employer.
Loan repayments must be identified as such or 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
associated with 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.
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.
If named, the Joint Owner possesses an undivided interest in the entire
Contract. Prior to the Annuitization Dates, a surviving Joint Owner shall retain
sole rights in the Contract upon the other Joint Owner's death if the deceased
Joint Owner was not also the Annuitant. If the deceased Joint Owner was also the
Annuitant, disposition of the Contract will be determined based on the "Death
Prior to the Annuitization Date" provisions. When a Joint Owner is named, the
exercise of any ownership right in the Contract shall require a written
indication, signed by both the Owner and Joint Owner, of an intent to exercise
such right, unless the Owner and Joint Owner provide in the application that the
exercise of any such ownership right may be made by either the Owner or Joint
owner independently of one another. In this latter situation, the Company will
not be liable for any loss, liability, cost of expense for acting in accordance
with the instructions of either the Owner or Joint Owner.
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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, the Company may eliminate Sub-Accounts, combine two or more
Sub-Accounts, or substitute shares of one or more underlying Mutual Fund for
other 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 and the amount of the first such payment
shall be determined 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
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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 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. In no event will the Company make payments under an annuity option less
frequently than annually.
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. 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:
(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.
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(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, computed 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 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 a 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.
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 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 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
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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.
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 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, provided that, for Tax
Sheltered Annuity Contracts, no Distributions will be required from
this Contract if Distributions otherwise required from the Contract
are being withdrawn from another Tax Sheltered Annuity Contract of
the Annuitant.
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 (as defined in Code Section 414(d)) or a
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/Annuitant 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 that a surviving spouse may treat a Tax Sheltered Annuity
as his or her own to the extent permitted by law.
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
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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.
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 extending beyond the
Owner's life expectancy or the joint life expectancy of the Owner and the
Owner's designated Beneficiary.
If the Owner dies prior to the commencement of his or her Distribution,
the interest in the Individual Retirement 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 Section
(a)(i) of this provision.
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.
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 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 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.
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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 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 the use of Asset Rebalancing
in his or her Contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Contract Owner, however, any discontinuation
will 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, 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
discontinuation will 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. 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. 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
discontinuation will not affect any Systematic Withdrawal programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
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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 accurately reported on quarterly statements or
confirmation statements 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.
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. The
Company may, however, 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.
Thereafter, Purchase Payments will be priced on the basis of the Accumulation
Unit Value next computed for the appropriate Sub-Account after the additional
Purchase Payment is received.
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 AN ACCUMULATION UNIT
The value of an 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 of:
(1) the net asset value per share of the underlying Mutual Fund held in
the Sub-Account determined at the end of the immediately preceding
Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved for in
the immediately preceding Valuation Period (see "Charge For Tax
Provisions").
(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 Accumulation Units attributable to the
Contract plus any 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. If 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.
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
or other eligible guarantor institution as defined by the federal securities
laws and regulations. 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
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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.
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 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.
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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 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. Distributions pursuant to Qualified Domestic
Relations Orders will not be considered in violation of the restrictions stated
above.
The contract surrender provisions may also be modified pursuant to the
plan terms and 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.
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 Code governs taxation of annuities in general. That
section sets forth different rules for (1) Qualified Plans; (2) IRAs; (3) Tax
Sheltered Annuities; or (4) Non-Qualified Contracts. Each type of annuity is
discussed below.
Distributions from Qualified Contracts or Tax Sheltered Annuities are
generally taxed when received. A portion of each Distribution is excludable from
income based on the ratio between (a) and (b), where (a): equals the after tax
investment on the Contract of the Owner/Annuitant and where (b) equals the value
of the Contract at the time of withdrawal or at Annuitization.
Distributions from Individual Retirement Annuities and Individual
Retirement Accounts are generally taxed when received. A portion of each
Distribution is likewise excludable from income based on the ratio between (a)
and (b) where (a) is the amount by which nondeductible Purchase Payments to all
Contracts exceed prior non-taxable Distributions from all Contracts and where
(b) is the total account balances in all contracts at the time of Distribution.
The Owner of an Individual Retirement Annuity or the Annuitant under a
Contract held by and Individual Retirement Account must annually report to the
Internal Revenue Service any or all of the following: (1) the amount of any
Distribution; (2) the amount by which nondeductible Purchase Payments for all
years exceed non-taxable Distributions for all years; and (3) the total balance
in all Individual Retirement Annuities or Individual Retirement Accounts.
Owners should consult a financial consultant, legal counsel or tax advisor
to discuss in detail the taxation of the Contracts.
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
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in the Contract as of that date. A Distribution in excess of the amount of the
investment in the Contract as of August 14, 1982, will be treated as taxable
income.
The Tax Reform Act of 1986 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. If this Contract is issued as a result of an exchange described in
Section 1035 of the Code, it will generally be considered to have been purchased
on the purchase date of the Contract given up in the exchange.
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.
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.
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 Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the 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
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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 or her account.
The Company believes, under its interpretation of the Code and regulations
thereunder, that the investments underlying this Contract meet these
diversification standards.
Representatives of the Internal Revenue Service have suggested, from time
to time, that the number of funds available or the number of transfer
opportunities available under a variable product may be relevant in determining
whether the product qualifies for the desired tax treatment. No formal guidance
has been issued in this area. Should the Secretary of the Treasury issue
additional rules or regulations limiting the number of underlying Mutual Funds,
transfers between underlying Mutual Funds, exchanges of underlying Mutual Funds
or changes in investment objectives of underlying Mutual Funds such that the
Contract would no longer qualify as an annuity under Section 72 of the Code, the
Company will take whatever steps are available to remain in compliance.
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 Code permits the rollover of most distributions from Qualified Plans
to other Qualified Plans, 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.
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.
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TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE
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
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
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, 1996. 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
PAGE
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
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 schedules have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the authority
of said firm as experts in accounting and auditing.
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, 1995, 1994 and 1993, 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
47 of 111
<PAGE> 48
<PAGE> 1
- --------------------------------------------------------------------------------
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, 1995, and the
related statements of operations and changes in contract owners' equity and
schedules of changes in unit value for each of the years in the three year
period then ended. These financial statements and schedules of changes in unit
value are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules of changes in
unit value 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 and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, 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 and schedules of changes in
unit value referred to above present fairly, in all material respects, the
financial position of MFS Variable Account as of December 31, 1995, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
MFS VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
ASSETS:
<S> <C>
Investments at market value:
MFS Series Trust IV - MFS(R) Money Market Fund (MFSMyMkt)
65,633,462 shares (cost $65,633,462) ..................... $ 65,633,462
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
3,329,499 shares (cost $37,167,763) ..................... 35,392,573
Massachusetts Investors Trust - Class A (MFSInvTr)
2,849,980 shares (cost $35,031,547) ..................... 36,223,242
MFS(R) Bond Fund - Class A (MFSBdFd)
2,891,261 shares (cost $39,281,428) ..................... 39,552,444
MFS(R) Emerging Growth Fund - Class A (MFSEmGro)
480,744 shares (cost $9,519,997) ........................ 12,840,673
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
9,079,330 shares (cost $100,744,966) .................... 108,407,206
MFS(R) High Income Fund - Class A (MFSHiInc)
6,799,186 shares (cost $34,673,248) ..................... 35,219,783
MFS(R) Research Fund - Class A (MFSRsrch)
2,321,299 shares (cost $29,802,374) ..................... 36,305,110
MFS(R) Total Return Fund - Class A (MFSTotRe)
4,997,017 shares (cost $62,232,144) ..................... 72,007,022
MFS(R) World Governments Fund - Class A (MFSWdGvt)
998,770 shares (cost $12,165,248) ....................... 11,006,446
Nationwide Separate Account Trust - Money Market Fund (NWMyMkt)
2,135,394 shares (cost $2,135,394) ...................... 2,135,394
------------
Total investments .................................. 454,723,355
Accounts receivable ............................................ 42,788
------------
Total assets ....................................... 454,766,143
ACCOUNTS PAYABLE ................................................ 4,250
------------
CONTRACT OWNERS' EQUITY (NOTE 4) ................................ $454,761,893
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
MFS VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ---------- ----------
INVESTMENT ACTIVITY:
<S> <C> <C> <C>
Reinvested capital gains and dividends ............................. $ 41,437,779 29,599,574 44,895,760
------------- ---------- ----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares ............... 103,288,834 115,051,876 135,937,570
Cost of mutual fund shares sold ............................... (99,147,354) (112,843,920) (127,686,637)
------------- ---------- ----------
Realized gain (loss) on investments ........................... 4,141,480 2,207,956 8,250,933
Change in unrealized gain (loss) on investments ............... 51,182,271 (41,633,519) 5,833,974
------------- ---------- ----------
Net gain (loss) on investments ........................... 55,323,751 (39,425,563) 14,084,907
------------- ---------- ----------
Net investment activity ............................. 96,761,530 (9,825,989) 58,980,667
------------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners ........................................................ 16,996,001 15,834,294 23,563,502
Redemptions ........................................................ (69,066,775) (73,513,222) (84,574,552)
Annuity benefits ................................................... (582,314) (569,906) (626,861)
Adjustments to maintain reserves ................................... 42,627 (3,929) 31,765
------------- ---------- ----------
Net equity transactions ............................. (52,610,461) (58,252,763) (61,606,146)
------------- ---------- ----------
EXPENSES (NOTE 2):
Contract charges ................................................... (6,106,575) (6,313,115) (7,015,249)
Contingent deferred sales charges .................................. (185,166) (201,021) (310,571)
------------- ---------- ----------
Total expenses ...................................... (6,291,741) (6,514,136) (7,325,820)
------------- ---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY .............................. 37,859,328 (74,592,888) (9,951,299)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........................ 416,902,565 491,495,453 501,446,752
------------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD .............................. $ 454,761,893 416,902,565 491,495,453
============= =========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 4
- --------------------------------------------------------------------------------
MFS VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
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.
The Company offers tax qualified and non-tax qualified Individual Deferred
Variable Annuity Contracts through the Account. The primary distribution for the
contracts is through Massachusetts Financial Services. Presently, the contracts
are not actively marketed.
(b) The Contracts
Prior to February 12, 1979, the contracts purchased provided for a
front-end sales charge and certain other fees. Beginning February 12, 1979, only
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)
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, 1995, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain contract expenses (see
note 2). The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their contracts and
exclude any purchase payments for fixed dollar benefits, the latter being
included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing net
asset value per share at December 31, 1995. 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.
<PAGE> 5
(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 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.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(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.
<PAGE> 6
(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
underlying mutual funds.)
- 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.
<PAGE> 7
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1995,
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 ................................................. 5,703 $ 33.966291 $ 193,710
Tax qualified spectrum ............................................ 1,630,393 29.055232 47,371,447
Non-tax qualified spectrum ........................................ 597,925 29.075421 17,384,921
Massachusetts Investors Growth Stock Fund - Class A:
Non-tax qualified ................................................. 1,043 77.839871 81,187
Tax qualified spectrum ............................................ 333,893 82.628565 27,589,099
Non-tax qualified spectrum ........................................ 102,114 70.114570 7,159,679
Non-tax qualified spectrum (81-225) ............................... 5,945 76.380777 454,084
Massachusetts Investors Trust - Class A:
Tax qualified ..................................................... 16 101.007177 1,616
Tax qualified spectrum ............................................ 350,277 81.308640 28,480,546
Non-tax qualified spectrum ........................................ 100,239 72.953374 7,312,773
Non-tax qualified spectrum (81-225) ............................... 2,696 77.505736 208,955
MFS(R) Bond Fund - Class A:
Non-tax qualified ................................................. 596 50.922705 30,350
Tax qualified spectrum ............................................ 613,426 43.808005 26,872,969
Non-tax qualified spectrum ........................................ 267,129 43.772192 11,692,822
Non-tax qualified spectrum (81-225) ............................... 4,145 43.943375 182,145
MFS(R) Emerging Growth Fund - Class A:
Tax qualified spectrum ............................................ 424,049 30.247061 12,826,236
Non-tax qualified spectrum (81-225) ............................... 474 30.247061 14,337
MFS(R) Growth Opportunities Fund - Class A:
Non-tax qualified ................................................. 2,642 103.553065 273,587
Tax qualified spectrum ............................................ 920,477 96.595726 88,914,144
Non-tax qualified spectrum ........................................ 206,611 82.052560 16,952,961
Non-tax qualified spectrum (81-225) ............................... 15,064 90.535764 1,363,831
MFS(R) High Income Fund - Class A:
Non-tax qualified ................................................. 359 57.870879 20,776
Tax qualified spectrum ............................................ 488,470 50.886631 24,856,593
Non-tax qualified spectrum ........................................ 188,820 50.114634 9,462,645
Non-tax qualified spectrum (81-225) ............................... 6,442 50.886631 327,812
MFS(R) Research Fund - Class A:
Non-tax qualified ................................................. 599 100.977005 60,485
Tax qualified spectrum ............................................ 270,229 100.013750 27,026,616
Non-tax qualified spectrum ........................................ 100,973 87.388917 8,823,921
Non-tax qualified spectrum (81-225) ............................... 1,591 98.846334 157,265
MFS(R) Total Return Fund - Class A:
Tax qualified ..................................................... 131 79.840336 10,459
Non-tax qualified ................................................. 87 78.457598 6,826
Tax qualified spectrum ............................................ 782,272 73.411912 57,428,083
Non-tax qualified spectrum ........................................ 199,257 71.060281 14,159,258
Non-tax qualified spectrum (81-225) ............................... 1,863 72.697711 135,436
MFS(R) World Governments Fund - Class A:
Tax qualified spectrum ............................................ 184,796 48.914346 9,039,175
Non-tax qualified spectrum ........................................ 36,927 47.688325 1,760,987
Non-tax qualified spectrum (81-225) ............................... 2,763 48.838310 134,940
Nationwide Separate Account Trust - Money Market Fund:
Tax qualified spectrum ............................................ 60,928 21.961256 1,338,055
Non-tax qualified spectrum ........................................ 36,289 21.975540 797,470
========= ============
Reserves for annuity contracts in payout phase:
Tax qualified ..................................................... 47,918
Non-tax qualified ................................................. 78,222
Tax qualified spectrum ............................................ 2,637,924
Non-tax qualified spectrum ........................................ 1,081,617
Non-tax qualified spectrum (81-225) ............................... 8,011
------------
$454,761,893
============
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 8
- --------------------------------------------------------------------------------
SCHEDULE I
MFS VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
MFSInvTr MFSBdFd MFSTotRe
-------- ------- --------
1995***
<S> <C> <C> <C>
Beginning unit value - Jan. 1 $ 73.217470 ** 63.581031
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 9.389953 6.796396
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 19.267126 10.187101
- -------------------------------------------------------------------------------------------------------
Contract charges (.867372) (.724192)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $101.007177 79.840336
- -------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 38% 26%
=======================================================================================================
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%
=======================================================================================================
</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.
- --------------------------------------------------------------------------------
<PAGE> 9
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
MFSMyMkt MFSGrStk MFSInvTr MFSBdFd
1995
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $32.595660 61.261465 ** 42.342529
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 1.704937 10.252961 3.454391
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 7.033136 5.596005
- ----------------------------------------------------------------------------------------------------------
Contract charges (.334306) (.707691) (.470220)
- ----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $33.966291 77.839871 50.922705
- ----------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 4% 27% 20%
==========================================================================================================
1994
Beginning unit value - Jan. 1 $31.804010 66.343035 ** 44.767184
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 1.114091 6.245985 3.022499
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (10.708702) (5.017439)
- ----------------------------------------------------------------------------------------------------------
Contract charges (.322441) (.618853) (.429715)
- ----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $32.595660 61.261465 42.342529
- ----------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 2% (8)% (5)%
==========================================================================================================
1993
Beginning unit value - Jan. 1 $31.374016 58.545028 64.725197 39.714988
- ----------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends .743804 9.875063 10.850787 6.132938
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (1.468495) (4.392986) (.648781)
- ----------------------------------------------------------------------------------------------------------
Contract charges (.313810) (.608561) (.678600) (.431961)
- ----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $31.804010 66.343035 70.504398 44.767184
- ----------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 1% 13% 9% 13%
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSGrOpp MFSHiInc MFSRsrch MFSTotRe
1995
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 77.773322 49.895862 73.593263 62.479885
- ---------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 13.011382 4.720108 6.201200 6.678704
- ---------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 13.690716 3.805299 22.049861 10.010672
- ---------------------------------------------------------------------------------------------------------
Contract charges (.922355) (.550390) (.867319) (.711663)
- ---------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 103.553065 57.870879 100.977005 78.457598
- ---------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 33% 16% 37% 26%
=========================================================================================================
1994
Beginning unit value - Jan. 1 81.961605 51.758789 74.327082 64.822235
- ---------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 6.380267 4.381074 7.237361 2.716055
- ---------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (9.773345) (5.737464) (7.223674) (4.424461)
- ---------------------------------------------------------------------------------------------------------
Contract charges (.795205) (.506537) (.747506) (.633944)
- ---------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 77.773322 49.895862 73.593263 62.479885
- ---------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* (5)% (4)% (1)% (4)%
=========================================================================================================
1993
Beginning unit value - Jan. 1 71.251149 43.789729 61.704356 56.868802
- ---------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 8.954754 4.151571 8.244049 3.667543
- ---------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.525050 4.305712 5.051213 4.939512
- ---------------------------------------------------------------------------------------------------------
Contract charges (.769348) (.488223) (.672536) (.653622)
- ---------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 81.961605 51.758789 74.327082 64.822235
- ---------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 15% 18% 20% 14%
=========================================================================================================
</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.
- --------------------------------------------------------------------------------
<PAGE> 10
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
TAX QUALIFIED SPECTRUM
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
MFSMyMkt MFSGrStk MFSInvTr MFSBdFd MFSEmGro MFSGrOpp
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan.1 $27.967294 65.227303 59.116939 36.536936 21.706658 72.767772
- -------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.460813 10.883902 7.560531 2.976527 .000000 12.137397
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 7.496845 15.541527 4.821993 8.878016 12.812372
- -------------------------------------------------------------------------------------------------------------------------------
Contract charges (.372875) (.979485) (.910357) (.527451) (.337613) (1.121815)
- -------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $29.055232 82.628565 81.308640 43.808005 30.247061 96.595726
- -------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 4% 27% 38% 20% 39% 33%
===============================================================================================================================
1994
Beginning unit value - Jan.1 $27.370768 70.852048 60.509797 38.746280 20.977490 76.918993
- -------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .957264 6.650437 6.934388 2.612018 .436556 5.969728
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (11.415978) (7.541473) (4.337835) .566606 (9.150770)
- -------------------------------------------------------------------------------------------------------------------------------
Contract charges (.360738) (.859204) (.785773) (.483527) (.273994) (.970179)
- -------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.967294 65.227303 59.116939 36.536936 21.706658 72.767772
- -------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 2% (8)% (2)% (6)% 3% (5)%
===============================================================================================================================
1993
Beginning unit value - Jan.1 $27.082782 62.713932 55.718475 34.477915 16.755110 67.070484
- -------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .641181 10.546573 9.314340 5.312013 1.987303 8.404559
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (1.561022) (3.763614) (.556158) 2.468986 2.385396
- -------------------------------------------------------------------------------------------------------------------------------
Contract charges (.353195) (.847435) (.759404) (.487490) (.233909) (.941446)
- -------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.370768 70.852048 60.509797 38.746280 20.977490 76.918993
- -------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 1% 13% 9% 12% 25% 15%
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSHiInc MFSRsrch MFSTotRe MFSWdGvt NWMyMkt
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan.1 44.007083 73.111959 58.638949 42.911877 21.058716
- ------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 4.157163 6.142147 6.254848 6.115071 1.183897
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.353463 21.879706 9.386344 .495697 .000000
- ------------------------------------------------------------------------------------------------------------
Contract charges (.631078) (1.120062) (.868229) (.608299) (.281357)
- ------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 50.886631 100.013750 73.411912 48.914346 21.961256
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 16% 37% 25% 14% 4%
============================================================================================================
1994
Beginning unit value - Jan.1 45.788518 74.064821 61.021714 46.532702 20.538004
- ------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 3.870377 7.195425 2.553354 2.288468 .791945
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (5.069261) (7.179946) (4.160311) (5.345421) .000000
- ------------------------------------------------------------------------------------------------------------
Contract charges (.582551) (.968341) (.775808) (.563872) (.271233)
- ------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 44.007083 73.111959 58.638949 42.911877 21.058716
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (4)% (1)% (4)% (8)% 3%
============================================================================================================
1993
Beginning unit value - Jan.1 38.856280 61.673295 53.697197 39.821939 20.250996
- ------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 3.678274 8.215232 3.457510 4.402242 .554187
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.817129 5.050110 4.662688 2.874170 .000000
- ------------------------------------------------------------------------------------------------------------
Contract charges (.563165) (.873816) (.795681) (.565649) (.267179)
- ------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 45.788518 74.064821 61.021714 46.532702 20.538004
- ------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 18% 20% 14% 17% 1%
============================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
- --------------------------------------------------------------------------------
<PAGE> 11
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED SPECTRUM
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
MFSMyMkt MFSGrStk MFSInvTr MFSBdFd MFSGrOpp
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $27.986728 55.348697 53.042089 36.507070 61.812074
- ------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.461834 9.235549 6.783611 2.974097 10.310027
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 6.361465 13.944489 4.818039 10.883379
- ------------------------------------------------------------------------------------------------------------------------
Contract charges (.373141) (.831141) (.816815) (.527014) (.952920)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $29.075421 70.114570 72.953374 43.772192 82.052560
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 4% 27% 38% 20% 33%
========================================================================================================================
1994
Beginning unit value - Jan. 1 $27.389788 60.121583 54.291825 38.714601 65.338300
- ------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .957927 5.643236 6.221811 2.609884 5.070943
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (9.687046) (6.766521) (4.334289) (7.773057)
- ------------------------------------------------------------------------------------------------------------------------
Contract charges (.360987) (.729076) (.705026) (.483126) (.824112)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.986728 55.348697 53.042089 36.507070 61.812074
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 2% (8)% (2)% (6)% (5)%
========================================================================================================================
1993
Beginning unit value - Jan. 1 $27.101602 53.215976 49.992851 34.449725 56.972537
- ------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .641629 8.949306 8.357200 5.307666 7.139194
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (1.324606) (3.376852) (.555693) 2.026262
- ------------------------------------------------------------------------------------------------------------------------
Contract charges (.353443) (.719093) (.681374) (.487097) (.799693)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $27.389788 60.121583 54.291825 38.714601 65.338300
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 1% 13% 9% 12% 15%
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSHiInc MFSRsrch MFSTotRe MFSWdGvt NWMyMkt
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 43.339456 63.882963 56.760546 41.836304 21.072414
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 4.094062 5.366818 6.054479 5.961799 1.184666
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.302603 19.117811 9.085680 .483276 .000000
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.621487) (.978675) (.840424) (.593054) (.281540)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 50.114634 87.388917 71.060281 47.688325 21.975540
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 16% 37% 25% 14% 4%
=======================================================================================================================
1994
Beginning unit value - Jan. 1 45.093866 64.715547 59.066983 45.366368 20.551361
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.811643 6.287139 2.471571 2.231109 .792462
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (4.992348) (6.273621) (4.027043) (5.211428) .000000
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.573705) (.846102) (.750965) (.549745) (.271409)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 43.339456 63.882963 56.760546 41.836304 21.072414
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (4)% (1)% (4)% (8)% 3%
=======================================================================================================================
1993
Beginning unit value - Jan. 1 38.266802 53.888228 51.977095 38.823817 20.264167
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.622473 7.178215 3.346744 4.291901 .554548
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.759218 4.412613 4.513320 2.802117 .000000
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.554627) (.763509) (.770176) (.551467) (.267354)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 45.093866 64.715547 59.066983 45.366368 20.551361
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 18% 20% 14% 17% 1%
=======================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
- --------------------------------------------------------------------------------
<PAGE> 12
- --------------------------------------------------------------------------------
SCHEDULE I, CONTINUED
MFS VARIABLE ACCOUNT
NON-TAX QUALIFIED SPECTRUM (81-225)
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
MFSGrStk MFSInvTr MFSBdFd MFSEmGro MFSGrOpp
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $60.295273 56.351973 36.649839 21.706658 68.202665
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 10.060939 7.206917 2.985727 .000000 11.375954
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 6.929991 14.814629 4.836885 8.878016 12.008582
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.905426) (.867783) (.529076) (.337613) (1.051437)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $76.380777 77.505736 43.943375 30.247061 90.535764
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 27% 38% 20% 39% 33%
=================================================================================================================================
1994
Beginning unit value - Jan. 1 $65.494712 57.679687 38.865999 20.977490 72.093454
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 6.147578 6.610058 2.620091 .436556 5.595215
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (10.552777) (7.188748) (4.351232) .566606 (8.576687)
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.794240) (.749024) (.485019) (.273994) (.909317)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $60.295273 56.351973 36.649839 21.706658 68.202665
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* (8)% (2)% (6)% 3% (5)%
=================================================================================================================================
1993
Beginning unit value - Jan. 1 $57.971950 53.112457 34.584435 16.755110 62.862782
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 9.749115 8.878698 5.328424 1.987303 7.877296
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.442991) (3.587588) (.557863) 2.468986 2.235756
- ---------------------------------------------------------------------------------------------------------------------------------
Contract charges (.783362) (.723880) (.488997) (.233909) (.882380)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $65.494712 57.679687 38.865999 20.977490 72.093454
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 13% 9% 12% 25% 15%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
MFSHiInc MFSRsrch MFSTotRe MFSWdGvt
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 44.007083 72.258548 58.068470 42.845163
- ---------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 4.157163 6.070452 6.194025 6.105566
- ---------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.353463 21.624321 9.294998 .494930
- ---------------------------------------------------------------------------------------------------------------
Contract charges (.631078) (1.106987) (.859782) (.607349)
- ---------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 50.886631 98.846334 72.697711 48.838310
- ---------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 16% 37% 25% 14%
===============================================================================================================
1994
Beginning unit value - Jan. 1 45.788518 73.200301 60.428053 46.460353
- ---------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.870377 7.111436 2.528526 2.284911
- ---------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (5.069261) (7.096145) (4.119853) (5.337099)
- ---------------------------------------------------------------------------------------------------------------
Contract charges (.582551) (.957044) (.768256) (.563002)
- ---------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 44.007083 72.258548 58.068470 42.845163
- ---------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* (4)% (1)% (4)% (8)%
===============================================================================================================
1993
Beginning unit value - Jan. 1 38.856280 60.953415 53.174791 39.760030
- ---------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.678274 8.119340 3.423916 4.395398
- ---------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.817130 4.991162 4.617284 2.869703
- ---------------------------------------------------------------------------------------------------------------
Contract charges (.563166) (.863616) (.787938) (.564778)
- ---------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 45.788518 73.200301 60.428053 46.460353
- ---------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in unit value* 18% 20% 14% 17%
===============================================================================================================
</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 note 3.
- --------------------------------------------------------------------------------
<PAGE> 49
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906
Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787
Mortgage loans on real estate 4,786,599 4,222,284
Real estate 239,089 252,681
Policy loans 370,908 340,491
Other long-term investments 67,280 63,914
Short-term investments (note 13) 45,732 131,643
----------- -----------
19,710,703 16,770,419
----------- -----------
Cash 10,485 7,436
Accrued investment income 239,881 220,540
Deferred policy acquisition costs 1,094,195 1,064,159
Deferred Federal income tax -- 36,515
Other assets 795,169 790,603
Assets held in Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
$40,614,111 31,112,133
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461
Policyholders' dividend accumulations 353,554 338,058
Other policyholder funds 71,155 72,770
Accrued Federal income tax (note 7):
Current 34,064 13,126
Deferred 238,877 -
----------- -----------
272,941 13,126
----------- -----------
Other liabilities 284,143 235,778
Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
37,945,599 29,203,654
----------- -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Additional paid-in capital 673,782 622,753
Retained earnings 1,606,607 1,401,579
Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668)
----------- -----------
2,668,512 1,908,479
----------- -----------
Commitments and contingencies (notes 9 and 15)
$40,614,111 31,112,133
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Traditional life insurance premiums $ 274,957 209,538 215,715
Accident and health insurance premiums 509,658 324,524 312,655
Universal life and investment product policy charges 307,676 239,021 188,057
Net investment income (note 5) 1,482,980 1,289,501 1,204,426
Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673
---------- ---------- ----------
2,576,107 2,046,200 2,034,526
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,656,287 1,279,763 1,236,906
Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Other operating costs and expenses 458,970 352,402 329,396
---------- ---------- ----------
2,256,375 1,772,970 1,721,625
---------- ---------- ----------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 319,732 273,230 312,901
---------- ---------- ----------
Federal income tax expense (note 7):
Current 103,464 79,847 75,124
Deferred 3,790 9,657 31,634
---------- ---------- ----------
107,254 89,504 106,758
---------- ---------- ----------
Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143
Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365
---------- ---------- ----------
Net income $ 212,478 183,726 211,508
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242
Capital contributions -- 111,000 -- -- 111,000
Dividends paid to shareholder -- -- (17,805) -- (17,805)
Net income -- -- 211,508 -- 211,508
Unrealized losses on equity securities, net -- -- -- (83,777) (83,777)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168
========== ========== ========= ========== ==========
1994:
Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168
Capital contribution -- 200,000 -- -- 200,000
Net income -- -- 183,726 -- 183,726
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 216,915 216,915
Unrealized losses on securities available-
for-sale, net -- -- -- (343,330) (343,330)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479
========== ========== ========== ========== ==========
1995:
Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479
Capital contribution (note 13) -- 51,029 -- (4,111) 46,918
Dividends paid to shareholder -- -- (7,450) -- (7,450)
Net income -- -- 212,478 -- 212,478
Unrealized gains on securities available-
for-sale, net -- -- -- 508,087 508,087
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 212,478 183,726 211,508
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994)
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Amortization and depreciation 10,319 6,207 11,156
Realized losses (gains) on invested assets, net 717 15,949 (113,648)
Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006)
Increase in accrued investment income (19,341) (29,654) (4,218)
Increase in other assets (3,227) (112,566) (549,277)
Increase in policy liabilities 198,200 1,038,641 509,370
Increase in policyholders' dividend accumulations 15,496 15,372 17,316
Increase in accrued Federal income tax payable 20,938 832 16,838
Increase in other liabilities 48,365 17,826 26,958
Other, net (20,556) (19,303) (11,745)
----------- ----------- ------------
Net cash provided by operating activities 211,000 945,174 18,392
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 706,442 579,067 --
Proceeds from sale of securities available-for-sale 131,420 247,876 247,502
Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093
Proceeds from sale of fixed maturities -- -- 33,959
Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047
Proceeds from sale of real estate 48,477 46,713 23,587
Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643
Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550)
Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831)
Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336)
Cost of real estate acquired (10,970) (15,962) (8,827)
Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491)
----------- ----------- ------------
Net cash used in investing activities (2,012,182) (2,261,105) (887,204)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions 46,918 200,000 111,000
Dividends paid to shareholder (7,450) -- (17,805)
Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740
Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504)
----------- ----------- -----------
Net cash provided by financing activities 1,718,320 1,391,378 884,431
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619
Cash and cash equivalents, beginning of year 139,079 63,632 48,013
----------- ----------- -----------
Cash and cash equivalents, end of year $ 56,217 139,079 63,632
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
Financial Horizons Life Insurance Company), West Coast Life Insurance
Company (WCLIC), Employers Life Insurance Company of Wausau and
subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
Financial Services, Inc. (NFS). NLIC and its subsidiaries are
collectively referred to as "the Company."
NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
and NCC is a property and casualty insurer. The Company is licensed in
all 50 states, the District of Columbia, the Virgin Islands and Puerto
Rico. The Company offers a full range of life insurance, health insurance
and annuity products through exclusive agents, brokers and other
distribution channels and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
Insurance Departments of states in which it is licensed, and undergoes
periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce insurer
profits, new legal theories or insurance company insolvencies through
guaranty fund assessments may create costs for the insurer beyond
those currently recorded in the consolidated financial statements. The
Company mitigates this risk by offering a wide range of products and
by operating throughout the United States, thus reducing its exposure
to any single product or jurisdiction, and also by employing
underwriting practices which identify and minimize the adverse impact
of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes this
risk by adhering to a conservative investment strategy, by maintaining
sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This change
in rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent
that liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities as of the
date of the consolidated financial statements and the reported amounts of
revenues and expenses for the reporting period. Actual results could differ
significantly from those estimates.
The most significant estimates include those used in determining deferred
policy acquisition costs, valuation allowances for mortgage loans on real
estate and real estate investments and the liability for future policy benefits
and claims. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
(a) CONSOLIDATION POLICY
The December 31, 1995 consolidated financial statements include the
accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
and NFS. The December 31, 1994 and 1993 consolidated financial statements
include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
1994 consolidated balance sheet also includes the accounts of ELICW, which
was acquired by NLIC effective December 31, 1994. See Note 13. All
significant intercompany balances and transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities and
equity securities as either held-to-maturity, available-for-sale or
trading. Fixed maturity securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the securities to
maturity and are stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the unrealized gains
and losses, net of adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate component of
shareholder's equity. The adjustment to deferred policy acquisition costs
represents the change in amortization of deferred policy acquisition costs
that would have been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed maturity
securities classified as held-to-maturity or trading as of
December 31, 1995.
Mortgage loans on real estate are carried at the unpaid principal balance
less valuation allowances. The Company provides valuation allowances for
impairments of mortgage loans on real estate based on a review by portfolio
managers. The measurement of impaired loans is based on the present value
of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the fair value of the collateral, if
the loan is collateral dependent. Loans in foreclosure and loans considered
to be impaired are placed on non-accrual status. Interest received on
non-accrual status mortgage loans on real estate are included in interest
income in the period received.
Real estate is carried at cost less accumulated depreciation and valuation
allowances. Other long-term investments are carried on the equity basis,
adjusted for valuation allowances.
Realized gains and losses on the sale of investments are determined on the
basis of specific security identification. Estimates for valuation
allowances and other than temporary declines are included in realized gains
and losses on investments.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121). SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The statement is effective for fiscal years beginning after December 15,
1995 and earlier application is permitted. Previously issued consolidated
financial statements shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the consolidated financial statements is not
expected to be material.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums and
benefits and consist primarily of whole life, limited-payment life, term
life and certain annuities with life contingencies. Premiums for
traditional life insurance products are recognized as revenue when due.
Benefits and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This association
is accomplished by the provision for future policy benefits and the
deferral and amortization of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual and
group deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and investment
products consist of asset fees, cost of insurance, policy administration
and surrender charges that have been earned and assessed against policy
account balances during the period. Policy benefits and claims that are
charged to expense include benefits and claims incurred in the period in
excess of related policy account balances and interest credited to policy
account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums
are recognized as revenue over the terms of the policies. Policy claims are
charged to expense in the period that the claims are incurred.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, certain
expenses of the policy issue and underwriting department and certain
variable agency expenses have been deferred. For traditional life and
individual health insurance products, these deferred policy acquisition
costs are predominantly being amortized with interest over the premium
paying period of the related policies in proportion to the ratio of actual
annual premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same assumptions as
were used for computing liabilities for future policy benefits. For
universal life and investment products, deferred policy acquisition costs
are being amortized with interest over the lives of the policies in
relation to the present value of estimated future gross profits from
projected interest margins, asset fees, cost of insurance, policy
administration and surrender charges. For years in which gross profits are
negative, deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs are
adjusted to reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific investment
objectives. The investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of the Separate
Accounts is not reflected in the consolidated statements of income and cash
flows except for the fees the Company receives for administrative services
and risks assumed.
(f) FUTURE POLICY BENEFITS
Future policy benefits for traditional life and individual health
insurance policies have been calculated using a net level premium method
based on estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the time the
policies were issued, rather than the assumptions prescribed by state
regulatory authorities. See note 6.
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Future policy benefits and claims for collectively renewable long-term
disability policies (primarily discounted at 5.2%) and group long-term
disability policies (primarily discounted at 5.5%) are the present value of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on other
group health insurance policies are not discounted.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 45% (45% in 1994 and
48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
45% in 1993) of life insurance premiums. The provision for policyholder
dividends is based on current dividend scales. Future dividends are
provided for ratably in future policy benefits based on dividend scales in
effect at the time the policies were issued. Dividend scales are approved
by the Board of Directors.
Income attributable to participating policies in excess of policyholder
dividends is accounted for as belonging to the shareholder. See note 12.
(h) FEDERAL INCOME TAX
NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
return with Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
income tax return with Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW files a separate Federal income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
from the deferred method of accounting for income tax of APB Opinion 11 to
the asset and liability method of accounting for income tax. Under the
asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under this method, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to be realized.
The Company has reported the cumulative effect of the change in method
of accounting for income tax in the 1993 consolidated statement of income.
See note 3.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits and
claims incurred are deducted from the respective income and expense
accounts. Assets and liabilities related to reinsurance ceded are reported
on a gross basis.
(j) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with original maturities of three
months or less to be cash equivalents.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(k) RECLASSIFICATION
Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(3) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,593,844
and $7,024,736, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994 has been recorded
as a direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
---------
$ 216,915
=========
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in
the 1993 consolidated statement of income as the cumulative effect of
changes in accounting principles, as follows:
Asset/liability method of recognizing income tax (note 2(h)) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296) (note 11) (20,979)
--------
$ 5,365
========
</TABLE>
(4) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
filed with the Department of Insurance of the State of Ohio (the
Department), California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by such
regulatory authorities. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
The statutory capital shares and surplus of NLIC as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$1,363,031, $1,262,861 and $992,631, respectively. The statutory net
income of NLIC as reported to regulatory authorities for the years
ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
$185,943, respectively.
<PAGE> 11
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(5) INVESTMENTS
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 772,589 674,346 --
Equity securities 1,436 550 7,230
Fixed maturities held-to-maturity 232,692 193,009 800,255
Mortgage loans on real estate 410,965 376,783 364,810
Real estate 39,222 40,280 39,684
Short-term investments 12,249 6,990 5,080
Other 61,701 42,831 33,832
---------- ---------- ----------
Total investment income 1,530,854 1,334,789 1,250,891
Less investment expenses 47,874 45,288 46,465
---------- ---------- ----------
Net investment income $1,482,980 1,289,501 1,204,426
========== ========== ==========
</TABLE>
An analysis of realized gains (losses) on investments, net of
valuation allowances, by investment type follows for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 6,792 (7,120) --
Equity securities 3,435 1,427 129,728
Fixed maturities -- -- 20,225
Mortgage loans on real estate (7,312) (20,462) (28,241)
Real estate and other (2,079) 9,771 (8,039)
-------- -------- --------
$ 836 (16,384) 113,673
======== ======== ========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- -------------
<S> <C> <C>
Gross unrealized gains (losses) $ 735,103 (266,618)
Adjustment to deferred policy acquisition costs (143,851) 82,525
Deferred Federal income tax (206,944) 64,425
--------- ---------
$ 384,308 (119,668)
========= =========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 1,001,706 (703,851) --
Equity securities 15 (1,990) (128,837)
Fixed maturities held-to-maturity 86,477 (421,427) 223,392
----------- ----------- -----------
$ 1,088,198 (1,127,268) 94,555
=========== =========== ===========
</TABLE>
<PAGE> 12
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities available-for-sale
were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 438,109 36,714 (53) 474,770
Obligations of states and political subdivisions 9,742 1,252 (1) 10,993
Debt securities issued by foreign governments 162,442 9,641 (66) 172,017
Corporate securities 8,902,494 524,796 (30,561) 9,396,729
Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868
--------- ----------- ----------- -----------
Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377
Equity securities 27,362 6,441 (85) 33,718
---------- ----------- ----------- -----------
$13,465,992 775,489 (40,386) 14,201,095
=========== =========== ============ ===========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
and fixed maturities held-to-maturity were as follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
---------- ---------- ---------- ---------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,372 6,637 (296) 24,713
---------- ---------- ---------- ---------
$8,337,237 77,888 (344,506) 8,070,619
========== ========= ========== =========
FIXED MATURITY SECURITIES HELD-TO-MATURITY
Obligations of states and political subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
---------- ---------- ---------- ---------
$3,688,787 34,383 (120,860) 3,602,310
========== ========== ========== =========
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
----------- ------------
<S> <C> <C>
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE
- --------------------------------------------
Due in one year or less $ 641,490 647,639
Due after one year through five years 5,365,703 5,623,126
Due after five years through ten years 2,477,457 2,609,262
Due after ten years 1,028,137 1,174,482
----------- -----------
9,512,787 10,054,509
Mortgage-backed securities 3,925,843 4,112,868
----------- -----------
$13,438,630 14,167,377
=========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 to available-for-sale
securities due to evidence of a significant deterioration in the issuer's
creditworthiness. The transfer of those fixed maturity securities resulted in
a gross unrealized loss of $4,285.
As permitted by the FASB's Special Report, A GUIDE TO IMPLEMENTATION OF
STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES, issued in November, 1995, the Company transferred all of its fixed
maturity securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the fixed
maturity securities had amortized cost of $3,705,644, resulting in a gross
unrealized gain of $171,531.
Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.
Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).
Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.
As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Allowance, beginning year $ 47,892
Additions charged to operations 7,653
Direct write-downs charged against the allowance (4,850)
--------
Allowance, end of year $ 50,695
========
</TABLE>
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
mortgage loans on real estate in process of foreclosure or in-substance
foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
value.
Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
of December 31, 1995 and 1994, respectively, were on deposit with various
regulatory agencies as required by law.
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts represents
approximately 82% and 81% of the total liability for future policy benefits
as of December 31, 1995 and 1994, respectively. The average interest rate
credited on investment product policies was approximately 6.5%, 6.5% and
7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.
The liability for future policy benefits for traditional life insurance and
individual health insurance policies has been established based upon the
following assumptions:
INTEREST RATES: Interest rates vary as follows:
<TABLE>
<CAPTION>
Health
Year of issue Life Insurance insurance
-------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
1995 7.6%, not graded - permanent contracts with loan provisions 4.5%
7.7%, not graded - all other contracts
1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0%
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0%
1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
</TABLE>
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published tables,
modified for the Company's actual experience.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the liability for unpaid claims and claim adjustment expenses is
summarized for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 637,998 592,180 760,209
Less reinsurance recoverables 438,761 430,720 547,683
--------- --------- ---------
Net balance, beginning of year 199,237 161,460 212,526
--------- --------- ---------
Incurred related to:
Current year 425,907 273,299 309,721
Prior years (17,203) (26,156) (26,248)
--------- --------- ---------
Total incurred 408,704 247,143 283,473
--------- --------- ---------
Paid related to:
Current year 290,605 175,700 208,978
Prior years 111,353 73,889 125,561
--------- --------- ---------
Total paid 401,958 249,589 334,539
--------- --------- ---------
Unpaid claims of acquired companies 2,542 40,223 --
--------- --------- ---------
Net balance, end of year 208,525 199,237 161,460
Plus reinsurance recoverables 491,321 438,761 430,720
--------- --------- ---------
Balance, end of year $ 699,846 637,998 592,180
========= ========= =========
</TABLE>
Reinsurance recoverables include amounts from affiliates, as discussed in
note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31,
1995, 1994, 1993 and 1992, respectively.
The provision for claims and claim adjustment expenses for prior years
decreased in each of the three years ended December 31, 1995 due to
lower-than-anticipated costs to settle accident and health insurance claims.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 179,916 124,044
Fixed maturity securities available-for-sale -- 95,536
Liabilities in Separate Accounts 129,120 94,783
Mortgage loans on real estate and real estate 26,062 25,632
Other policyholder funds 7,752 7,137
Other assets and other liabilities 47,215 57,528
--------- ---------
Total gross deferred tax assets 390,065 404,660
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 312,616 317,224
Fixed maturity securities available-for-sale 266,184 --
Equity securities available-for-sale and other
long-term investments 3,431 3,620
Other 46,711 47,301
--------- ---------
Total gross deferred tax liabilities 628,942 368,145
--------- ---------
$(238,877) 36,515
========= =========
</TABLE>
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company has determined that valuation allowances are not necessary as
of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
of the total gross deferred tax assets will not be realized. All future
deductible amounts can be offset by future taxable amounts or recovery of
Federal income tax paid within the statutory carryback period. In
addition, for future deductible amounts for securities available-for-sale,
affiliates of the Company which are included in the same consolidated
Federal income tax return hold investments that could be sold for capital
gains that could offset capital losses realized by the Company should
securities available-for-sale be sold at a loss.
<TABLE>
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
--------------- ----- -------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0
Tax exempt interest and dividends
received deduction (137) (0.1) (194) (0.1) (2,322) (0.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 1,704 0.5
Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7)
--------- ---- --------- ---- --------- ----
Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1
========= ==== ========= ==== ========= ====
</TABLE>
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the
years ended December 31, 1995, 1994 and 1993, respectively.
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral
from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated in
the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
consolidated financial statements. The DRA eliminated any additional
deferrals to the PSA. Any distributions from the PSA, however, will
continue to be taxable at the then current tax rate. The balance of the
PSA was approximately $35,344 as of December 31, 1995.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair
value information about existing on and off-balance sheet financial
instruments. SFAS 107 defines the fair value of a financial instrument as
the amount at which the financial instrument could be exchanged in a
current transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using present
value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Although
fair value estimates are calculated using assumptions that management
believes are appropriate, changes in assumptions could cause these
estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets
and,in many cases, could not be realized in the immediate settlement of
the instruments. SFAS 107 excludes certain assets and liabilities from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the consolidated balance sheets for these
instruments approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services or,
in the case of private placements, is estimated by discounting
expected future cash flows using a current market rate applicable to
the yield, credit quality and maturity of the investments. The fair
value for equity securities is based on quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of
assets held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage
loans on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations. Fair
value for mortgages in default is the estimated fair value of the
underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities under
investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted cash
flow analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the amount
payable on demand. Also included are disclosures for the Company's
limited payment policies, which the Company has used discounted cash
flow analyses similar to those used for investment contracts with
known maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts were
as follow as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments:
Securities available-for-sale:
Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906
Equity securities 33,718 33,718 24,713 24,713
Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310
Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284
Policy loans 370,908 370,908 340,491 340,491
Short-term investments 45,732 45,732 131,643 131,643
Cash 10,485 10,485 7,436 7,436
Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461
LIABILITIES
- -----------
Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556
Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384
Policyholders' dividend accumulations 353,554 353,554 338,058 338,058
Other policyholder funds 71,155 71,155 72,770 72,770
Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
</TABLE>
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a party to
financial instruments with off-balance-sheet risk in the normal course of
business through management of its investment portfolio. These financial
instruments include commitments to extend credit in the form of loans. These
instruments involve, to varying degrees, elements of credit risk in excess
of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are agreements
to lend to a borrower, and are subject to conditions established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a deposit. Commitments
extended by the Company are based on management's case-by-case credit
evaluation of the borrower and the borrower's loan collateral. The
underlying mortgage property represents the collateral if the commitment is
funded. The Company's policy for new mortgage loans on real estate is to
lend no more than 80% of collateral value. Should the commitment be funded,
the Company's exposure to credit loss in the event of nonperformance by the
borrower is represented by the contractual amounts of these commitments less
the net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments. Commitments on
mortgage loans on real estate of $361,974 extending into 1996 were
outstanding as of December 31, 1995.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the United
States. The Company has a diversified portfolio with no more than 20% (22%
in 1994) in any geographic area and no more than 2% (2% in 1994) with any
one borrower.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 140,732 110,361 534,814 184,201 970,108
East South Central 23,978 15,653 183,790 84,588 308,009
Mountain -- 18,940 144,156 48,727 211,823
Middle Atlantic 124,079 72,201 183,562 18,383 398,225
New England 9,594 39,526 153,644 1 202,765
Pacific 190,628 239,687 395,914 107,650 933,879
South Atlantic 101,904 74,731 458,355 279,692 914,682
West North Central 134,866 14,205 81,521 37,586 268,178
West South Central 69,143 99,618 194,717 272,323 635,801
--------- --------- --------- --------- ---------
$ 794,924 684,922 2,330,473 1,033,151 4,843,470
========= ========= ========= =========
Less valuation allowances and unamortized discount 56,871
---------
Total mortgage loans on real estate, net $4,786,599
=========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
--------- --------- --------- --------- ---------
$ 669,832 613,707 2,176,705 816,831 4,277,075
========= ========= ========= =========
Less valuation allowances and unamortized discount 54,791
---------
Total mortgage loans on real estate, net $4,222,284
=========
</TABLE>
(10) PENSION PLAN
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least one
thousand hours of service within a twelve-month period and who have met
certain age requirements. Benefits are based upon the highest average
annual salary of a specified number of consecutive years of the last ten
years of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost of
the enhanced benefit was borne by NMIC and certain of its property and
casualty insurance company affiliates.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual Insurance
Company Employees' Retirement Plan and the Wausau Insurance Companies
Pension Plan to form the Nationwide Insurance Enterprise Retirement
Plan. Immediately prior to the merger, the plans were amended to provide
consistent benefits for service after January 1, 1996. These amendments had
no significant impact on the accumulated benefit obligation or projected
benefit obligation as of December 31, 1995.
Pension costs charged to operations by the Company during the years ended
December 31, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
respectively.
The Company's net accrued pension expense as of December 31, 1995 and
1994 was $1,376 and $1,836, respectively.
The net periodic pension cost for the Nationwide Insurance Companies and
Affiliates Retirement Plan as a whole for the years ended December 31,
1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighed average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
in group annuity contracts of NLIC and ELICW. Prior to the merger, the
assets of the Nationwide Insurance Companies and Affiliates Retirement
Plan were invested in a group annuity contract of NLIC.
(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years of
service with the Company after reaching age 40. Postretirement health
care benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. In addition, there are caps
on the Company's portion of the per-participant cost of the postretirement
health care benefits. These caps can increase annually, but not more than
three percent. The Company's policy is to fund the cost of health care
benefits in amounts determined at the discretion of management. Plan
assets are invested primarily in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
accrual method of accounting for postretirement life and health care
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $32,275 ($20,979 net of related income tax benefit) was
recorded in the 1993 consolidated statement of income as a cumulative
effect of a change in accounting principle. See note 3. The adoption of
SFAS 106, including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $35,277
to $36,544 in 1993. Certain affiliated companies elected to amortize their
initial transition obligation over periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of
December 31, 1995 and 1994 was $51,490 and $36,001, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was
$8,269 and $4,627, respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the plan as a whole as of
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
-------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance subsidiaries exceed the minimum risk-based capital
requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, as of the year-end shall
inure to the benefit of the shareholder. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall
be used only for the payment or apportionment of dividends to
participating policyholders at least to the extent required by statute
or for the purpose of making up any loss on participating policies.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In the opinion of counsel for the Company, the ultimate ownership of the
entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable to
participating policies in excess of the amounts paid as dividends to
policyholders belong to the shareholder rather than the policyholders,
and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares was
$2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
1993, respectively. The amount thereof not presently available for
dividends to the shareholder due to the New York restrictions was
$1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
respectively.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $2,468,687
of shareholder's equity, as presented in the accompanying consolidated
financial statements, is so restricted as to dividend payments in 1996.
Each of NLIC's insurance company subsidiaries are limited in their
payment of dividends by the state insurance department of their
respective state of domicile. As of December 31, 1995, the maximum amount
of shareholder's equity available for dividend payment to NLIC in 1996 by
its insurance company subsidiaries without prior approval are:
<TABLE>
<S> <C>
Nationwide Life and Annuity Insurance Company $10,143
West Coast Life Insurance Company 13,153
Employers Life Insurance Company of Wausau 10,132
National Casualty Company --
-------
$33,428
=======
</TABLE>
(13) TRANSACTIONS WITH AFFILIATES
----------------------------
On March 1, 1995, Corp. contributed all of the outstanding shares of
Farmland Life Insurance Company (Farmland) to NLIC, which then merged
Farmland into WCLIC effective June 30, 1995. The contribution resulted in
a direct increase to consolidated shareholder's equity of $46,918. The
contribution of Farmland has been accounted for in a manner similar to a
pooling of interests and accordingly, Farmland's results are included in
the consolidated statements of income beginning January 1, 1995. However,
prior period consolidated financial statements have not been restated due
to the impact of Farmland being immaterial.
Effective December 31, 1994, NLIC purchased all of the outstanding shares
of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC
transferred fixed maturity securities and cash with a fair value of
$155,000 to WSC on December 28, 1994, which resulted in a realized loss
of $19,239 on the disposition of the securities. The purchase price
approximated both the historical cost basis and fair value of net assets
of ELICW. ELICW has and will continue to share home office, other
facilities, equipment and common management and administrative services
with WSC.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Corp. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1995 were
$57,969, $50,470 and $44,577, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company participates in intercompany repurchase agreements with
affiliates whereby the seller will transfer securities to the buyer at a
stated value. Upon demand or a stated period, the securities will be
repurchased by the seller at the original sales price plus a price
differential. Transactions under the agreements during 1995 and
1994 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
31, 1995. These contracts are immaterial to the consolidated financial
statements.
NCC participates in several 100% quota share reinsurance agreements with
NMIC and Nationwide Mutual Fire Insurance Company, the minority
shareholder of Corp. As a result of these agreements, the following
assets and (liabilities) are included in the consolidated financial
statements as of December 31, 1995 and 1994 for reinsurance ceded:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Reinsurance recoverable $ 590,379 541,289
Unearned premium reserves (112,467) (110,353)
Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
</TABLE>
The ceding of reinsurance does not discharge the original insurer from
primary liability to its policyholder. The insurer which assumes the
coverage assumes the related liability and it is the practice of insurers
to treat insured risks, to the extent of reinsurance ceded, as though
they were risks for which the original insurer is not liable. Management
believes the financial strength of NMIC reduces to an acceptable level
any risk to NCC under these intercompany reinsurance agreements.
ELICW assumes certain accident and health insurance business from
Employers Insurance of Wausau A Mutual Company, an affiliate. During
1995, total premiums assumed by ELICW under the reinsurance
agreement were $150,622.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash Management
Company (CCMC), both affiliates, under which NCMC and CCMC act as common
agents in handling the purchase and sale of short-term securities for the
respective accounts of the participants. Amounts on deposit with NCMC and
CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994,
respectively, and are included in short-term investments on the
accompanying consolidated balance sheets.
(14) BANK LINES OF CREDIT
--------------------
As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization.
(15) CONTINGENCIES
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to be
material to the Company's financial position or results of operations.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT INFORMATION
-------------------
The Company operates in the long-term savings, life insurance and
accident and health insurance lines of business in the life insurance and
property and casualty insurance industries. Long-term savings operations
include both qualified and non-qualified annuity contracts issued to both
individuals and groups. Life insurance operations include whole life,
universal life, variable universal life and endowment and term life
insurance issued to individuals and groups. Accident and health insurance
operations also provide coverage to individuals and groups. Corporate
primarily includes investments, and the related investment income, which
are not specifically allocated to one of the three operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better reflect
the way the businesses are managed. Prior periods have been restated to
reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in accounting
principles for the years ended December 31, 1995, 1994 and 1993 and
assets as of December 31, 1995, 1994 and 1993, by business segment.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 1,406,241 1,125,013 1,048,045
Life insurance 502,885 452,795 432,343
Accident and health insurance 532,383 345,545 339,764
Corporate 134,598 122,847 214,374
------------ ------------ ------------
$ 2,576,107 2,046,200 2,034,526
============ ============ ============
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 129,475 95,530 47,966
Life insurance 63,169 46,119 36,383
Accident and health insurance (12,521) 13,221 15,041
Corporate 139,609 118,360 213,511
------------ ------------ ------------
$ 319,732 273,230 312,901
============ ============ ============
Assets:
Long-term savings 34,634,892 25,815,273 20,695,598
Life insurance 3,675,581 3,231,651 2,897,574
Accident and health insurance 307,643 291,296 297,200
Corporate 1,995,995 1,773,913 1,515,989
------------ ------------ ------------
$ 40,614,111 31,112,133 25,406,361
============ ============ ============
</TABLE>
<PAGE> 26
Schedule I
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Summary of Investments - Other Than Investments in Related Parties
December 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
----------------- --------------- ------------------
Column B Column C Column D
----------------- --------------- ---------------
Amount at which
shown in the
consolidated
Cost Market value balance sheet
----------------- ---------------- -------------------
<S> <C> <C> <C>
Fixed maturities available-for-sale:
Bonds and notes:
U.S. Government and government agencies and authorities $ 3,913,961 4,116,744 4,116,744
States, municipalities and political subdivisions 9,742 10,993 10,993
Foreign governments 162,442 172,016 172,016
Public utilities 2,053,701 2,146,000 2,146,000
All other corporate 7,298,784 7,721,624 7,721,624
----------------- ---------------- -------------------
Total fixed maturities available-for-sale 13,438,630 14,167,377 14,167,377
----------------- ---------------- -------------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 26,037 32,474 32,474
Non-redeemable preferred stock 1,325 1,244 1,244
----------------- ---------------- -------------------
Total equity securities available-for-sale 27,362 33,718 33,718
----------------- ---------------- -------------------
Mortgage loans on real estate 4,838,432 4,786,599*
Real estate:
Investment properties 213,340 171,739*
Acquired in satisfaction of debt 82,930 67,350*
Policy loans 370,908 370,908
Other long-term investments 73,190 67,280#
Short-term investments 45,732 45,732
----------------- -------------------
Total investments $19,090,524 19,710,703
================= ===================
</TABLE>
* Difference from Column B is primarily due to accumulated depreciation
and valuation allowances due to impairments on real estate and
valuation allowances due to impairments on mortgage loans on real
estate. See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations and note 5 to the consolidated
financial statements.
# Difference from Column B is primarily due to operating losses of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 27
Schedule III
------------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplementary Insurance Information
December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
Segment acquisition claims and Unearned premiums benefits payable Premium
costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
1995: Long-term savings $ 668,784 14,847,449 455 -
Life insurance 416,209 2,494,344 408,990 274,957
Accident and health
insurance 9,202 858,335 15,264 509,658
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,094,195 18,200,128 424,709 784,615
============== ===================== ================== ===============
1994: Long-term savings 663,696 13,300,015 240 -
Life insurance 387,486 2,245,375 397,174 209,538
Accident and health
insurance 12,977 776,071 13,414 324,524
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,064,159 16,321,461 410,828 534,062
============== ===================== ================== ===============
1993: Long-term savings 506,243 11,308,024 1,262 -
Life insurance 291,683 2,047,844 378,788 215,715
Accident and health
insurance 14,018 736,387 14,595 312,655
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $ 811,944 14,092,255 394,645 528,370
============== ===================== ================== ===============
- ----------------------------------- -------------- -------------------- ------------------ ----------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Net Amortization Other
investment Benefits, claims, of deferred operating
Segment income losses and policy expenses Premiums
(3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
1995: Long-term savings $1,124,207 1,009,632 51,998 210,525
Life insurance 202,285 267,123 34,124 94,461
Accident and health
insurance 22,725 379,532 6,922 153,984 473,513
Corporate 133,763 - - -
-------------- -------------------- ------------------- ------------------
Total $1,482,980 1,656,287 93,044 458,970
============== ==================== =================== ==================
1994: Long-term savings 945,318 807,756 56,236 171,038
Life insurance 183,933 237,125 33,394 90,535
Accident and health
insurance 21,020 234,882 5,114 90,829 315,688
Corporate 139,230 - - -
-------------- -------------------- ------------------- ------------------
Total $1,289,501 1,279,763 94,744 352,402
============== ==================== =================== ==================
1993: Long-term savings 897,639 800,385 43,291 157,046
Life insurance 178,978 227,786 35,220 89,496
Accident and health
insurance 27,108 208,735 23,623 82,854 263,117
Corporate 100,701 - - -
-------------- -------------------- ------------------- ------------------
Total $1,204,426 1,236,906 102,134 329,396
============== ==================== =================== ==================
<FN>
(1) Unearned premiums are included in Column C amounts. (3) Allocations of net investment income and certain general
(2) Column E agrees to the sum of the consolidated balance expenses are based on a number of assumptions and
sheet captions, "Policyholders' dividend estimates, and reported operating results would
accumulations" and "Other policyholder funds". change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
Schedule IV
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
------------------- ------------------ ----------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
1995:
Life insurance in force $51,613,116 6,865,011 742,451 45,490,556 1.6%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 281,687 12,817 6,087 274,957 2.2%
Accident and health
insurance 427,943 73,131 154,846 509,658 30.4%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 709,630 85,948 160,933 784,615 20.5%
=================== ================== ================= ================== ===============
1994:
Life insurance in force $46,262,595 5,289,259 819,799 41,793,135 2.0%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 209,918 7,551 7,171 209,538 3.4%
Accident and health
insurance 389,573 69,095 4,046 324,524 1.2%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 599,491 76,646 11,217 534,062 2.1%
=================== ================== ================= ================== ===============
1993:
Life insurance in force $39,417,116 4,352,071 180,739 35,245,784 0.5%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 218,764 6,161 3,112 215,715 1.4%
Accident and health
insurance 398,289 88,506 2,872 312,655 0.9%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 617,053 94,667 5,984 528,370 1.1%
=================== ================== ================= ================== ===============
</TABLE>
See accompanying independent auditors' report.
<PAGE> 29
Schedule V
----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- ------------------------------------------------- ---------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1995:
Valuation allowances - fixed maturity securities $ - 10,153 - 10,153 -
Valuation allowances - mortgage loans on real
estate 47,892 7,653 - 4,850 50,695
Valuation allowances - real estate 27,330 (1,080) - - 26,250
Valuation allowances - other long-term
investments - 457 - - 457
1994:
Valuation allowances - fixed maturity securities 6,680 (6,680) - - -
Valuation allowances - mortgage loans on real
estate 42,350 21,672 - 16,130 47,892
Valuation allowances - real estate 31,357 (4,027) - - 27,330
1993:
Valuation allowances - fixed maturity securities 5,746 934 - - 6,680
Valuation allowances - mortgage loans on real
estate 31,872 28,241 - 17,763 42,350
Valuation allowances - real estate 35,471 (4,114) - - 31,357
Valuation allowances - other long-term
investments 700 (700) - - -
<FN>
(1) Amounts represent direct write-downs charged against the valuation
allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 50
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial statements and schedule included PAGE
in Prospectus
(Part A):
Condensed Financial Information. 10
(2) Financial statements and schedule included
in Part B:
Those financial statements and schedule 48
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. 48
Statement of Assets, Liabilities and Contract 49
Owners' Equity as of December 31, 1995.
Statements of Operations and Changes in 50
Contract Owners' Equity for the years ended
December 31, 1995, 1994 and 1993.
Notes to Financial Statements. 51
Schedules of Changes in Unit Value. 55
Nationwide Life Insurance Company:
Independent Auditors' Report. 60
Consolidated Balance Sheets as of December 61
31, 1995 and 1994.
Consolidated Statements of Income for the 62
years ended December 31, 1995, 1994 and
1993.
Consolidated Statements of Shareholder's 63
Equity for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows for 64
the years ended December 31, 1995, 1994
and 1993.
Notes to Consolidated Financial Statements. 65
Schedule I - Summary of Investments - Other 85
Than Investments in Related Parties.
Schedule III - Supplementary Insurance 86
Information.
Schedule IV - Reinsurance. 87
Schedule V - Valuation and Qualifying Accounts. 88
89 of 111
<PAGE> 51
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
53
90 of 111
<PAGE> 52
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olives, NC 28365
Keith W. Eckel
1647 Falls Road
Clarks Summit, PA 18411 Director
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Ray Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
54
91 of 111
<PAGE> 53
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
55
92 of 111
<PAGE> 54
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
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-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
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
56
93 of 111
<PAGE> 55
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance
corporations worldwide
American Marine Underwriters, Florida Underwriting Manager
Inc.
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management California Investment Securities Agent
Company
Colonial County Mutual Texas Insurance Company
insurance Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage Germany Insurance Broker
and Service GMBH
Companies Agency Insurance California Insurance Broker
Services of California
Companies Agency of Alabama, Alabama Insurance Broker
Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Illinois Acts as Collection Agent for Policies
Inc. placed through Brokers
Companies Agency of Kentucky, Kentucky Insurance Broker
Inc.
Companies Agency of Massachusetts Insurance Broker
Massachusetts, Inc.
Companies Agency of New York, New York Insurance Broker
Inc.
Companies Agency of Pennsylvania Insurance Broker
Pennsylvania, Inc.
Companies Agency of Phoenix, Arizona Insurance Broker
Inc.
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Annuity Agency of Texas Insurance Broker
Texas, Inc.
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas Insurance Broker
Texas, Inc.
Countrywide Services Delaware Products Liability, Investigative and
Corporation Claims Management Services
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
</TABLE>
57
94 of 111
<PAGE> 56
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
** Employers Life Insurance Wisconsin Life Insurance Company
Company of Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Iowa Insurance Company
Company
Financial Horizons Alabama Life Insurance Agency
Distributors Agency of
Alabama, Inc.
Financial Horizons Ohio Insurance Agency
Distributors Agency of Ohio,
Inc.
Financial Horizons Oklahoma Life Insurance Agency
Distributors Agency of
Oklahoma, Inc.
Financial Horizons Texas Life Insurance Agency
Distributors Agency of Texas,
Inc.
* Financial Horizons Investment Massachusetts Investment Company
Trust
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Self-Insurance Administration Claims
Nevada Examinations and Data Processing
Services
Gates, McDonald & Company of New York Workers Compensation Claims
New York, Inc. Administration
Greater La Crosse Health Wisconsin Writes Commercial Health and Medicare
Plans, Inc. Supplement Insurance
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Ohio Develops and operates Managed Care
Inc. Delivery System
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New York Life Insurance Agency
New York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski
Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of Great Britain Insurance Company
America, Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
Nationwide Agribusiness Iowa Insurance Company
Insurance Company
Nationwide Cash Management Ohio Investment Securities Agent
Company
</TABLE>
58
95 of 111
<PAGE> 57
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas
Redevelopment Corporation within the City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of
acquiring, holding, encumbering,
transferring, or otherwise disposing
of shares, bonds, and other evidences
of indebtedness, securities, and
contracts of other persons,
associations, corporations, domestic
or foreign and to form or acquire the
control of other corporations
Nationwide Development Company Ohio Owns, leases and manages commercial
real estate
Nationwide Financial Delaware Insurance Agency
Institution Distributors
Agency, Inc.
** Nationwide Financial Services, Ohio Registered Broker-Dealer, Investment
Inc. Manager and Administrator
Nationwide General Insurance Ohio Insurance Company
Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Ohio Membership Non-Profit Corporation
Enterprise Foundation
Nationwide Insurance Golf Ohio Membership Non-Profit Corporation
Charities, Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Ohio Stock Transfer Agent
Inc.
** Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
** Nationwide Life Insurance Ohio Life Insurance Company
Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Ohio Insurance Company
Insurance Company
Nationwide Mutual Insurance Ohio Insurance Company
Company
Nationwide Property and Ohio Insurance Company
Casualty Insurance Company
** Nationwide Property Ohio Owns, leases, manages and deals in
Management, Inc. Real Property
</TABLE>
59
96 of 111
<PAGE> 58
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
* Nationwide Separate Account Massachusetts Investment Company
Trust
NEA Valuebuilder Investor Alabama Life Insurance Agency
Services of Alabama, Inc.
NEA Valuebuilder Investor Arizona Life Insurance Agency
Services of Arizona, Inc.
NEA Valuebuilder Investor Massachusetts Life Insurance Agency
Services of Massachusetts, Inc.
NEA Valuebuilder Investor Montana Life Insurance Agency
Services of Montana, Inc.
NEA Valuebuilder Investor Nevada Life Insurance Agency
Services of Nevada, Inc.
NEA Valuebuilder Investor Ohio Life Insurance Agency
Services of Ohio, Inc.
NEA Valuebuilder Investor Oklahoma Life Insurance Agency
Services of Oklahoma, Inc.
NEA Valuebuilder Investor Texas Life Insurance Agency
Services of Texas, Inc.
NEA Valuebuilder Investor Wyoming Life Insurance Agency
Services of Wyoming
NEA Valuebuilder Investor Delaware Life Insurance Agency
Services, Inc.
NEA Valuebuilder Services Massachusetts Life Insurance Agency
Insurance Agency, Inc.
Neckura General Insurance Germany Insurance Company
Company
Neckura Holding Company Germany Administrative Service for Neckura
Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Massachusetts Markets and Administers Deferred
Insurance Agency, Inc. Compensation Plans for Public
Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred
Compensation Plans for Public
Employees
Pension Associates of Wausau, Wisconsin Pension plan administration, record
Inc. keeping and consulting and
compensation consulting
Public Employees Benefit Delaware Marketing and Administration of
Services corporation Deferred Employee Compensation Plans
for Public Employees
Public Employees Benefit Alabama Markets and Administers Deferred
Services Corporation of Alabama Compensation Plans for Public
Employees
</TABLE>
60
97 of 111
<PAGE> 59
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Public Employees Benefit Arkansas Markets and Administers Deferred
Services Corporation of Compensation Plans for Public
Arkansas Employees
Public Employees Benefit Montana Markets and Administers Deferred
Services Corporation of Montana Compensation Plans for Public
Employees
Public Employees Benefit New Mexico Markets and Administers Deferred
Services Corporation of New Compensation Plans for Public
Mexico Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
SVM Sales GmbH, Neckura Germany Sales support for Neckura Insurance
Insurance Group Group
Wausau Business Insurance Illinois Insurance Company
Company
Wausau General Insurance Illinois Insurance Company
Company
Wausau Insurance Company United Kingdom Insurance and Reinsurance Company
(U.K.) Limited
Wausau International California Special Risks, Excess and Surplus
Underwriters Lines Insurance Underwriting Manager
** Wausau Preferred Health Wisconsin Insurance and Reinsurance Company
Insurance Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Wisconsin Insurance Company
Company
** West Coast Life Insurance California Life Insurance Company
Company
</TABLE>
61
98 of 111
<PAGE> 60
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Life Separate Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account No. 1 Account
* Nationwide Multi-Flex Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-A Annuity Separate Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-B Annuity Separate Account
Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-C Annuity Separate Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-Q Annuity Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Ohio Nationwide Life Separate Issuer of Annuity Contracts
Variable Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Issuer of Life Insurance
Account-A Annuity Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Ohio Nationwide Life Separate Issuer of Life Insurance
Account-2 Account Contracts
* Nationwide VLI Separate Ohio Nationwide Life Separate Issuer of Life Insurance
Account-3 Account Contracts
</TABLE>
62
99 of 111
<PAGE> 61
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |_________________________________
| Contribution Note Cost |_________________________________
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________ __________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | | | |
| | | | | NATIONWIDE LLOYDS | | COMPANIES |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | | | |
| ------------- Shares | | ------------- Shares |_____| |_____| AGENCY OF |
| | | |_____| |_____| |
| Cost | | Cost | | | | TEXAS, INC. |
| ---- | | ---- | | A TEXAS LLOYDS | | |
| Employers-- | | Employers-- | | | | |
| 100% $15,683,300 | | 100% $106,763,000 | | | | |
|_______________________________| |________________________________| |_____________________| |__________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 10,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $21,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $44,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| |
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
___| NATIONWIDE MUTUAL |_____________________________________________| NATIONWIDE MUTUAL |
___| INSURANCE COMPANY |_____________________________________________| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
|_________________________________________| |___________________________|
| || |________________________________________________________________ |
| || | | |
______________|_______________ || | _____________________________ _____________|_______|______________
| | || | | | | |
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NATIONWIDE |
| | || | | INSURANCE COMPANY | | CORPORATION |
| Common Stock: 2,936 | || | | | | |
| ------------- Shares | || | | Common Stock: 20,000 Shares | | Common Stock: Control |
| Cost | || |___| ------------- | | ------------- ------- |
| ---- | || | | | | $13,642,432 100% |
| Casualty-26% $88,320 | || | | Cost | | |
| Fire-26% $88,463 | || | | ---- | | Shares Cost |
| Preferred Stock: 1,466 Shares| || | | Casualty-100% $5,944,422 | | ----- ---- |
| ---------------- | || | |_____________________________| | Casualty 12,992,922 $751,352,485 |
| Cost | || | | Fire 649,510 24,007,936 |
| ---- | || | | |
| Casualty-6.8% $100,000 | || | | (See Page 2) |
| Fire-6.8% $100,000 | || | |____________________________________|
|______________________________| || |
|| |
_________________________ || | _____________________________
| | || | | |
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY |
| INSURANCE COMPANY | || | | AND CASUALTY |
| | || | | INSURANCE COMPANY |
| Guaranty Fund |______|| | | |
| ------------- |_______| | | Common Stock: 60,000 Shares |
| Certificate | | | ------------- |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | |
| | | COLONIAL INSURANCE |
_______________|___________ | | COMPANY OF CALIFORNIA |
| F & B, INC. | | | (COLONIAL) |
| | | | |
| Common Stock: 1 Share | |___| Common Stock: 1,750 Shares |
| ------------- | | | ------------- |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | | | |
| | | | SCOTTSDALE | | NATIONAL PREMIUM & |
| NATIONWIDE AGRIBUSINESS | | | INSURANCE COMPANY | | BENEFIT ADMINISTRATION |
| INSURANCE COMPANY | | | | | COMPANY |
| | | | Common Stock: 30,136 Shares | | |
| Common Stock: 1,000,000 |___|___| ------------- |______| Common Stock: 10,000 |
| ------------- Shares | | | | | ------------ Shares |
| | | | Cost | | |
| | | | ---- | | Cost |
| | | | Casualty-100% $150,000,000 | | ---- |
| Casualty-99.9% $26,714,335 | | |_____________________________| | Scottsdale-100% $10,000 |
| | | |__________________________|
| Other Capital: | |
| -------------- | |
| Casualty-Ptd. $ 713,567 | |
|____________________________| |
|
|
|
|
| _____________________________ ______________________________
| | NECKURA HOLDING | | NECKURA |
| | COMPANY (NECKURA) | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |_____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS INSURANCE |
| | | BROKERAGE AND SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIREKT |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT COMPANY | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY COMPANY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | INDEMNITY COMPANY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares |______| Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | | | |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty-100% $5,000,000 | | Colonial $500,000 |
| |_____________________________| | Lone Star 150,000 |
| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | CORPORATION |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________
| | CALIFORNIA CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 90 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $9,000 |
| |_____________________________|
|
|
| _____________________________ __________________________
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| | | | |
| | Common Stock: 14,750 Shares | | Common Stock: 750 Shares |
|___| ------------- |_____| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Contractual Association - Double Line
December 31, 1995
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|_________________
| NATIONWIDE LIFE INSURANCE |
| COMPANY (NW LIFE) |
|Common Stock: 3,814,779 Shares|
| ------------- |
| |
| NW Corp.- Cost |
| 100% ---- |
| $950,226,915 |
|______________________________|
_________________________________________________________________________________|
____________|_____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | NATIONWIDE LIFE AND |
| FINANCIAL SERVICES, INC. | | COMPANY (NC) | | | ANNUITY INSURANCE COMPANY |
| (NW FIN. SERV.) | | Common Stock: 100 Shares | | | |
______|Common Stock: 7,676 Shares| | ------------- | | | Common Stock: 66,000 Shares |
| ____|------------- | | | |_______| ------------- |
| | | Cost | | Cost | | | NW Life- Cost |
| | | ---- | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |__________________________| |___________________________| | |______________________________|
| | __________________________ ___________|_______________ | ________________________________
| | | NATIONWIDE | | | | | WEST COAST LIFE |
| | | INVESTOR SERVICES, INC. | | | | | INSURANCE COMPANY |
| | | Common Stock: 5 Shares | | NCC OF AMERICA, INC. | | | Common Stock: 1,000,000 Shares|
| |___| ------------- | | (INACTIVE) | |_______| ------------- |
| | | NW Fin. Serv.-100% | | | | | |
| | | Cost | | NC-100% | | | Cost |
| | | ---- | | | | | ---- |
| | | $5,000 | | | | | NW Life-100% $133,809,265 |
| | |__________________________| |___________________________| | |________________________________|
| | __________________________ ______________________________ | ____________________________
| | | NATIONWIDE | | EMPLOYERS LIFE INSURANCE CO. | | | NATIONWIDE PROPERTY |
| | | INVESTING | | OF WAUSAU (ELIOW) | | | MANAGEMENT, INC. |
| | | FOUNDATION | | | | | Common Stock: 59 Shares |
| |___| | ______| Common Stock: 250,000 Shares |____|_______| ------------ |
| ___| | | | ------------- Cost | | | Cost |
| | | | | | ---- | | | ---- |
| | | | | | NW Life-100% $155,000,000 | | | NW Life-100% $1,907,896 |
| | | COMMON LAW TRUST | | |______________________________| | |__________________________ |
| | |__________________________| | | |
| | | _____________________________ | __________|_______________
| | __________________________ | | WAUSAU PREFERRED | | | MRM INVESTMENTS, INC. |
| | | NATIONWIDE | | | HEALTH INSURANCE CO. | | | |
| | | INVESTING | | | | | | Common Stock: 1 Share |
| |___| FOUNDATION II | |______| Common Stock: 200 Shares | | | ------------ |
| ___| | | | ------------- | | | |
| | | | | | Cost | | | Cost |
| | | | | | ---- | | | Nat. Prop. ---- |
| | | COMMON LAW TRUST | | | ELIOW -- 100% $57,413,193 | | | Mgmt.-100% $550,000 |
| | |__________________________| | |_____________________________| | |___________________________|
| | | |
| | | _____________________________ | ___________________________
| | __________________________ | | KEY HEALTH PLAN, INC. | | | NWE, INC. |
| | | NATIONWIDE | | | | | | |
| | | SEPARATE ACCOUNT | |______| Common Stock: 1,000 Shares | |______| Common Stock: 100 Shares |
| | | TRUST | | ------------- | | ------------ |
| |___| | | Cost | | Cost |
| ___| | | ---- | | ---- |
| | | COMMON LAW TRUST | | ELIOW-80% $2,700,000 | | NW Life-100% $35,971,375 |
| | | | |_____________________________| |___________________________|
| | |__________________________|
| |
| | __________________________
| | | FINANCIAL HORIZONS |
| | | INVESTMENT TRUST |
| |___| |
|_____| |
| COMMON LAW TRUST |
|__________________________|
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| INSURANCE COMPANY |___________________________________________________________
| (CASUALTY) |
|_______________________________________|
| _______________________________________________________________
__________________|______________|___
| NATIONWIDE CORPORATION (NW Corp) |
| Common Stock: Control: |
| ------------- ------- |
| 13,642,432 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_________________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES BENEFIT | | GATES, McDONALD | | NATIONWIDE FINANCIAL |
|SERVICES CORPORATION (PEBSCO) | | & COMPANY (GATES) | | INSTITUTION DISTRIBUTORS |
______| Common Stock: 236,494 Shares | | Common Stock: 254 Shares | | AGENCY, INC. (NFIDAI)|
| ____| ------------- | | ------------- |___ _____| Common Stock: 1,000 Shares|
| | | Cost | | | | | ___| ------------- |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $ 7,830,936 | | ---- | | | | | NW Corp. ---- |
| | |______________________________| | NW Corp.- $25,683,532 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK, INC. | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 Shares | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- | | | | | |___|Common Stock: 10,000 Shares|
| | | Cost | | Cost | | | | |----------- |
| | | ---- | | ---- | | | | | Cost |
| | | PEBSCO-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |____________________________| | | | | | | NFIDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | ALABAMA | | | | | | | LANDMARK FINANCIAL |
| | |Common Stock: 100,000 Shares| | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____|------------- | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___|Common Stock: 10,000 Shares|
| | | ---- | | ---- | | | |------------- |
| | | PEBSCO-100% $1,000 | | $93,750 | | | | Cost |
| | |____________________________| |___________________________| | | | ---- |
| | | | | NFIDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ____________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 Shares| | | | FINANCIAL HORIZONS |
| |____| ------------- | | | | SECURITIES CORP. |
| | | Cost | ________________________________|_|___|Common Stock: 10,000 Shares|
| | | ---- | | AFFILIATE AGENCY, INC. | | | |------------- |
| | | PEBSCO-100% $500 | | | | | | Cost |
| | |____________________________| | Common Stock: 100 Shares | | | | ---- |
| | | | | | | NFIDAI-100% $153,000 |
| | | NFIDAI-100% Cost | | | |___________________________|
| | | ---- | | |
| | ___________________________ | $100 | | |
| | | PEBSCO OF MASSACHUSETTS | |___________________________| | |
| | | INSURANCE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 1,000 Shares| | | | |
| | | ------------- | | | | FINANCIAL HORIZONS |
| | | Cost | | |___| DISTRIBUTORS |
| | | ---- | | ___| AGENCY OF OHIO, |
| | | PEBSCO-100% $1,000 | | | | INC. |
| | |___________________________| | | |___________________________|
| | | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | MONTANA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 500 Shares | | ___| DISTRIBUTORS AGENCY |
| | | ------------- | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | ---- | | |
| | | PEBSCO-100% $500 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | NEW MEXICO | | | | |
| | | | | |___| FINANCIAL HORIZONS |
| |____|Common Stock: 1,000 Shares | | ___| DISTRIBUTORS AGENCY |
| | |------------- | | | | OF TEXAS, INC. |
| | | Cost | | | |___________________________|
| | | ----- | | |
| | | PEBSCO-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____| AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS, INC. | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE INSURANCE COMPANY |
| (FIRE) |
|_______________________________________|
________________________________________|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | NATIONWIDE HMO, INC. |
| INVESTOR SERVICES, INC. | | | (NW HMO) |
| (NEA) | | | Common Stock: 100 Shares |
_______| Common Stock: 500 Shares | |_____| ------------ |
| _____| ------------- | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $14,603,732 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MANAGEMENT |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| |_____| OF ALABAMA, INC. | | | Common Stock: 100 Shares |
| | | Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW HMO ---- |
| | | NEA-100% $5,000 | | | INC.-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH |
| | | INVESTOR SERVICES | | | AGENCY, INC. |
| | | OF MONTANA, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | Cost |
| | | Cost | | NW HMO ---- |
| | | ----- | | INC.-99% $116,077 |
| | | NEA-100% $500 | |___________________________|
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF NEVADA, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF OHIO, INC. |
| | | Common Stock: 100 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-91% $5,000 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF WYOMING, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | |
| | | NEA VALUEBUILDER |
| |_____| INVESTOR SERVICES |
| | | OF TEXAS, INC. |
| | | |
| | |___________________________|
| |
| | ___________________________
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
</TABLE>
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
Page 2
104 of 111
<PAGE> 66
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of February 22, 1996 was 9,603 and 2,175, 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.
105 of 111
<PAGE> 67
(b) CLARENDON INSURANCE AGENCY, INC.
DIRECTORS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
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
CLARENDON INSURANCE AGENCY, INC.
OFFICERS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
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
106 of 111
<PAGE> 68
(b) CLARENDON INSURANCE AGENCY, INC.
OFFICERS (CONTINUED)
James E. Russell Treasurer
500 Boylston Street
Boston, MA 02116
Bruce C. Avery Vice President
500 Boylston Street
Boston, MA 02116
<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>
107 of 111
<PAGE> 69
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
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 Code
is issued by the Registrant in reliance upon, and in compliance with,
the Securities and Exchange Commission's no-action letter to the
American Council of Life Insurance (publicly available November 28,
1988) which permits withdrawal restrictions to the extent necessary
to comply with IRC Section 403(b)(11).
108 of 111
<PAGE> 70
Offered by
NATIONWIDE
LIFE INSURANCE COMPANY
and its
MFS VARIABLE ACCOUNT
INDIVIDUAL DEFERRED
VARIABLE ANNUITY CONTRACTS
PROSPECTUS
MAY 1, 1996
109 of 111
<PAGE> 71
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of the MFS Variable Account:
The audits referred to in our report on Nationwide Life Insurance Company
(the Company) dated February 26, 1996 included the related financial statement
schedules as of December 31, 1995, and for each of the years in the three-year
period ended December 31, 1995, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1996
110 of 111
<PAGE> 72
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 1996.
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, 1996.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- -------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- -------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- -------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- ------------------------- Operating Office and Director
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board
- ------------------------- and Director
Henry S. Holloway
D. RICHARD McFERSON Chairman and Chief Executive Officer-
- -------------------------- Nationwide Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- -------------------------
David O. Miller
C. RAY NOECKER Director
- -------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By /s/JOSEPH P. RATH
- ------------------------- ----------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- -------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -------------------------
Harold W. Weihl
111 of 111
<PAGE> 73
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 1993, 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, Nationwide Multi-Flex Variable Account and
Nationwide Variable Account-8; 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, Nationwide DCVA III, 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 VLI Separate Account, Nationwide
VLI Separate Account-2, Nationwide VLI Separate Account-3 of Nationwide Life
Insurance Company, hereby constitutes and appoints D. Richard McFerson, Joseph
J. Gasper, 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 4th day of April, 1996.
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------- -------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------- -------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard P. Engel /s/ Robert A. Oakley
- ------------------------------------- -------------------------------------
Willard P. Engel, Director Robert A. Oakley, Executive Vice
President and Chief Financial Officer
/s/ Fred C. Finney
- ------------------------------------- /s/ James F. Patterson
Fred C. Finney, Director -------------------------------------
James F. Patterson, Director
/s/ Charles L. Fuellgraf
- ------------------------------------- /s/ Arden L. Shisler
Charles L. Fuellgraf, Director -------------------------------------
Arden L. Shisler, Director
/s/ Joseph J. Gasper
- ------------------------------------- /s/ Robert L. Stewart
Joseph J. Gasper, President and Chief -------------------------------------
Operating Officer and Director Robert L. Stewart, Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------- -------------------------------------
Henry S. Holloway, Chairman of the Nancy C. Thomas, Director
Board, Director
/s/ Harold W. Weihl
/s/ D. Richard McFerson -------------------------------------
- ------------------------------------- Harold W. Weihl, Director
D. Richard McFerson, Chairman and
Chief Executive Officer-Nationwide
Insurance Enterprise and Director
