<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 2-58043
'40 Act File No. 811-2716
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 24 /x/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 /x/
NATIONWIDE 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 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 December 18, 1995 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a
prior registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable fee
in the amount of $500 has been paid to the Commission. Registrant filed its Rule
24f-2 Notice for the fiscal year ended December 31, 1994, on February 22, 1995.
- --------------------------------------------------------------------------------
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<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Synopsis or Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 4. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 5. General Description of Registrant, Depositor, and Portfolio Companies . . . . . . . 26
Item 6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Item 7. General Description of Variable Annuity Contracts . . . . . . . . . . . . . . . . . 31
Item 8. Annuity Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 9. Death Benefit and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 10. Purchases and Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Item 11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Item 12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Item 13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Item 14. Table of Contents of the Statement of Additional Information . . . . . . . . . . . . 51
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Item 16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Item 17. General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Item 18. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Item 19. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . 62
Item 20. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Item 21. Calculation of Yield Quotations of Money Market Sub-Accounts . . . . . . . . . . . . 63
Item 22. Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 99
Item 25. Directors and Officers of the Depositor . . . . . . . . . . . . . . . . . . . . . . 101
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Item 27. Number of Contract Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Item 28. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Item 29. Principal Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Item 30. Location of Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Item 31. Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Item 32. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
</TABLE>
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<PAGE> 3
SUPPLEMENT DATED DECEMBER 18, 1995 TO
THE PROSPECTUS DATED MAY 1, 1995 FOR
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE VARIABLE ACCOUNT
This supplement updates certain information contained in your Prospectus.
Please read it and keep it with your Prospectus for future reference.
EFFECTIVE DECEMBER 18, 1995, THE FOLLOWING MUTUAL FUNDS WILL BE AVAILABLE IN
THE NATIONWIDE VARIABLE ACCOUNT FOR CONTRACTS ISSUED ON OR AFTER JANUARY 1,
1993:
Fidelity Advisor Equity Income Fund
Fidelity Advisor Growth Opportunities Fund
Fidelity Advisor High Yield Fund
Fidelity Advisor Income & Growth Fund
Janus Fund
Nationwide U.S. Government Income Fund
Warburg Pincus Emerging Growth Fund
Accordingly, the "Summary of Contract Expenses" (For Contracts Issued On or
After January 1, 1993) section located in the Prospectus is hereby amended to
include the following expense information:
<TABLE>
<CAPTION>
Management Fees Other Expenses Total Expenses
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fidelity Advisor Equity Income
Fund 0.50% 1.14% 1.64%
Fidelity Advisor Growth
Opportunities Fund 0.69% 0.93% 1.62%
Fidelity Advisor High Yield
Fund 0.60% 0.60% 1.20%
Fidelity Advisor Income &
Growth Fund 0.52% 1.06% 1.58%
Janus Fund 0.66% 0.25% 0.91%
Nationwide U.S. Government
Income Fund 0.65% 0.44% 1.09%
Warburg Pincus Emerging Growth
Fund 0.86% 0.36% 1.22%
</TABLE>
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<PAGE> 4
(FOR CONTRACTS ISSUED ON OR AFTER JANUARY 1, 1993)
EXAMPLE
The following chart depicts the dollar amount of expenses that would be
incurred under this Contract assuming a $1000 investment 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 presented are derived from
a formula which shows the $30 Contract Maintenance Charge to be expressed as a
percentage of the average Contract account size for existing contracts. Since
the average contract account size for Contracts issued under this prospectus is
greater than $1000, the expense effect of the Contract Maintenance Charge is
reduced accordingly.
<TABLE>
<CAPTION>
If you surrender your If you do not surrender If you annuitize your
Contract at the end of the your Contract at the end of Contract at the end of the
applicable time period the applicable time period applicable time period
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Advisor
Equity Income Fund 102 143 194 349 32 98 167 349 * 98 167 349
Fidelity Advisor
Growth Opportunities 102 143 193 347 32 98 166 347 * 98 166 347
Fund
Fidelity Advisor High
Yield Fund 98 130 171 306 28 85 144 306 * 85 144 306
Fidelity Advisor
Income & Growth Fund 102 142 191 344 32 97 164 344 * 97 164 344
Janus Fund 95 121 156 276 25 76 129 276 * 76 129 276
Nationwide U.S.
Government Income 96 126 166 294 26 81 139 294 * 81 139 294
Fund
Warburg Pincus
Emerging Growth Fund 98 130 172 308 28 85 145 308 * 85 145 308
<FN>
*The Contracts sold under this Prospectus do not permit annuitizations during
the first two Contract years.
</TABLE>
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<PAGE> 5
"APPENDIX B FOR UNDERLYING MUTUAL FUND OPTIONS AVAILABLE FOR CONTRACTS ISSUED
ON OR AFTER JANUARY 1, 1993" OF THE PROSPECTUS IS ALSO AMENDED TO INCLUDE THE
FOLLOWING INFORMATION REGARDING THE MUTUAL FUNDS:
Fidelity Advisor Equity Income Fund
Investment Objective: Seeks to obtain reasonable income from a portfolio
consisting primarily of income-producing equity securities, with a secondary
emphasis on growth potential.
Fidelity Advisor Growth Opportunities Fund
Investment Objective: Pursues capital growth that exceeds market performance
through investments in growth, cyclical, and value stocks, and securities
convertible to common stocks.
Fidelity Advisor High Yield Fund
Investment Objective: A bond fund designed to meet the needs of the long-term
investor, seeking above-average monthly income and potential capital growth by
investing in lower-rated, high yielding, fixed income securities.
Fidelity Advisor Income & Growth Fund
Investment Objective: Seeks income and growth potential by investing in
securities including U.S. government and corporate bonds, and a diversified
selection of common stocks.
Janus Fund
Investment Objective: Seeks long-term growth of capital by investing primarily
in common stocks of a large number of issuers of any size. Generally, this
fund emphasizes issuers with larger market capitalizations.
Warburg Pincus Emerging Growth Fund
Investment Objective: Seeks maximum capital appreciation by investing in
equity securities of small-to medium-sized companies in the United States with
emerging or renewed growth potential.
3
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<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 16609
Columbus, Ohio 43216-6609, 1-800-848-6331, TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE 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"). References throughout the prospectus to "Contracts" shall
also mean certificates issued under Group Flexible Fund Retirement Contracts.
For such group contracts, references to "Owner" shall also mean the
"Participant" unless the Plan otherwise permits or requires the Owner to
exercise such rights under the authority of the plan terms. The Contracts are
sold to individuals for use in retirement plans which may qualify for special
federal tax treatment under the Internal Revenue Code. Annuity payments under
the Contracts are deferred until a selected later date.
Purchase payments are allocated to the Nationwide 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:
FOR CONTRACTS ISSUED ON OR AFTER JANUARY 1, 1993
<TABLE>
<S> <C>
- -Delchester Fund-Institutional Class -Nationwide(R) Money Market Fund
- -Dreyfus A Bonds Plus, Inc. -Neuberger & Berman Guardian Fund, Inc.
- -The Dreyfus Third Century Fund, Inc. -Neuberger & Berman Limited Maturity Bond
- -The Evergreen Total Return Fund Fund
- -Fidelity Asset Manager TM -Neuberger & Berman Partners Fund, Inc.
- -Fidelity Equity-Income Fund -Oppenheimer Global Fund
- -Fidelity Magellan(R) Fund -Peoples Index Fund, Inc.
- -Fidelity Puritan Fund -Phoenix Balanced Fund Series
- -Fidelity VIP High Income Portfolio* (additional purchase -Strong Total Return Fund, Inc.
payments or exchanges may not be made to this -Templeton Foreign Fund
fund on or after December 1, 1993). -Twentieth Century Growth Investors
- -Janus Twenty Fund -Twentieth Century International Equity Fund
- -MFS(R) World Governments Fund -Twentieth Century Ultra Investors
- -Nationwide(R) Bond Fund -Twentieth Century U.S. Governments Short-
- -Nationwide(R) Fund Term
- -Nationwide(R) Growth Fund
* The High Income Portfolio may invest in lower quality debt securities
commonly referred to as junk bonds.
</TABLE>
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<PAGE> 7
<TABLE>
FOR CONTRACTS ISSUED ON OR AFTER DECEMBER 25, 1982 AND BEFORE JANUARY 1, 1993
<S> <C>
- -Fidelity Capital & Income Fund -MFS(R) World Governments Fund
(additional purchase payments or -Nationwide(R) Money Market Fund
exchanges may not be made to this fund on -Twentieth Century Growth Investors
or after May 1, 1991. Not available for -Twentieth Century U.S. Governments Short-
Contracts issued on or after May 1, 1987). Term
- -Fidelity VIP High Income Portfolio*
(additional purchase payments or exchanges may not
be made to this fund on or after December 1, 1993).
</TABLE>
FOR CONTRACTS ISSUED BEFORE DECEMBER 25, 1982
- -Nationwide(R) Bond Fund -Nationwide(R) Growth Fund
- -Nationwide(R) Fund -Nationwide(R) Money Market Fund
This Prospectus provides you with the basic information you should know
about the Individual Deferred Variable Annuity Contracts issued by the
Nationwide Variable Account before investing. You should read it and keep it for
future reference. A Statement of Additional Information dated May 1, 1995,
containing further information about the Contracts and the Nationwide 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, 1995, IS
INCORPORATED HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF
ADDITIONAL INFORMATION APPEARS ON PAGE 46 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1995.
2
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<PAGE> 8
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person actually receiving annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 78 or younger at the time of contract issuance.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence, as originally shown on the Contract Data Page of the Contract, unless
changed by the Owner.
ANNUITY PAYMENT OPTION- The method for making annuity payments. Several options
are available under this Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Designated Annuitant. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- The Contingent Designated Annuitant may be the
recipient of certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named in the application, all provisions of the Contract which are
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. The Owner's right to name a Contingent Designated Annuitant may be
restricted under the provisions of any retirement or deferred compensation plan
for which this Contract is issued.
CONTINGENT OWNER- A Contingent Owner, if named in the Application, succeeds to
the rights of Contract Owner upon the Contract Owner's death before
Annuitization. For contracts issued in the state of New York, references
throughout this prospectus to "Contingent Owner" shall mean "Owner's
Beneficiary."
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, and the Annuity Commencement Date.
3
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<PAGE> 9
CONTRACT VALUE- The sum of the Variable Account Contract Value and the Fixed
Account Contract Value.
CONTRACT YEAR- Each year commencing with the Date of Issue, and each Contract
Anniversary thereafter shall be a Contract Year.
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.
This benefit does not apply upon the death of the Contract Owner when the Owner
and Designated Annuitant are not the same person. If the Annuitant dies after
the Annuitization Date, any benefit that may be payable shall be as specified in
the Annuity Payment Option elected.
DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in any segregated asset account.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during the annuity payment period.
INDIVIDUAL RETIREMENT ACCOUNT- A custodial account which qualifies for treatment
under Section 408 of the Internal Revenue Code.
INDIVIDUAL RETIREMENT ANNUITY- An annuity which qualifies for treatment under
Section 408 of the Internal Revenue Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time in which an interest rate credited to the Fixed Account under
the Contract is guaranteed to remain the same. For Purchase Payments into the
Fixed Account or transfers from the Variable Account, this period begins upon
the date of deposit or transfer and ends at the end of the calendar quarter at
least one year from deposit or transfer. At the end of an Interest Rate
Guarantee Period, a new interest rate is declared with an Interest Rate
Guarantee Period starting at the end of the prior period and ending at the end
of the calendar quarter one year later.
MUTUAL FUND - The registered management investment companies in which the assets
of the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACTS- Contracts not issued to or as Qualified Plans,
Individual Retirement Annuities or Tax Sheltered Annuities.
NON-QUALIFIED PLANS- Retirement Plans which do not receive favorable tax
treatment under the provisions of the Internal Revenue Code.
PLAN PARTICIPANT-The Plan Participant is the person for whom contributions are
being made to a Qualified Plan or Tax Sheltered Annuity either through employer
contributions or employee salary reduction contributions.
QUALIFIED CONTRACTS- Contracts issued under Qualified Plans.
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<PAGE> 10
QUALIFIED PLANS- Retirement Plans which receive favorable tax treatment under
the provisions of the Internal Revenue Code, including those described in
Section 401 and 403(a) of the Internal Revenue Code.
TAX SHELTERED ANNUITY- An annuity which qualifies for treatment under Section
403(b) of the Internal Revenue Code of 1986, as amended.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office is open for business or any other day during which there is a sufficient
degree of trading of the Variable Account's underlying Mutual Fund shares that
the current net asset value of its Accumulation Units might be materially
affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- A separate investment account of the Company into which
Variable Account purchase payments are allocated.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
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<PAGE> 11
<TABLE>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF SPECIAL TERMS..................................................................... 3
SUMMARY OF CONTRACT EXPENSES.................................................................. 8
SYNOPSIS...................................................................................... 14
CONDENSED FINANCIAL INFORMATION............................................................... 15
NATIONWIDE LIFE INSURANCE COMPANY............................................................. 21
THE VARIABLE ACCOUNT.......................................................................... 21
Underlying Mutual Fund Options....................................................... 21
Voting Rights........................................................................ 22
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS............................. 23
Mortality Risk Charge................................................................ 23
Expense Risk Charge.................................................................. 23
Contingent Deferred Sales Charge..................................................... 23
Elimination of Contingent Deferred Sales Charge...................................... 25
Contract Maintenance and Administration Charge....................................... 25
Premium Taxes........................................................................ 26
Expenses of Variable Account......................................................... 26
Investments of the Variable Account.................................................. 26
Right to Revoke...................................................................... 26
Transfers............................................................................ 27
Assignment........................................................................... 28
Loan Privilege....................................................................... 28
Beneficiary Provisions............................................................... 29
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.............................................................. 31
Frequency and Amount of Annuity Payments............................................. 32
Change in Annuity Commencement Date.................................................. 32
Change in Form of Annuity............................................................ 32
Annuity Payment Option............................................................... 32
Death of Contract Owner.............................................................. 33
Death Benefit at Death of Designated Annuitant Prior to the Annuitization Date....... 34
Death Benefit After the Annuitization Date........................................... 35
Required Distributions for Qualified Plans or Tax Sheltered Annuities................ 35
Required Distributions for Individual Retirement Annuities and
Individual Retirement Accounts.................................................. 36
Generation-Skipping Transfers........................................................ 37
GENERAL INFORMATION........................................................................... 37
Contract Owner Services.............................................................. 37
Statements and Reports............................................................... 38
Allocation of Purchase Payments and Contract Value................................... 39
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C>
Value of a Variable Account Accumulation Unit........................................ 39
Net Investment Factor................................................................ 40
Valuation of Assets.................................................................. 40
Determining the Contract Value....................................................... 40
Surrender (Redemption)............................................................... 41
Surrenders Under a Qualified Plan or Tax Sheltered Annuity........................... 42
Taxes................................................................................ 43
Non-Qualified Contracts.............................................................. 43
Charge for Tax Provisions............................................................ 45
Qualified Plans, Individual Retirement Annuities, Individual Retirement Accounts
and Tax Sheltered Annuities..................................................... 45
Individual Retirement Accounts....................................................... 45
Diversification...................................................................... 46
LEGAL PROCEEDINGS............................................................................. 46
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...................................... 46
APPENDIX A.................................................................................... 47
FIXED ACCOUNT ALLOCATIONS..................................................................... 47
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT.......................................................... 48
APPENDIX B.................................................................................... 49
PARTICIPATING FUNDS........................................................................... 49
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
SUMMARY OF CONTRACT EXPENSES
(FOR CONTRACTS ISSUED ON OR AFTER JANUARY 1, 1993)
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1).................................................... 7%
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGES(2)................................................... $30
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charge......................................................... 1.25%
Administration Charge..................................................................... 0.05%
Total Variable Account Annual Expenses................................................. 1.30%
</TABLE>
(1) For Contracts issued on or after January 1, 1993 the maximum Contingent
Deferred Sales Charge is 7%. Starting with the second year after a purchase
payment has been made, 10% of that purchase payment may be withdrawn
without imposition of a Contingent Deferred Sales Charge. The Contingent
Deferred Sales Charge is waived for first-year withdrawals of up to 10% of
premium on IRA rollover contracts or for distributions required for the
Contract to meet minimum distribution rules. This free withdrawal privilege
is non-cumulative and must be used in the year available. Withdrawals may
be restricted for Contracts issued pursuant to the terms of a Qualified
Plan. The Contingent Deferred Sales Charge is imposed only against purchase
payments.
(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 and
Administration Charges").
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<PAGE> 14
<TABLE>
<CAPTION>
(FOR CONTRACTS ISSUED ON OR AFTER JANUARY 1, 1993)
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
- ------------------------------------------------------------------------------------------------------
Total Portfolio
Management Other Company
Fees Expenses Expenses
<S> <C> <C> <C>
DELCHESTER FUND-INSTITUTIONAL CLASS 0.58% 0.25% 0.83%
- ------------------------------------------------------------------------------------------------
DREYFUS A BONDS PLUS, INC. 0.65% 0.25% 0.90%
- ------------------------------------------------------------------------------------------------
THE DREYFUS THIRD CENTURY FUND, INC. 0.75% 0.42% 1.17%
- ------------------------------------------------------------------------------------------------
THE EVERGREEN TOTAL RETURN FUND 1.00% 0.18% 1.18%
- ------------------------------------------------------------------------------------------------
FIDELITY ASSET MANAGER 0.72% 0.32% 1.04%
- ------------------------------------------------------------------------------------------------
FIDELITY EQUITY-INCOME FUND 0.44% 0.25% 0.69%
- ------------------------------------------------------------------------------------------------
FIDELITY MAGELLAN(R) FUND 0.76% 0.23% 0.99%
- ------------------------------------------------------------------------------------------------
FIDELITY PURITAN FUND 0.53% 0.26% 0.79%
- ------------------------------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME PORTFOLIO 0.61% 0.10% 0.71%
- ------------------------------------------------------------------------------------------------
JANUS TWENTY FUND 0.67% 0.35% 1.02%
- ------------------------------------------------------------------------------------------------
MFS(R) WORLD GOVERNMENTS FUND 0.90% 0.64% 1.54%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) BOND FUND 0.50% 0.21% 0.71%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) FUND 0.50% 0.13% 0.63%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) GROWTH FUND 0.50% 0.18% 0.68%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) MONEY MARKET 0.45% 0.20% 0.65%
- ------------------------------------------------------------------------------------------------
NEUBERGER & BERMAN GUARDIAN FUND, INC. 0.62% 0.19% 0.81%
- ------------------------------------------------------------------------------------------------
NEUBERGER & BERMAN LIMITED MATURITY BOND FUND 0.49% 0.21% 0.70%
- ------------------------------------------------------------------------------------------------
NEUBERGER & BERMAN PARTNERS FUND, INC. 0.65% 0.16% 0.81%
- ------------------------------------------------------------------------------------------------
OPPENHEIMER GLOBAL FUND 0.73% 0.49% 1.22%
- ------------------------------------------------------------------------------------------------
PEOPLES INDEX FUND(R), INC. 0.10% 0.54% 0.64%
- ------------------------------------------------------------------------------------------------
PHOENIX BALANCED FUND SERIES 0.53% 0.43% 0.96%
- ------------------------------------------------------------------------------------------------
STRONG TOTAL RETURN FUND, INC. 0.81% 0.39% 1.20%
- ------------------------------------------------------------------------------------------------
TEMPLETON FOREIGN FUND 0.63% 0.51% 1.14%
- ------------------------------------------------------------------------------------------------
TWENTIETH CENTURY GROWTH INVESTORS 1.00% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------
TWENTIETH CENTURY INTERNATIONAL EQUITY FUND 1.90% 0.00% 1.90%
- ------------------------------------------------------------------------------------------------
TWENTIETH CENTURY ULTRA INVESTORS 1.00% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------
TWENTIETH CENTURY U.S. GOVERNMENTS SHORT TERM 1.00% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------
</TABLE>
(3) The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against Variable Account assets or
reductions from Contract Values. These underlying Mutual Fund expenses are
taken into consideration in computing each underlying Mutual Fund's net
asset value, which is the share price used to calculate the unit values of
the Variable Account.
9
14 of 118
<PAGE> 15
(FOR CONTRACTS ISSUED ON OR AFTER JANUARY 1, 1993)
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment 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 presented are derived from a
formula which allows the $30 Contract Maintenance Charge to be expressed as a
percentage of the average Contract account size for existing Contracts. Since
the average contract account size for Contracts issued under this prospectus is
greater than $1000, the expense effect of the Contract Maintenance Charge is
reduced accordingly.
<TABLE>
<CAPTION>
IF YOU SURRENDER YOUR IF YOU DO NOT SURRENDER IF YOU ANNUITIZE YOUR
CONTRACT AT THE END OF THE YOUR CONTRACT AT THE END OF CONTRACT AT THE END OF THE
APPLICABLE TIME PERIOD THE APPLICABLE TIME PERIOD APPLICABLE TIME PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delchester Fund-Inst'l 74 118 165 267 24 73 125 267 * 73 125 167
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus A Bonds Plus 74 120 169 275 24 75 129 275 * 75 129 275
- ----------------------------------------------------------------------------------------------------------------------------
The Dreyfus Third
Century Fund, Inc. 77 129 183 303 27 84 143 303 * 84 143 303
- ----------------------------------------------------------------------------------------------------------------------------
The Evergreen Total
Return Fund 77 129 183 304 27 84 143 304 * 84 143 304
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Asset
ManagerTM 76 125 176 289 26 80 136 289 * 80 136 289
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income
Fund 72 114 158 253 22 69 118 253 * 69 118 253
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Magellan Fund 75 123 173 284 25 78 133 284 * 78 133 284
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 73 117 163 263 23 72 123 263 * 72 123 263
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High
Income Portfolio 72 114 159 255 22 69 119 255 * 69 119 255
- ----------------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 76 124 175 287 26 79 135 287 * 79 135 287
- ----------------------------------------------------------------------------------------------------------------------------
MFS(R) World
Governments Fund 81 140 202 340 31 95 162 340 * 95 162 340
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Bond
Fund 72 114 159 255 22 69 119 255 * 69 119 255
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund 72 112 154 246 22 67 114 246 * 67 114 246
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth
Fund 72 113 157 251 22 68 117 251 * 68 117 251
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money
Market Fund 72 112 156 248 22 67 116 248 * 67 116 248
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman
Guardian Fund, Inc. 74 117 164 265 24 72 124 265 * 72 124 265
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman
Limited Maturity Bond
Fund 72 114 158 254 22 69 118 254 * 69 118 254
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman
Partners Fund, Inc. 74 117 164 265 24 72 124 265 * 72 124 265
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
15 of 118
<PAGE> 16
<TABLE>
<CAPTION>
IF YOU SURRENDER YOUR IF YOU DO NOT SURRENDER IF YOU ANNUITIZE YOUR
CONTRACT AT THE END OF THE YOUR CONTRACT AT THE END OF CONTRACT AT THE END OF THE
APPLICABLE TIME PERIOD THE APPLICABLE TIME PERIOD APPLICABLE TIME PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oppenheimer Global
Fund 78 130 185 308 28 85 145 308 * 85 145 308
- ---------------------------------------------------------------------------------------------------------------------------
Peoples Index Fund,
Inc. 72 112 155 247 22 67 115 247 * 67 115 247
- ---------------------------------------------------------------------------------------------------------------------------
Phoenix Balanced
Fund Series 75 122 172 281 25 77 132 281 * 77 132 281
- ---------------------------------------------------------------------------------------------------------------------------
Strong Total Return
Fund, Inc. 78 130 184 306 28 85 144 306 * 85 144 306
- ---------------------------------------------------------------------------------------------------------------------------
Templeton Foreign
Fund 77 128 181 300 27 83 141 300 * 83 141 300
- ---------------------------------------------------------------------------------------------------------------------------
Twentieth C. Growth
Investors 76 123 174 285 26 78 134 285 * 78 134 285
- ---------------------------------------------------------------------------------------------------------------------------
Twentieth C.
International Equity
Fund 85 151 220 374 35 106 180 374 * 106 180 374
- ---------------------------------------------------------------------------------------------------------------------------
Twentieth C. U.S.
Governments Short-
Term 76 123 174 285 26 78 134 285 * 78 134 285
- ---------------------------------------------------------------------------------------------------------------------------
Twentieth C. Ultra
Investors Short-Term 76 123 174 285 26 78 134 285 * 78 134 285
- ---------------------------------------------------------------------------------------------------------------------------
</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 is to assist the
Contract Owner in understanding the various costs and expenses that a Contract
Owner will bear directly or indirectly. The expenses of the Nationwide
Variable Account as well as those of the underlying Mutual Funds are reflected
in the table. For more and complete descriptions of the expenses of the
Nationwide Variable Account, (see "Variable Account Charges, Purchase
Payments, and Other Deductions"). For more and complete information regarding
expenses paid out of the assets of a particular underlying Mutual Fund, see
the underlying Mutual Fund's prospectus. Deductions for premium taxes may
also apply but are not reflected in the Example shown above (see
"Premium Taxes").
11
16 of 118
<PAGE> 17
SUMMARY OF CONTRACT EXPENSES
(FOR CONTRACTS ISSUED PRIOR TO JANUARY 1, 1993)
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1)................. 5%
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGES(2).................. $30
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charge........................... 1.30%
Total Variable Account Annual Expenses.................. 1.30%
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
<TABLE>
<CAPTION>
TOTAL PORTFOLIO
MANAGEMENT OTHER COMPANY
FEES EXPENSES EXPENSES
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIDELITY CAPITAL & INCOME FUND 0.71% 0.26% 0.97%
- ------------------------------------------------------------------------------------------------
FIDELITY VIP HIGH INCOME PORTFOLIO 0.61% 0.10% 0.71%
- ------------------------------------------------------------------------------------------------
MFS WORLD GOVERNMENTS FUND 0.90% 0.64% 1.54%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) MONEY MARKET FUND 0.45% 0.20% 0.65%
- ------------------------------------------------------------------------------------------------
TWENTIETH CENTURY GROWTH INVESTORS 1.00% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------
TWENTIETH CENTURY U.S. GOVERNMENTS SHORT-TERM 1.00% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) BOND FUND* 0.50% 0.21% 0.71%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) FUND* 0.50% 0.13% 0.63%
- ------------------------------------------------------------------------------------------------
NATIONWIDE(R) GROWTH FUND* 0.50% 0.18% 0.68%
- ------------------------------------------------------------------------------------------------
</TABLE>
* Available only for Contracts issued Prior to December 25, 1982.
(1) For purchase payments made after January 30, 1981 the contract owner may,
after the first year from the date of such purchase payment, withdraw 5% of
that purchase payment without imposition of a Contingent Deferred Sales
Charge. For Contracts issued prior to August 4, 1981 starting with the third
Contract Year, the Company will waive Contingent Deferred Sales Charge on a
cumulative basis to 10% of 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 and
Administration Charges").
(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.
12
17 of 118
<PAGE> 18
(FOR CONTRACTS ISSUED PRIOR TO JANUARY 1, 1993)
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 presented are derived from a
formula which allows the $30 Contract Maintenance Charge to be expressed as a
percentage of the average contract account size for existing contracts. Since
the average contract account size for contracts issued under this prospectus is
greater than $1000, the expense effect of the Contract Maintenance Charge is
reduced accordingly.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR IF YOU DO NOT SURRENDER YOUR IF YOU ANNUITIZE YOUR
CONTRACT AT THE END OF THE CONTRACT AT THE END OF THE CONTRACT AT THE END OF THE
APPLICABLE TIME PERIOD APPLICABLE TIME PERIOD APPLICABLE TIME PERIOD
- ---------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS. 1 YR. 3 YRS. 5 YRS. 10 YRS.
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Capital & 75 122 172 282 25 77 132 282 ** 77 132 282
Income Fund
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP High 72 114 159 255 22 69 119 255 ** 69 119 255
Income Portfolio
- --------------------------------------------------------------------------------------------------------------------
MFS(R) World 81 140 202 340 31 95 162 340 ** 95 162 340
Governments Fund
- --------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money 72 112 156 248 22 67 116 248 ** 67 116 248
Market Fund
- --------------------------------------------------------------------------------------------------------------------
Twentieth C. Growth 76 123 174 285 26 78 134 285 ** 78 134 285
Investors.
- --------------------------------------------------------------------------------------------------------------------
Twentieth C. U.S. 76 123 174 285 26 78 134 285 ** 78 134 285
Governments Short
- -Term
- --------------------------------------------------------------------------------------------------------------------
Nationwide(R) Bond 72 114 159 255 22 69 119 255 ** 69 119 255
Fund*
- --------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund* 72 112 154 246 22 67 114 246 ** 67 114 246
- --------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth 72 113 157 251 22 68 117 251 ** 68 117 251
Fund*
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Available only for Contracts issued Prior to December 25, 1982.
** 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 a Contract
Owner will bear directly or indirectly. The expenses of the Nationwide Variable
Account as well as those of the underlying Mutual Fund Company are reflected in
the table. For more and complete descriptions of the expenses of the Nationwide
Variable Account, see "Variable Account Charges, Purchase Payments, and Other
Deductions." For more and complete information regarding expenses paid out of
the assets of a particular underlying Mutual Fund, see the underlying Mutual
Fund's prospectus. Deductions for premium taxes may also apply but are not
reflected in the Example shown above (see "Premium Taxes").
13
18 of 118
<PAGE> 19
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 Owner's Contract Value a Contingent Deferred Sales Charge not to exceed 7%
of the lesser of the total of all purchase payments made within 84 months prior
to the date of the request to surrender, or the amount surrendered. For
Contracts issued before January 1, 1993 the Company will 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. 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 from the Contract Value of such Contracts.
The Company will also assess for Contracts issued on or after January 1, 1993 an
Administration Charge equal to an annual rate of 0.05% of the daily net asset
value of the Variable Account. These charges are 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 and
Administration Charges").
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 Charge").
The Company deducts an Expense Risk Charge equal to an annual rate of
0.45% (0.50% for contracts issued prior to January 1, 1993) of the daily net
asset value of the Variable Account as compensation for the Company's risk by
undertaking not to increase administrative charges on the Contracts regardless
of the actual administrative costs (see "Expense Risk Charge").
The cumulative total of all purchase payments under a Contract may not
exceed $1,000,000 without the prior consent of the Company (see "Allocations of
Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $500, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $20, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $20 (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable at the time purchase
payments are made, the premium tax deduction will be made from the Contract
prior to allocation to any underlying Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the day the Contract
is received, it may be returned to the Home Office of the Company, at the
address shown on page 1 of this Prospectus. When the Contract is received by the
Company, the Company will void the Contract and refund the Contract Value in
full unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be return of purchase payments (see "Right To
Revoke").
14
19 of 118
<PAGE> 20
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period(1).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Delchester Fund Inst'l-Q 11.511092 10.867271 -5.59% 43,997 1994
10.000000 11.511092 15.11% 15,953 1993
- ---------------------------------------------------------------------------------------------------------
Peoples Index Fund-Q 10.819026 10.749166 -0.65% 12,668 1994
10.000000 10.819026 8.19% 585 1993
- ---------------------------------------------------------------------------------------------------------
Dreyfus A Bonds Plus, Inc. 10.000000 9.110600 -8.89% 15,283 1994
- -Q
- ---------------------------------------------------------------------------------------------------------
The Dreyfus Third Century 10.477293 9.570659 -8.65% 7,325 1994
Fund, Inc.-Q 10.000000 10.477293 4.77% 2,583 1993
- ---------------------------------------------------------------------------------------------------------
The Evergreen Total 11.153183 10.301799 -7.63% 51,305 1994
Return Fund-Q 10.000000 11.153183 11.53% 32,321 1993
- ---------------------------------------------------------------------------------------------------------
Fidelity Asset Manager-Q 10.415849 9.589367 -7.93% 150,536 1994
10.000000 10.415849 4.16% 3,292 1993
- ---------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund-Q 12.346838 11.964387 -3.10% 307,064 1994
10.000000 12.346838 23.47% 59,100 1993
- ---------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund-Q 11.972512 12.020413 0.40% 161,179 1994
10.000000 11.972512 19.73% 44,320 1993
- ---------------------------------------------------------------------------------------------------------
Janus Twenty Fund-Q 9.451097 8.701036 -7.94% 56,135 1994
10.000000 9.451097 -5.49% 1,020 1993
- ---------------------------------------------------------------------------------------------------------
Neuberger & Berman 10.000000 9.640402 -3.60% 25,549 1994
Guardian Fund-Q
- ---------------------------------------------------------------------------------------------------------
Neuberger & Berman 9.995028 9.833352 -1.62% 89,231 1994
Limited Maturity Bond 10.000000 9.995028 -0.05% 423 1993
Fund-Q
- ---------------------------------------------------------------------------------------------------------
Neuberger & Berman 11.548721 11.183371 -3.16% 38,329 1994
Partners Fund-Q 10.000000 11.548721 15.49% 9,926 1993
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund- 14.119303 13.503390 -4.36% 87,590 1994
Q 10.000000 14.119303 41.19% 5,128 1993
- ---------------------------------------------------------------------------------------------------------
Phoenix Balanced Fund 10.000000 9.338434 -6.62% 9,028 1994
Series-Q
- ---------------------------------------------------------------------------------------------------------
Strong Total Return Fund, 12.205201 11.881033 -2.66% 19,727 1994
Inc.-Q 10.000000 12.205201 22.05% 3,939 1993
- ---------------------------------------------------------------------------------------------------------
Twentieth Century Ultra 9.505758 9.043121 -4.87% 116,020 1994
Investors-Q 10.000000 9.505758 -4.94% 2,713 1993
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) The unit value information is not provided for the Templeton Foreign Fund
and the TCI International Equity Fund because those underlying Mutual Funds
were only added to the Variable Account on February 1, 1995 and therefore
have no unit value histories prior to that time.
15
20 of 118
<PAGE> 21
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nationwide(R) Fund-Q 45.422888 45.095466 -0.72% 32,311 1994
-----------------------------------------------------------------------
43.104048 45.422888 5.38% 32,770 1993
-----------------------------------------------------------------------
42.418147 43.104048 1.62% 30,648 1992
-----------------------------------------------------------------------
33.001868 42.418147 28.53% 28,864 1991
-----------------------------------------------------------------------
33.337339 33.001868 -1.01% 27,869 1990
-----------------------------------------------------------------------
25.242361 33.337339 32.07% 26,210 1989
-----------------------------------------------------------------------
21.904484 25.242361 15.24% 34,078 1988
-----------------------------------------------------------------------
21.753896 21.904484 0.69% 29,853 1987
-----------------------------------------------------------------------
18.738993 21.753896 16.09% 30,428 1986
-----------------------------------------------------------------------
13.914957 18.738993 34.67% 23,160 1985
-----------------------------------------------------------------------
13.283383 13.914957 4.75% 26,218 1984
- ------------------------------------------------------------------------------------------------
Nationwide(R) Fund-NQ
47.312558 46.971513 -0.72% 259 1994
-----------------------------------------------------------------------
44.897247 47.312558 5.38% 260 1993
-----------------------------------------------------------------------
44.182806 44.897247 1.62% 261 1992
-----------------------------------------------------------------------
34.374796 44.182806 28.53% 753 1991
-----------------------------------------------------------------------
34.724214 34.374796 -1.01% 1,169 1990
-----------------------------------------------------------------------
26.292480 34.724214 32.07% 3,791 1989
-----------------------------------------------------------------------
22.815734 26.292480 15.24% 4,689 1988
-----------------------------------------------------------------------
22.658886 22.815734 0.69% 4,939 1987
-----------------------------------------------------------------------
19.518552 22.658886 16.09% 5,238 1986
-----------------------------------------------------------------------
14.493830 19.518552 34.67% 5,139 1985
-----------------------------------------------------------------------
13.835981 14.493830 4.75% 5,141 1984
- ------------------------------------------------------------------------------------------------
Nationwide(R) 51.458079 51.535806 0.15% 48,009 1994
Growth Fund-Q -----------------------------------------------------------------------
46.832151 51.458079 9.88% 48,190 1993
-----------------------------------------------------------------------
44.639577 46.832151 4.91% 48,853 1992
-----------------------------------------------------------------------
33.241418 44.639577 34.29% 42,168 1991
-----------------------------------------------------------------------
36.439953 33.241418 -8.78% 43,789 1990
-----------------------------------------------------------------------
32.118373 36.439953 13.46% 53,223 1989
-----------------------------------------------------------------------
26.557068 32.118373 20.94% 58,604 1988
-----------------------------------------------------------------------
26.282362 26.557068 1.05% 61,931 1987
-----------------------------------------------------------------------
22.485465 26.282362 16.89% 61,795 1986
-----------------------------------------------------------------------
17.090851 22.485465 31.56% 51,773 1985
-----------------------------------------------------------------------
15.974526 17.090851 6.99% 33,021 1984
- ------------------------------------------------------------------------------------------------
</TABLE>
16
21 of 118
<PAGE> 22
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nationwide(R) 54.333269 54.415339 0.15% 121 1994
Growth Fund-NQ ---------------------------------------------------------------------
49.448867 54.333269 9.88% 126 1993
---------------------------------------------------------------------
47.133788 49.448867 4.91% 397 1992
---------------------------------------------------------------------
35.098768 47.133788 34.29% 568 1991
---------------------------------------------------------------------
38.476025 35.098768 -8.78% 580 1990
---------------------------------------------------------------------
33.912975 38.476025 13.46% 2,019 1989
---------------------------------------------------------------------
28.040930 33.912975 20.94% 2,498 1988
---------------------------------------------------------------------
27.750867 28.040930 1.05% 2,757 1987
---------------------------------------------------------------------
23.741823 27.750867 16.89% 2,270 1986
---------------------------------------------------------------------
18.045792 23.741823 31.56% 2,246 1985
---------------------------------------------------------------------
16.867093 18.045792 6.99% 2,249 1984
- ----------------------------------------------------------------------------------------------
Nationwide(R) 33.991130 30.832258 -9.29% 35,282 1994
Bond Fund-Q ---------------------------------------------------------------------
31.104546 33.991130 9.28% 35,392 1993
---------------------------------------------------------------------
29.186916 31.104546 6.57% 21,409 1992
---------------------------------------------------------------------
25.300143 29.186916 15.36% 18,724 1991
---------------------------------------------------------------------
23.686756 25.300143 6.81% 16,600 1990
---------------------------------------------------------------------
21.674206 23.686756 9.29% 20,519 1989
---------------------------------------------------------------------
20.301575 21.674206 6.76% 21,508 1988
---------------------------------------------------------------------
20.512400 20.301575 -1.03% 21,175 1987
---------------------------------------------------------------------
18.406923 20.512400 11.44% 19,962 1986
---------------------------------------------------------------------
15.655621 18.406923 17.57% 10,849 1985
---------------------------------------------------------------------
13.906483 15.655621 12.58% 7,239 1984
- ----------------------------------------------------------------------------------------------
Nationwide(R) 33.845410 30.700082 -9.29% 657 1994
Bond Fund-NQ ---------------------------------------------------------------------
30.971200 33.845410 9.28% 676 1993
---------------------------------------------------------------------
29.061793 30.971200 6.57% 836 1992
---------------------------------------------------------------------
25.191682 29.061793 15.36% 1,030 1991
---------------------------------------------------------------------
23.585215 25.191682 6.81% 1,070 1990
---------------------------------------------------------------------
21.581298 23.585215 9.29% 1,061 1989
---------------------------------------------------------------------
20.214557 21.581298 6.76% 1,063 1988
---------------------------------------------------------------------
20.424489 20.214557 -1.03% 1,340 1987
---------------------------------------------------------------------
18.328041 20.424489 11.44% 717 1986
---------------------------------------------------------------------
15.588540 18.328041 17.57% 304 1985
---------------------------------------------------------------------
13.846897 15.588540 12.58% 304 1984
- ----------------------------------------------------------------------------------------------
</TABLE>
17
22 of 118
<PAGE> 23
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nationwide(R) 22.315407 22.850271 2.40% 56,127 1994
Money Market Fund-Q* -----------------------------------------------------------------------
- -Contracts issued before 22.042019 22.315407 1.24% 68,074 1993
December 25, 1982 -----------------------------------------------------------------------
21.636991 22.042019 1.87% 92,318 1992
-----------------------------------------------------------------------
20.752553 21.636991 4.26% 118,625 1991
-----------------------------------------------------------------------
19.490217 20.752553 6.48% 139,482 1990
-----------------------------------------------------------------------
18.134311 19.490217 7.48% 143,367 1989
-----------------------------------------------------------------------
17.153896 18.134311 5.72% 141,139 1988
-----------------------------------------------------------------------
16.365495 17.153896 4.82% 167,178 1987
-----------------------------------------------------------------------
15.592616 16.365495 4.96% 170,053 1986
-----------------------------------------------------------------------
14.634154 15.592616 6.55% 195,495 1985
-----------------------------------------------------------------------
13.434102 14.634154 8.93% 213,440 1984
- ----------------------------------------------------------------------------------------------------
Nationwide(R) 22.456439 22.994681 2.40% 1,329 1994
Money Market Fund-NQ* -----------------------------------------------------------------------
- -Contracts issued before 22.181323 22.456439 1.24% 1,335 1993
Decmeber 25, 1982 -----------------------------------------------------------------------
21.773734 22.181323 1.87% 2,211 1992
-----------------------------------------------------------------------
20.883706 21.773734 4.26% 3,526 1991
-----------------------------------------------------------------------
19.613392 20.883706 6.48% 3,539 1990
-----------------------------------------------------------------------
18.248916 19.613392 7.48% 4,681 1989
-----------------------------------------------------------------------
17.262304 18.248916 5.72% 4,923 1988
-----------------------------------------------------------------------
16.468923 17.262304 4.82% 5,697 1987
-----------------------------------------------------------------------
15.691157 16.468923 4.96% 6,392 1986
-----------------------------------------------------------------------
14.726641 15.691157 6.55% 9,046 1985
-----------------------------------------------------------------------
13.519005 14.726641 8.93% 15,764 1984
- ----------------------------------------------------------------------------------------------------
</TABLE>
* The 7-day yield on the Nationwide Money Market Fund as of December 30, 1994,
was 5.65%.
18
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<PAGE> 24
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity 34.612981 32.589111 -5.85% 47,236 1994
Capital & Income -----------------------------------------------------------------------
Fund-Q 28.076548 34.612981 23.28% 59,521 1993
-----------------------------------------------------------------------
22.214568 28.076548 26.39% 67,342 1992
-----------------------------------------------------------------------
17.337275 22.214568 28.13% 73,366 1991
-----------------------------------------------------------------------
18.269034 17.337275 -5.10% 100,081 1990
-----------------------------------------------------------------------
19.118217 18.269034 -4.44% 181,935 1989
-----------------------------------------------------------------------
17.209582 19.118217 11.09% 209,084 1988
-----------------------------------------------------------------------
17.219486 17.209582 -0.06% 222,142 1987
-----------------------------------------------------------------------
14.790934 17.219486 16.42% 245,592 1986
-----------------------------------------------------------------------
11.937295 14.790934 23.91% 186,458 1985
-----------------------------------------------------------------------
10.941999 11.937295 9.10% 85,802 1984
- ----------------------------------------------------------------------------------------------------
MFS(R) World 33.728667 31.104159 -7.78% 39,642 1994
Governments -----------------------------------------------------------------------
Fund-Q 28.864451 33.728667 16.85% 45,016 1993
-----------------------------------------------------------------------
28.856612 28.864451 0.03% 48,580 1992
-----------------------------------------------------------------------
25.777493 28.856612 11.94% 39,397 1991
-----------------------------------------------------------------------
22.152081 25.777493 16.37% 44,525 1990
-----------------------------------------------------------------------
20.902197 22.152081 5.98% 44,572 1989
-----------------------------------------------------------------------
20.287562 20.902197 3.03% 54,351 1988
-----------------------------------------------------------------------
16.504183 20.287562 22.92% 69,736 1987
-----------------------------------------------------------------------
12.845363 16.504183 28.48% 53,614 1986
-----------------------------------------------------------------------
10.026547 12.845363 28.11% 21,316 1985
-----------------------------------------------------------------------
9.926953 10.026547 1.00% 8,044 1984
- ----------------------------------------------------------------------------------------------------
Fidelity Equity- 35.955883 35.576037 -1.06% 306,544 1994
Income Fund-Q -----------------------------------------------------------------------
30.029661 35.955883 19.73% 305,774 1993
-----------------------------------------------------------------------
26.531856 30.029661 13.18% 285,928 1992
-----------------------------------------------------------------------
20.772673 26.531856 27.72% 294,858 1991
-----------------------------------------------------------------------
24.479712 20.772673 -15.14% 330,860 1990
-----------------------------------------------------------------------
20.898784 24.479712 17.13% 408,022 1989
-----------------------------------------------------------------------
17.285651 20.898784 20.90% 399,082 1988
-----------------------------------------------------------------------
17.804841 17.285651 -2.92% 434.996 1987
-----------------------------------------------------------------------
15.408481 17.804841 15.55% 296,988 1986
-----------------------------------------------------------------------
12.482893 15.408481 23.44% 167,305 1985
-----------------------------------------------------------------------
11.442838 12.482893 9.09% 78,085 1984
- ----------------------------------------------------------------------------------------------------
</TABLE>
19
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<PAGE> 25
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE UNIT VALUE CHANGE IN ACCUMULATION
AT BEGINNING AT END ACCUMULATION UNITS AT END
FUND OF PERIOD OF PERIOD UNIT VALUE OF THE PERIOD YEAR
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Twentieth Century 39.197771 38.113717 -2.77% 324,141 1994
Growth Investors-Q -----------------------------------------------------------------------
38.275689 39.197771 2.41% 335,369 1993
-----------------------------------------------------------------------
40.518750 38.275689 -5.54% 404,811 1992
-----------------------------------------------------------------------
24.287059 40.518750 66.83% 410,440 1991
-----------------------------------------------------------------------
25.592676 24.287059 -5.10% 401,940 1990
-----------------------------------------------------------------------
18.114515 25.592676 41.28% 428,017 1989
-----------------------------------------------------------------------
17.866465 18.114515 1.39% 470,808 1988
-----------------------------------------------------------------------
16.040713 17.866465 11.38% 564,503 1987
-----------------------------------------------------------------------
13.641819 16.040713 17.58% 754,611 1986
-----------------------------------------------------------------------
10.317997 13.641819 32.21% 880,137 1985
-----------------------------------------------------------------------
11.776821 10.317997 -12.39% 938,102 1984
- ---------------------------------------------------------------------------------------------------
Nationwide(R) 17.721943 18.146709 2.40% 326,464 1994
Money Market Fund-Q* -----------------------------------------------------------------------
For Contracts issued 17.504831 17.721943 1.24% 294,859 1993
on or after -----------------------------------------------------------------------
December 25, 1982 17.183173 17.504831 1.87% 303,845 1992
-----------------------------------------------------------------------
16.480790 17.183173 4.26% 450,748 1991
-----------------------------------------------------------------------
15.478296 16.480790 6.48% 548,549 1990
-----------------------------------------------------------------------
14.401492 15.478296 7.48% 568,349 1989
-----------------------------------------------------------------------
13.622887 14.401492 5.72% 731,284 1988
-----------------------------------------------------------------------
12.996777 13.622887 4.82% 798,771 1987
-----------------------------------------------------------------------
12.382985 12.996777 4.96% 292,431 1986
-----------------------------------------------------------------------
11.621822 12.382985 6.55% 188,214 1985
-----------------------------------------------------------------------
10.668791 11.621822 8.93% 198,730 1984
- ---------------------------------------------------------------------------------------------------
Twentieth Century 19.087872 18.748399 -1.78% 183,649 1994
U.S. Governments -----------------------------------------------------------------------
Short-Term Q 18.563845 19.087872 2.82% 182,484 1993
-----------------------------------------------------------------------
18.018283 18.563845 3.03% 177,970 1992
-----------------------------------------------------------------------
16.352445 18.018283 10.19% 191,264 1991
-----------------------------------------------------------------------
15.400806 16.352445 6.18% 188,328 1990
-----------------------------------------------------------------------
14.188398 15.400806 8.55% 224,117 1989
-----------------------------------------------------------------------
13.608723 14.188398 4.26% 252,401 1988
-----------------------------------------------------------------------
13.278840 13.608723 2.48% 215,842 1987
-----------------------------------------------------------------------
12.240182 13.278840 8.49% 100,711 1986
-----------------------------------------------------------------------
10.975550 12.240182 11.52% 26,196 1985
-----------------------------------------------------------------------
10.000000 10.975550 9.76% 6,244 1984
- ---------------------------------------------------------------------------------------------------
Fidelity VIP- 16.739460 16.267017 -2.82% 34,151 1994
High Income -----------------------------------------------------------------------
Portfolio 14.073333 16.739460 18.94% 62,931 1993
-----------------------------------------------------------------------
11.587552 14.073333 21.45% 42,842 1992
-----------------------------------------------------------------------
10.000000 11.587552 15.88% 10,365 1991
- ---------------------------------------------------------------------------------------------------
</TABLE>
* The 7-day yield on the Nationwide Money Market Fund as of December 30, 1994
was 5.65%.
20
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<PAGE> 26
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 the District of Columbia, Puerto Rico, and in all states.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard and 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 Fund option(s)
designated by the Contract Owner. There are two sub-accounts within the Variable
Account for each of the underlying Mutual Fund options which may be designated
by the Contract Owner under Contracts issued prior to December 25, 1982. One
such sub-account contains the underlying Mutual Fund shares attributable to
Accumulation Units under Qualified Contracts and one such sub-account contains
the underlying Mutual Fund shares attributable to Accumulation Units under
Non-Qualified Contracts. Beginning December 25, 1982, only Qualified Contracts
are issued pursuant to this Variable Account.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different underlying
Mutual Fund Options (see Appendix B which contains a summary of investment
objectives for each underlying Mutual Fund option). More detailed information
may be found in the current prospectus for each underlying Mutual Fund option
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 1-800-848-6331, TDD 1-800-238-3035
or writing P.O. Box 16609, Columbus, Ohio 43216-6609.
21
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<PAGE> 27
The underlying Mutual Fund options may also be available to registered
separate accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect the
Contract Owners and variable annuity payees, including withdrawal of the
Variable Account from participation in the underlying Mutual Fund or Mutual
Funds which are involved in the conflict.
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 Fund options held in the Variable
Account at regular and special meetings of the shareholders of the underlying
Mutual Funds in accordance with instructions received from persons whose
Contract Value is measured by Accumulation Units in the Variable Account.
However, if the Investment Company Act of 1940 or any Regulation thereunder
should be amended or if the present interpretation thereof should change, and as
a result the Company determines that it is permitted to vote the shares of the
underlying Mutual Funds in its own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares held in the Variable Account which is
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in the Variable Account by the net asset value of the
applicable share of the underlying Mutual Funds.
The number of shares held in the Variable Account which is attributable
to each Contract is determined by dividing the reserve for such Contract by the
net asset value of one share.
The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund and voting instructions will
be solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having the voting interest in the Variable Account will
receive periodic reports relating to the underlying Mutual Fund, proxy material
and a form with which to give such voting instructions with respect to the
proportion of the underlying Mutual Fund shares held in the Variable Account
corresponding to their interest in the Variable Account.
22
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<PAGE> 28
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" that variable annuity payments
will not be affected by the death rates of persons receiving such payments or of
the general population by virtue of annuity rates incorporated in the Contract
which cannot be changed.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis, and
is equal on 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 from the Variable Account. This amount is
computed on a daily basis, and is equal on an annual rate of 0.45% (0.50% for
Contracts issued prior to January 1, 1993) of the daily net asset value of the
Variable Account. The Company expects to generate a profit through assessing
this charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the purchase payments for
these Contracts. However, the Contingent Deferred Sales Charge, referred to
below, when it is applicable, will be used to cover expenses relating to the
sale of the Contracts, including commissions paid to sales personnel, the costs
of preparation of sales literature and other promotional activity. The Company
attempts to recover 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 Charges since the Company expects to generate a
profit through these charges. Gross Distribution Allowances which maybe paid on
the sale of these Contracts are not more than 5.25% of the purchase payments.
If part or all of the Contract Value is surrendered, a Contingent
Deferred Sales Charge will be made by the Company. 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 period. (For tax purposes, a surrender is treated as a withdrawal
of earnings first.)
FOR CONTRACTS ISSUED ON OR AFTER JANUARY 1, 1993
For Contracts issued on or after January 1, 1993, the Contingent Deferred
Sales Charge will apply in the amounts set forth below. In no event will any
Contingent Deferred Sales Charge be made against any values which have been held
under the Contract for at least 84 months, or to commencement of an annuity
payout under Contracts which have been in effect for at least two years or upon
the death of the Designated Annuitant.
23
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<PAGE> 29
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE OF SALES CHARGE YEARS FROM DATE OF SALES CHARGE
PURCHASE PAYMENT PERCENTAGE PURCHASE PAYMENT PERCENTAGE
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
Starting with the second year after a purchase payment has been made
under the Contract, 10% of that purchase payment may be withdrawn each year
without imposition of the Contingent Deferred Sales Charge. This free withdrawal
privilege is non-cumulative and will not exceed 10% of the purchase payment in
any year. Under current Company administrative practice, Contingent Deferred
Sales Charge is waived for first-year withdrawals of up to 10% of premium on IRA
rollover contracts or for distributions required for the Contract to meet
minimum distribution rules. Withdrawals may be restricted for Contracts issued
pursuant to the terms of a Qualified Plan. No sales charges are deducted on
redemption proceeds that are transferred to the Fixed Account option of this
annuity.
FOR CONTRACTS ISSUED BEFORE JANUARY 1, 1993
For Contracts issued before January 1, 1993 a Contingent Deferred Sales
Charge will be made by the Company equal to 5% of the lesser of the total of all
purchase payments made within 96 months prior to the date of the request for
surrender, or the amount surrendered. In no event will any Contingent Deferred
Sales Charge be made against any values which have been held under the Contract
for at least 96 months. The Contract Owner may request certain partial
surrenders of Contract Values for which no Contingent Deferred Sales Charge will
be assessed, as set forth on the following page:
(a) For all purchase payments made after January 30, 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 (less the amount of such purchase payment previously surrendered
free of charge).
(b) For Contracts issued prior to August 4, 1981, starting with the third
Contract year, the Company will waive the Contingent Deferred Sales
Charge on surrendered amounts equal on a cumulative basis to 10% of
purchase payments made under the Contract within 96 months immediately
prior to the Valuation Period during which 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 August 4, 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.
24
29 of 118
<PAGE> 30
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
For Qualified Contracts the Company will waive the Contingent Deferred
Sales Charge when:
A. the Plan Participant experiences a case of hardship (as defined
for purposes of Code Section 401(k));
B. the Plan Participant becomes disabled (within the meaning of Code
Section 72(m)(7));
C. the Plan Participant attains age 59-1/2 and has participated in
the Contract for at least 5 years, as determined from the
Contract Anniversary date;
D. the Plan Participant has participated in the Contract for at
least 15 years as determined from the Contract Anniversary date;
E. the Plan Participant dies; or
F. the Plan Participant annuitizes after 2 years in the Contract.
For Individual Retirement Annuities and Non-Qualified Contracts other
than SEP-IRA Contracts, the Company will waive the Contingent Deferred Sales
Charge when:
A. the Designated Annuitant dies; or
B. the Contract Owner annuitizes after 2 years in the Contract.
For Contracts issued prior to December 25, 1982, the Contingent Deferred
Sales Charges will be eliminated on amounts derived from redemption of Mutual
Fund shares of Nationwide Investing Foundation's Nationwide Fund, Nationwide
Growth Fund, Nationwide Bond Fund or Nationwide Money Market Fund, where such
proceeds are applied to the purchase of Contracts described in this Prospectus
within 60 days after the issuance of such proceeds.
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.
In no event will elimination of Contingent Deferred Sales Charges be
permitted where such elimination will be unfairly discriminatory to any person,
or where it is prohibited by law.
CONTRACT MAINTENANCE AND ADMINISTRATION 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. For Qualified Contracts established on or after January 1, 1993, the
Contract Maintenance Charge varies from $30 to $0. Variances are based on
internal underwriting guidelines which can result in reductions of charges in
incremental amounts of $5. Underwriting considerations include the size of the
group, the average participant account balance transferred to the Company, if
any, and administrative savings. The Contract Maintenance Charge will be
allocated between the Fixed Account and Variable Account in the same percentages
as the purchase payment investment allocations are to the Fixed Account and
Variable Account. The Company also assesses an Administration Charge equal on an
annual basis to 0.05% of the daily net
25
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<PAGE> 31
asset value of the Variable Account, for Contracts issued on or after January 1,
1993. The deduction of the Administration Charge is made from each sub-account
in the same proportion that the Contract Value in each sub-account bears to the
total Contract Value in the Variable Account. These charges are designed only to
reimburse the Company for administrative expenses, the Company does not expect
to recover from these charges any amount in excess of accumulated expenses. In
any Contract Year when a Contract is surrendered for its full value on other
than the Contract Anniversary, the Contract Maintenance Charge will be deducted
at the time of such surrender. The amount of the Contract Maintenance Charge may
not be increased by the Company. In no event will reduction or elimination of
the Contract Maintenance Charge be permitted where such reduction or elimination
will be unfairly discriminatory to any person, or where it is prohibited by
state law.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon purchase
payments received by the Company. To the best of the Company's present
knowledge, premium taxes currently imposed by certain jurisdictions range from
0% to 3.5%. This range is subject to change. The method used to recoup premium
tax expense will be determined by the Company at its sole discretion and in
compliance with applicable state law. The Company currently deducts such charges
from a Contract Owner's Contract Value either: (1) at the time the Contract is
surrendered, (2) at annuitization, or (3) in those states which require, at the
time purchase payments are made to the Contract.
EXPENSES OF VARIABLE ACCOUNT
Deductions from and expenses paid out of the assets of the underlying
Mutual Fund options are described in each of the underlying Mutual Funds'
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 30, 1994, were 1.54% of average net assets.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have purchase
payments attributable to his 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 Fund
option(s) specified by the Contract Owner are purchased at net asset value for
the respective sub-account(s) and converted into Accumulation Units. The
Contract Owner designates the underlying Mutual Fund(s) to which he or she
desires to have purchase payments allocated. Such election is subject to any
minimum purchase payments limitations which may be imposed by the underlying
Mutual Fund(s) 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 Fund
options, in addition to those set forth in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the date
of Application and the date 10 days after receipt of the Contract and receive a
refund of the Contract Value unless
26
31 of 118
<PAGE> 32
otherwise required by state and/or federal law. All Individual Retirement
Annuity refunds will be 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 Owner may request a transfer of up to 100% of the Contract Value from
the Variable Account to the Fixed Account. No penalty shall be assessed with
respect to any such transfer. All amounts transferred to the Fixed Account must
remain on deposit in the Fixed Account until the expiration of the Interest Rate
Guarantee Period. The Interest Rate Guarantee Period expires on the final day of
a calendar quarter during which the one year anniversary of the allocation to
the Fixed Account occurs. The Owner's value in each sub-account will be
determined as of the date the transfer request is received in the home office in
good order. The Company reserves the right to restrict transfers from the
Variable Account to the Fixed Account to 25% of the Contract Value for any 12
month period.
The Owner may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account from the Fixed Account to
the Variable Account. The maximum percentage that may be transferred from the
Fixed Account to the Variable Account will be determined by the Company, at its
sole discretion, but will not be less than 10% of the total value of the portion
of the Fixed Account that is maturing and will be declared upon the expiration
date of the then current Interest Rate Guarantee Period. The specific percentage
will be declared upon the expiration date of the guaranteed period. Transfers
from the Fixed Account must be made within 45 days after the expiration date of
the guarantee 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 from the Fixed Account may not be made prior to the first
Contract Anniversary. Transfers must also be made prior to the Annuitization
Date.
Transfers among the sub-accounts may be made either in writing or, in
states allowing such transfers, by telephone. This telephone exchange privilege
is made available to Contract Owners automatically without their having to elect
the privilege. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include
any or all of the following, or such other procedures as the Company may, from
time to time, deem reasonable: requesting identifying information, such as name,
contract number, Social Security number, and/or personal identification number;
tape recording all telephone transactions; and providing written confirmation
thereof to both the Contract Owner and any agent of record, at the last address
of record. The Company will not be liable for following instructions
communicated by telephone
27
32 of 118
<PAGE> 33
which it reasonably believes to be genuine. Any losses incurred pursuant to
actions taken by the Company in reliance on telephone instructions reasonably
believed to be genuine shall be borne by the Contract Owner. The Company may
withdraw the telephone exchange privilege upon 30 days' written notice to
Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign the Contract at any time
during the lifetime of the Designated Annuitant. Such assignment will take
effect upon receipt by the Company of a written notice thereof executed by the
Contract Owner. The Company assumes no responsibility for the validity or
sufficiency of any assignment. The Company shall not be liable as to any payment
or other settlement made by the Company before receipt of the assignment.
Qualified Contracts may not be assigned, pledged or otherwise transferred except
under such conditions as may be allowed by applicable law.
If this contract is a Non-Qualified Contract, any portion of Contract
Value attributable to purchase payments made after August 13, 1982, which is
pledged or assigned after August 13, 1982, shall be treated as a distribution
and shall be included in gross income to the extent that the cash value exceeds
the investment in the Contract, for the taxable year in which assigned or
pledged. In addition, any Contract Value assigned would, under certain
conditions, be subject to a tax penalty equal to 10% of the amount which is
included in gross income. Individual Retirement Annuities, Individual Retirement
Accounts 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 their Contract Value, subject to the
terms of the Contract, the Plan, and the Internal Revenue Code ("Code"), which
imposes restrictions on loans. Individual Retirement Annuities, Individual
Retirement Accounts and SEP-IRA accounts and Non-Qualified Contracts are not
eligible for 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 balances
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.
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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 Fixed Account the Variable Account units from the
Contract Owner's investment options in proportion to the assets in each option
until the required balance is reached or all such variable units are exhausted.
The remaining required collateral will next be transferred from the Fixed
Account. No withdrawal charges are deducted at the time of the loan, or on the
transfer from the Variable Account to the 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 annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the outstanding
loan plus accrued interest. Until the loan is repaid, the Company reserves the
right to restrict any transfer of the Contract which would otherwise qualify as
a transfer as permitted in Section 1035 of the Internal Revenue Code.
If a loan payment is not made when due, interest will continue to accrue.
The defaulted payment plus accrued interest will be deducted from any future
Distribution under the Contract and paid to the Company. Any loan payment which
is not made when due, plus interest will be treated as a Distribution, as
permitted by law, may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty.
Loans may also be limited or controlled by the provisions of the
employer's plan.
Loan repayments must be identified as such or else they will be treated
as purchase payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures of the loan in the event of a change in the laws or regulations
relating to the treatment of loans. The Company also reserves the right to
assess a loan processing fee.
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
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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. 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 and may be treated as an assignment for federal income tax purposes.
Such an assignment would result in a deemed distribution of the value of the
Contract. 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 will have 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.
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SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Fund options described in this
prospectus should no longer be available for investment by the Variable Account
or, if in the judgment of the Company's management, further investment in such
underlying Mutual Fund shares should become inappropriate in view of the
purposes of the Contract, the Company may substitute shares of another
underlying Mutual Fund for underlying Mutual Fund shares already purchased or to
be purchased in the future by purchase payments under the Contract. No
substitution of securities in 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
1-800-848-6331, TDD 1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value is applied
to the Annuity Payment Option elected in accordance with the Annuity Table in
the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month. The
dollar amount of each subsequent payment is determined by multiplying the fixed
number of Annuity Units by the Annuity Unit Value for the Valuation Period in
which the payment is due. The Company guarantees that the dollar amount of each
payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an Annuity
Unit for a sub-account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
built into the Annuity Tables contained in the Contracts (See "Net Investment
Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables contained
in the Contracts. A higher assumption would mean a higher initial payment but
more slowly rising or more rapidly falling subsequent payments. A lower
assumption would have the opposite effect. If the actual investment rate is at
the annual rate of 3.5%, the annuity payments will be level.
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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.
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. In the event the Contract is issued
subject to the terms of a Qualified Plan, Annuitization may occur during the
first 2 years subject to approval by the Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made shall
be the first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership Provisions"),
and the Company approves the request, the Annuity Commencement Date may be
deferred. No further changes in the Designated Annuitant will be permitted under
the Contract. The amount of the Death Benefit will be limited to the Contract
Value if the Annuity Commencement Date is postponed beyond the first day of the
calendar month after the Designated Annuitant's 75th birthday or such other
Annuity Commencement Date provided under the Contract Owner's Qualified Plan.
CHANGE IN FORM OF ANNUITY
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.
ANNUITY PAYMENT OPTION
Any of the following Annuity Payment Option may be elected:
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
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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) If an Annuitant is payee, 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 section ( 2) below.
(2) If a Beneficiary is payee, the present value, computed as of the
date on 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 Form, the Contract Value will continue to accumulate. Qualified
Plan Contracts, Individual Retirement Annuities or Tax Sheltered Annuities are
subject to the minimum distribution requirements set forth in the Plan,
Contract, or the Internal Revenue Code.
DEATH OF CONTRACT OWNER
A. For Non-Qualified Contracts issued on or after January 19, 1985, in the
event the Contract Owner dies, the following rules will apply:
(1) In the event the Contract Owner dies prior to the Annuitization Date, the
entire interest in the contract, less any applicable deductions (which
may include a Contingent Deferred Sales Charge), must be distributed
within 5 years. Such distribution will be paid to the Designated
Annuitant unless the Owner has named a Contingent Owner or estate to
receive the distribution. In the alternative, the Designated Annuitant or
Contingent Owner (where one is named) may elect to receive distribution
in the form of a life annuity or an annuity for a period certain not
exceeding the Designated Annuitant's (Contingent Owner's) life expectancy
and such annuity must begin 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" below provided, however, that all
distributions made as a result of the death
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of the Contract Owner shall be made within the time limits set forth in
this paragraph. 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.
In the event the Contract Owner is not an individual, the death of the
Designated Annuitant (or a change of the Designated Annuitant) will result in a
distribution pursuant to paragraph (1) above, regardless of whether or not a
Contingent Designated Annuitant has been named.
B. Contracts issued in connection with Qualified Contracts, Individual
Retirement Annuities, Individual Retirement Accounts or Tax Sheltered
Annuities will be subject to specific rules, set forth in the Plan,
Contract, or Internal Revenue Code concerning distributions upon the
death of the Owner/Designated Annuitant (see the "Required Distribution
for Qualified Plans or Tax Sheltered Annuities" provision).
DEATH BENEFIT AT DEATH OF DESIGNATED ANNUITANT PRIOR TO THE ANNUITIZATION DATE
The Death Benefit is payable to the Beneficiary unless, the Owner has
named a Contingent Designated Annuitant. In such case, the Death Benefit is
payable to the Beneficiary upon the death of the last survivor of the Designated
Annuitant and Contingent Designated Annuitant. The value of the Death Benefit
will be determined as of the Valuation Date coincident with or next following
the date the Company receives both (1) due proof of death and (2) an election
for (a) a single sum payment or (b) Annuity Payment Option.
If a single sum settlement is requested, payment will be made in
accordance with any applicable laws and regulations governing the payment of
Death Benefits. If an Annuity Payment Option is desired, election may be made by
the Beneficiary during the 90-day period commencing with the date written notice
is received by the Company. If no election has been made by the end of such
90-day period, the Death Benefit will be paid to the Beneficiary in a single
sum. The amount of the Death Benefit will be the greater of (i) the sum of all
purchase payments, less any amounts surrendered, or (ii) the Contract Value.
If the Contract Owner has (1) requested an Annuity Commencement Date
later than the first day of the calendar month after the Designated Annuitant's
75th birthday; (2) the Company has approved the request; and (3) the Designated
Annuitant dies after his or her 75th birthday; the dollar amount of the Death
Benefit will be equal to the Contract Value.
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 the first paragraph in the
"Death of the Contract Owner" provision, regardless of whether a Contingent
Annuitant has also been named. If the Contract Owner is not an individual, the
death of the Annuitant (or a change in the Annuitant) will be treated like a
death of the Contract Owner for purposes of the "Death of Contract Owner"
provision, and will result in a distribution of either:
(a) the Death Benefit described above (if there is no Contingent
Annuitant), or
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(b) the benefit described in the "Death of Contract Owner" provision
(in all other cases), except that in the event of a change of
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 prior to the expiration of the period described in the
"Death of Contract Owner" provision.
DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable 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 will be distributed in a manner consistent with the Minimum
Distribution and Incidental Benefit (MDIB) provisions of Section 401(a)(9) of
the Internal Revenue Code and regulations thereunder, as applicable, and will be
paid, notwithstanding anything else contained herein, to the Owner/Annuitant
under the Annuity Payments Options selected, over a period not exceeding:
A. the life of the Owner/Annuitant or the lives of the
Owner/Annuitant and the Owner/Annuitant's designated Beneficiary;
or
B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and
the Owner/Annuitant's designated Beneficiary.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70-1/2 (the Required Beginning Date).
In the case of a governmental plan or church plan (as defined in Code Section
401(a)(9)(C)), the Required Beginning Date will be the later of the dates
determined under the preceding sentence or April 1 of the calendar year
following the calendar year in which the Annuitant retires.
If the Owner dies prior to the commencement of his or her distribution,
the interest in the Qualified Contract or Tax Sheltered Annuity must be
distributed by December 31 of the calendar 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 you 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
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expectancy) commencing not later than December 31 of the year following
the year in which you die.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or the joint and
last survivor expectancy of the Owner/Annuitant and the Owner/Annuitant's
Designated Beneficiary (whichever is applicable under the applicable Minimum
Distribution or MDIB provisions). Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES AND INDIVIDUAL
RETIREMENT ACCOUNTS
Distribution from an Individual Retirement Annuity or Individual
Retirement Account must begin not later than April 1 of the calendar year
following the calendar year in which you attain 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 your life expectancy or the life expectancy of the
Owner and his or her spouse or designated Beneficiary.
If the Owner dies prior to the commencement of distributions, the
interest in the Qualified Contract or Tax Sheltered Annuity must be distributed
by December 31 of the calendar year during which the fifth anniversary of your
death occurs unless:
(a) The Owner has named 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 you would have attained age 70-1/2; or
(b) The Owner has named 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 you die.
If the Owner dies after distribution has commenced, distribution must
continue at least as rapidly as under the schedule being used prior to your
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 is described in
section (a)(i) above.
If the amounts distributed to you 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
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is based on the ratio between the amount by which non-deductible contributions
exceed prior non-taxable distributions and total account balances at the time of
the distribution. The Owner must annually report to the Internal Revenue Service
the amount of non-deductible contributions, the amount of any distribution, the
amount by which non-deductible contributions for all years exceed non-taxable
distributions for all years, and the total balance of all Individual Retirement
Annuities and Individual Retirement Accounts.
Individual Retirement Annuity and Individual Retirement Account
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
Internal Revenue Code, and the amount of the tax on the generation-skipping
transfer resulting from such direct skip. If applicable, such payment will be
reduced by any tax the Company is required to pay by Section 2603 of the
Internal Revenue Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING-The Contract Owner may direct the automatic
reallocation of contract values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the three
month period falls on a Saturday, Sunday, recognized holiday, or any other day
when the New York Stock Exchange is closed, the Asset Rebalancing exchange will
occur on the last business day before that day. Asset Rebalancing will not
affect future allocations of purchase payments. An Asset Rebalancing request
must be in writing on a form provided by the Company.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Internal Revenue Code may have superseding plan restrictions with
regard to the frequency of fund exchanges and underlying Mutual Fund options.
The Contract Owner may want to contact a financial adviser in order to discuss a
specific contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Contract Owners, however, any such
discontinuation would not affect Asset Rebalancing programs which have already
commenced. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING-The Contract Owner may direct the Company to
automatically transfer from the Money Market sub-account or the Fixed Account to
any other sub-account within the Variable Account on a monthly basis. This
service is intended to allow the Contract Owner to utilize Dollar Cost
Averaging, a long-term investment program which provides for regular, level
investments over time.
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The Company makes no guarantees that Dollar Cost Averaging will result in a
profit or protect against loss in a declining market. 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 such
discontinuation would not affect Dollar Cost Averaging programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
SYSTEMATIC WITHDRAWALS-A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. The Company will process the withdrawals as directed by
surrendering on a pro-rata basis Accumulation Units from all sub-accounts in
which the Contract Owner has an interest, and the Fixed Account. A Contingent
Deferred Sales Charge may also apply to Systematic Withdrawals in accordance
with the considerations set forth in the "Contingent Deferred Sales Charge"
section. Each Systematic Withdrawal is subject to federal income taxes on the
taxable portion. In addition, a 10% federal penalty tax may be assessed on
Systematic Withdrawals if the Contract Owner is under age 59-1/2. If directed by
the Contract Owner, the Company will withhold federal income taxes from each
Systematic Withdrawal. The Contract Owner may discontinue Systematic Withdrawals
at any time by notifying the Company in writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days' written notice to Contract Owners however, any such
discontinuation would not affect any Systematic Withdrawal programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give the Company prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional purchase payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a dollar cost averaging program) or salary reduction arrangement,
the Contract Owner may receive confirmation of such transactions in their
quarterly statements. The Contract Owner
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should review the information in these statements carefully. All errors or
corrections must be reported to the Company immediately to assure proper
crediting to the Owner's Contract. The Company will assume all transactions are
accurate unless the Contract Owner notifies the Company otherwise within 30 days
after receipt of the statement. The Company will also send to Contract Owners
each year an annual report and a semi-annual report containing financial
statements for the Variable Account, as of December 31 and June 30,
respectively.
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.
Purchase payments, if any, after the first Contract Year must be at least
$10 each. The Company, however, reserves the right to lower this $10 purchase
payment minimum for certain employer sponsored programs. 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.
The cumulative total of all purchase payments under Contracts issued on
the life of any one Designated Annuitant may not exceed $1,000,000 without prior
consent of the Company.
THE PURCHASER IS CAUTIONED THAT INVESTMENT RETURN ON SMALL INITIAL AND
SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE COMPANY.
The initial purchase payment allocated to designated sub-accounts of the
Variable Account will be priced not later than 2 business days after receipt of
an order to purchase, if the Application and all information necessary for
processing the purchase order are complete upon receipt by the Company, and the
Company may retain the purchase payment for up to 5 business days while
attempting to complete an incomplete Application. If the Application cannot be
made complete within 5 days, the prospective purchaser will be informed of the
reasons for the delay and the purchase payment will be returned immediately
unless the prospective purchaser specifically consents to the Company retaining
the purchase payment until the Application is made complete. Thereafter, the
purchase payment will be priced within 2 business days.
Purchase payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each sub-account
was arbitrarily set initially at $10 when the 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
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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.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the sub-account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain distributions
made by the underlying Mutual Fund held in the sub-account if the
"ex-dividend" date occurs during the current Valuation Period,
(b) is the net asset value per share of the underlying Mutual Fund held in
the sub-account determined as of the end of the immediately preceding
Valuation Period.
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration 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 Funds that credit dividends on a daily basis and
pay such dividends once a month (such as money market funds and certain bond
funds), the Net Investment Factor allows for the monthly 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, Expense Risk Charge and Administration
Charge, and any charge or credit for tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited per each sub-account
are determined by dividing the net amount allocated to the sub-account by the
Accumulation Unit Value for the sub-account for the Valuation Period during
which the purchase payment is received by the Company. In the event part or all
of the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an appropriate amount from the Fixed Account will be
deducted in the same proportion that the Contract Owner's interest in the
Variable Account and the Fixed Account bears to the total Contract Value.
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SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper Written Application" means that the surrender must be
requested in writing by the Contract Owner, satisfy all good order requirements,
and the Company may require that signature(s) be guaranteed by a member firm of
the New York, American, Boston, Midwest, Philadelphia, or Pacific Stock
Exchange, or by a Commercial Bank or a Savings and Loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases (for example, requests
by a corporation, partnership, agent or fiduciary) the Company will require
additional documentation of a customary nature.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested, less any
applicable Contingent Deferred Sales Charge. (See "Contingent Deferred Sales
Charge"). In the event of a partial surrender, the Company will, unless
instructed to the contrary, surrender Accumulation Units from all sub-accounts
in which the Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each sub-account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the sub-accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any 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 exercise 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 Texas Optional Retirement Program subject to any applicable
Contingent Deferred Sales Charge The Company issues this Contract to
participants in the Optional Retirement Program in reliance upon, and in
compliance with, Rule 6c-7 of the Investment Company Act of 1940.
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SURRENDERS UNDER A QUALIFIED PLAN OR TAX SHELTERED ANNUITY
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 a Tax Sheltered Annuity Contract Value attributable to
contributions made pursuant to a salary reduction agreement (within the
meaning of Code Section 402(g)(3)(C)), or transfers from a Custodial
Account described in Section 403(b)(7) of the Internal Revenue Code
(403(b)(7) Custodial Accounts), may be executed only -
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the
case of hardship may not include any income attributable to
salary reduction contributions.
B. The surrender limitations described in A. above for Tax Sheltered
Annuities apply to:
1. salary reduction contributions to Tax Sheltered Annuities made
for plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts may be withdrawn in the case of
hardship).
C. Any distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties of a Tax Sheltered
Annuity.
A premature distribution may not be eligible for rollover treatment. To
assist in preventing disqualification in the event of a ten-day free look, the
Company will agree to transfer the proceeds to another contract which meets the
requirements of Section 403(b) of the Internal Revenue Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Code Section
403(b)(11) and Revenue Ruling 90-24. Such restrictions are subject to
legislative change and/or reinterpretation from time to time.
The contract surrender provisions may also be modified pursuant to the
plan terms and Internal Revenue Code tax provisions when the contract is issued
to fund a Qualified Plan or Tax Sheltered Annuity.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF
A PERSONAL TAX ADVISER.
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TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Internal Revenue Code (the "Code") governs taxation of
annuities in general. That section sets forth different rules for annuities
purchased by (1) Qualified Plans, Individual Retirement Annuities, Individual
Retirement Accounts (including simplified employee pension-individual retirement
account plans), and Tax Sheltered Annuities and (2) annuities which are not
purchased by such plans. Each type of annuity is discussed separately below.
The Tax Reform Act of 1986 and subsequent legislation changed some of the
rules regarding the tax treatment of distributions from Qualified Plans and
annuities purchased by Qualified Plans. You should consult your financial
consultant or legal or tax advisor to discuss in detail your particular tax
situation and the use of the Contracts.
Generally the amount of any payment of items of interest to a nonresident
alien of the United States shall be subject to withholding of a tax equal to
thirty percent (30%) of such amount or, if applicable, a lower treaty rate. A
payment may not be subject to withholding where the recipient sufficiently
establishes that such payment is effectively connected to the recipient's
conduct of a trade or business in the United States and such payment is
includable in the recipient's gross income.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to annuitization 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 annuitization with respect to that portion of the Contract invested prior to
August 14, 1982, are treated first as a recovery of the investment in the
Contract as of that date. A distribution in excess of the amount of the
investment in the Contract as of August 14, 1982, will be treated as taxable
income.
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
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which are attributable to contributions made to the Contract after February 28,
1986. There are exceptions for Qualified Contracts, 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 purchase payment Contract on which
payments begin within one year of purchase.
Internal Revenue Code Section 72 also provides for a penalty, equal to
10% of any distribution which is includable in gross income, if such
distribution is made prior to attaining age 59-1/2, the death or disability of
the Contract Owner. The penalty does not apply if the distribution is one of a
series of substantially equal periodic payments made over the life or life
expectancy (or joint lives or life expectancies) of the Annuitant (and the
Annuitant's Beneficiary), or is made from an immediate annuity, or is allocable
to an investment in the Contract before August 14, 1982. A Contract Owner
wishing to begin taking distributions to which the 10% tax penalty does not
apply should forward a written request to the Company. Upon receipt of a written
request from the Contract Owner, the Company will inform the Contract Owner of
the procedures pursuant to Company Policy and subject to limitations of the
Contract including but not limited to first year withdrawals. If the Annuitant
selects an annuity for life or life expectancy and changes the method of payment
before the expiration of 5 years and the attainment of age 59-1/2, the early
withdrawal penalty will apply. The penalty will be equal to that which would
have been imposed had no exception applied from the outset, and the Annuitant
will also pay interest on the amount of the penalty from the date it would have
originally applied until it is actually paid.
In order to qualify as an Annuity Contract under Section 72 of the Code,
the Contract must provide for distribution to be made upon the death of the
Contract Owner. In such case the Designated Annuitant, Beneficiary or other
named recipient must receive the distribution within 5 years of the Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy if such payments begin within one year following the
death of the Contract Owner. If the Contract Owner's Beneficiary is the
surviving spouse, such spouse may be treated as the Contract Owner and the
Contract may be continued throughout the life of the surviving spouse subject to
certain minimum distribution requirements for Individual Retirement Annuities,
Individual Retirement Accounts and Tax Sheltered Annuities. In the event the
Contract Owner dies on or after the Annuitization 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. If the Contract Owner is not an individual, the
death of the Annuitant (or a charge of the Annuitant) will result in a
distribution under their rules, regardless of whether a Contingent Annuitant has
been named (see "Required Distribution for Qualified Plans or Tax Sheltered
Annuities").
The Company is required to withhold tax from certain distributions to the
extent that such distribution would constitute income to the Contract Owner. The
Contract Owner is entitled to elect not to have federal income tax withheld from
any such distribution, but may be subject to penalties in the event insufficient
federal income tax is withheld during a calendar year.
Payment of a benefit or transfer of any property to an individual two or
more generations younger than the contract owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et. seq. of
the Internal Revenue Code.
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CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT
ACCOUNTS AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of purchase payments, and tax consequences on
distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Internal Revenue Code of 1986, as amended, 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, 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, and
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.
Individual Retirement Accounts and Individual Retirement Annuities may
not provide life insurance benefits. If the Death Benefit exceeds the greater of
the cash value of the Contract or the sum of all purchase payments (less any
surrenders), it is possible the Internal Revenue Code could determine that the
Individual Retirement Account or Individual Retirement Annuity did not qualify
for the desired tax treatment.
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.
INDIVIDUAL RETIREMENT ACCOUNTS
The Internal Revenue Service Determined that, effective September 25,
1981, Individual Retirement Annuities could not be established using variable
annuity contracts that allocated assets to separate accounts of life insurance
companies, if the separate account purchased shares of publicly available mutual
funds. The owner of such a contract is treated as the owner of the underlying
Mutual Fund shares purchased and is taxed on any dividends accruing or
recognized gains.
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It is possible to establish an Individual Retirement Account funded with
such a variable annuity contract, by depositing the funds in a trust or
custodial account which qualifies under Section 408 of the Internal Revenue
Code, and having the trustee or custodian purchase the contract. Such an
Individual Retirement Account is subject to rules which are comparable to those
which apply to Individual Retirement Annuities. The trustee or custodian is
treated as the owner of the underlying mutual fund shares, and the individual
establishing the account is taxed in the manner described in "Required
Distributions For Individual Retirement Annuities And Individual Retirement
Accounts."
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Internal Revenue Code ("Code") relating to diversification
standards for the investments underlying a variable annuity contract. The
regulations provide that a variable annuity contract which does not satisfy the
diversification standards will not be treated as an annuity contract, unless the
failure to satisfy the regulations was inadvertent, the failure is corrected,
and the owner of the Company pays an amount to the Internal Revenue Service. The
amount will be based on the tax that would have been paid by the Owner if the
income, for the period the contract was not diversified, had been received by
the Owner. If the failure to diversify is not corrected in this manner, the
Owner of an annuity contract will be deemed the Owner of the underlying
securities and will be taxed on the earnings of his account. The Company
believes, under its interpretation of the Code and regulations thereunder, that
the investments underlying this Contract meet these diversification standards.
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, Nationwide Financial Services, Inc., is not
engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History............................................................................ 1
Services................................................................................................... 1
Purchase of Securities Being Offered....................................................................... 1
Underwriters............................................................................................... 2
Calculation of Yield Quotations of Money Market Sub-Accounts............................................... 2
Annuity Payments........................................................................................... 2
Financial Statements....................................................................................... 3
</TABLE>
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APPENDIX A
Purchase payments under the Fixed Account portion of the Contract and
transfers to the Fixed Account portion become part of the general account of the
Company, which support insurance and annuity obligations. Because of exemptive
and exclusionary provisions, interests in the general account have not been
registered under the Securities Act of 1933 ("1933 Act"), nor is the general
account registered as an investment company under the Investment Company Act of
1940 ("1940 Act"). Accordingly, neither the general account nor any interest
therein are generally subject to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this prospectus which related to the guaranteed
interest portion. Disclosures regarding the Fixed Account portion of the
Contract and the general account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company,
other than those in the Nationwide Variable Account II and any other segregated
asset account. Fixed Account purchase payments will be allocated to the Fixed
Account by election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from such
Fixed Account assets will be allocated by the Company between itself and the
Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts will
not be affected by the mortality experience (death rate) of persons receiving
such payments or of the general population. The Company assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion of
the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year. (as otherwise required under state law, or at such minimum rate
as stated in the Contract when sold). ANY INTEREST CREDITED TO AMOUNTS ALLOCATED
TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF
3.0% FOR ANY GIVEN YEAR. New purchase payments deposited to the Contract which
are allocated to the Fixed Account may receive a different rate of interest than
money
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transferred from the Variable Account sub-accounts to the Fixed Account
and amounts maturing in the Fixed Account after the expiration of an Interest
Rate Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of the purchase payments allocated to the
Fixed Account, plus interest credited as described above, less the sum of all
administrative charges, any applicable premium taxes, and less any amounts
surrendered. If the Contract Owner effects a surrender, the amount available
from the Fixed Account will be reduced by any applicable Contingent Deferred
Sales Charge (see "Contingent Deferred Sales Charge").
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account from the Fixed Account to
the Variable Account. The maximum percentage that may be transferred will be
determined by the Company at its sole discretion, but will not be less than 10%
of the total value of the portion of the Fixed Account that is maturing and will
be declared upon the expiration date of the then current Interest Rate Guarantee
Period. The Interest Rate Guarantee Period expires on the final day of a
calendar quarter. Transfer under this provision must be made within 45 days
after the expiration date of the guarantee 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.
Any group annuity Contract offered in conjunction with this Prospectus,
the assets of which are invested in the general account of the Company may be
subject to restrictions on surrender of a plan's or a participant's interest in
the annuity Contract, and may require that such a surrender be completed over a
period of five years.
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The first Fixed
Annuity payment will be determined by applying the Fixed Account Contract Value
to the applicable Annuity Table in accordance with the Annuity Payment Option
elected. This will be done at the Annuitization Date on an age last birthday
basis. Fixed Annuity payments after the first will not be less than the first
Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
ANNUITY TABLES
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year).
ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year) and an assumed interest
rate of 3.5%.
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APPENDIX B
PARTICIPATING FUNDS
UNDERLYING MUTUAL FUND OPTIONS AVAILABLE FOR CONTRACTS
ISSUED ON OR AFTER JANUARY 1, 1993
For new Contracts issued on or after January 1, 1993, Variable Account purchase
payments may be allocated only to the sub-accounts which consist of shares of
the underlying Mutual Fund options listed below:
Delchester Fund-Institutional Class
Investment Objective: Seeks to provide high current income by investing
principally in corporate bonds, and also in U.S. Government securities
and commercial paper. This fund invests primarily in high-yield
securities (junk bonds) and greater risks may be involved with an
investment in the fund than an investment in a mutual fund comprised
primarily of investment grade bonds.
Dreyfus A Bonds Plus, Inc.
Investment Objective: The Fund's goal is to provide the maximum amount of
current income to the extent consistent with the preservation of capital
and the maintenance of liquidity. The Fund invests principally in debt
obligations of corporations, the U.S. Government and its agencies and
instrumentalities, and major U.S. banking institutions. The Fund's
investment objective cannot be changed without approval by the holders of
a majority (as defined in the Investment Company Act of 1940) of the
Fund's outstanding voting shares. There can be no assurance that the
Fund's investment objective will be achieved.
The Dreyfus Third Century Fund, Inc.
Investment Objective: Primarily seeks to provide capital growth through
equity investment in companies that, in the opinion of the Fund's
management, not only meet traditional investment standards but which also
show evidence that they conduct their business, in a manner that
contributes to the enhancement of the quality of life in America. Current
income is secondary to the primary goal.
The Evergreen Total Return Fund
Investment Objective: Seeks to achieve a return consisting of current
income and capital appreciation in the value of its shares. The emphasis
on current income and capital appreciation will be relatively equal
although, over time, changes in the outlook for market conditions and the
level of interest rates will cause the fund to vary its emphasis between
these two elements in its search for the optimum return for its
shareholders. The fund seeks to achieve its investment objective through
investments in common stocks, preferred stocks, securities convertible
into or exchangeable for common stocks and fixed income securities. The
fund may also write covered call options.
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Fidelity Asset ManagerTM
Investment Objective: Seeks high total return with reduced risk over the
long term by allocating its assets among stocks, bonds and short-term
instruments.
Fidelity Equity-Income Fund
Investment Objective: Seeks to obtain reasonable income from a portfolio
consisting primarily of income-producing equity securities. The fund
seeks a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price index. In
addition, consistent with the above objective, in managing its portfolio,
the fund will consider the potential for achieving capital appreciation.
Fidelity Magellan(R) Fund
Investment Objective: Seeks capital appreciation by investing primarily
in common stock and securities convertible into common stock. Up to 20%
of the fund's assets may also be invested in debt securities of all types
and qualities issued by foreign and domestic issuers if the fund's
management believes that doing so will result in capital appreciation. No
emphasis is placed on dividend income except when the fund's management
believes that this income will have a favorable influence on the market
value of the security. Because the fund has no limitation on the quality
of debt securities in which it may invest, the debt securities in its
portfolio may be of poor quality and may present the risk of default or
may be in default.
Fidelity Puritan Fund
Investment Objective: Seeks to obtain as much income as possible,
consistent with the preservation and conservation of capital, by
investing in a broadly diversified portfolio of high-yielding securities,
including common stocks, preferred stocks, and bonds. While emphasis on
income is an important objective, this does not preclude growth in
capital since some securities offering a better than average yield may
also possess some growth possibilities.
Fidelity VIP High Income Portfolio (additional purchase payments or
exchanges may not be made to this fund on or after December 1, 1993)
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, lower rated, high-yielding,
fixed-income securities, while also considering growth of capital. The
fund's manager will seek high current income normally by investing the
Portfolio's assets as follows:
- at least 80% in income-producing debt securities and preferred
stocks, including convertible securities; and
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities.
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or
lower by Moody's; BB or lower by Standard & Poor's and may be deemed to
be of a speculative nature. The Portfolio may also purchase lower-quality
bonds such as those rated Ca3 by Moody's or C- by Standard & Poor's which
provide poor
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protection for payment of principal and interest (commonly referred to as
"junk bonds"). For a further discussion of lower-rated securities, please
see the "Risks of Lower-Rated Debt Securities" section of the Portfolio's
prospectus.
Janus Twenty Fund
Investment Objective: Seeks growth of capital in a manner consistent with
the preservation of capital. Under normal conditions, the Fund will
concentrate its investments in a core position of 20-30 common stocks.
However, the percentage of the Fund's assets invested in common stocks
will vary, depending upon its investment adviser's opinion of prevailing
market, financial and economic conditions. Consequently, the Fund may at
times hold substantial positions in cash, or interest bearing securities.
MFS(R) World Governments Fund
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.
Nationwide(R) Bond Fund
Investment Objective: Seeks to generate a high level of income consistent
with capital preservation through investments in high quality bonds and
other fixed income securities. Through investment in long-term income
obligations, including corporate debt securities, United States and
Canadian government obligations and commercial paper, this fund seeks to
serve those who are less willing to accept the greater risk and higher
volatility of a common stock portfolio.
Nationwide(R) Fund
Investment Objective: Seeks to obtain a reasonable current income on
invested capital and possible growth of such income through timely
investments in common stocks, convertible issues or bonds. Major emphasis
in the selection of investments for this fund is placed on securities
which will provide a reasonable current return. Though growth of capital
considerations is secondary, an effort is made to select those securities
which, while paying a reasonable current return, also hold some promise
of long-term growth as well as possibilities of growth of income.
Nationwide(R) Growth Fund
Investment Objective: Seeks to achieve reasonable growth of capital
through selective participation in the long-term progress of business
without emphasis on current return on invested capital. Major emphasis in
the selection of securities for this fund is placed on strong companies
which have capable management, and are in fields where social and
economic trends, technical developments and new processes or products
indicate greater than average growth.
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Nationwide(R) Money Market Fund
Investment Objective: Seeks to provide as high a level of current income
as is consistent with the preservation of capital and maintenance of
liquidity, through a diversified portfolio of high quality money market
instruments maturing in one year or less.
Neuberger & Berman Guardian Fund, Inc.
Investment Objective: Seeks capital appreciation through investments
generally in dividend-paying issues of established companies that its
investment officers believe are well managed. The emphasis of the Fund's
investments is on common stock. The Fund diversifies its holdings among
different industries and different companies in light of conditions
prevailing at any given time. Current income is a secondary objective.
Neuberger & Berman Limited Maturity Bond Fund
Investment Objective: Seeks highest current income consistent with low
risk to principal and liquidity. The Fund invests in a diversified
portfolio of short-to intermediate-term debt securities and other debt
securities with special features producing similar price characteristics.
Total return is a secondary objective.
Neuberger & Berman Partners Fund, Inc.
Investment Objective: Seeks capital growth. The fund invests in
securities solely on the basis of management's evaluation of their
investment merit and potential for growth using a value-oriented approach
to the selection of individual securities. The fund's management believes
that the fund is an attractive investment vehicle for conservative
investors who are interested in long-term appreciation from stock
investments, but who have a low tolerance for risk.
Oppenheimer Global Fund
Investment Objective: Seeks capital appreciation. The fund emphasizes
investment in foreign and domestic securities considered by the fund's
investment manager to have appreciation possibilities, primarily common
stocks or securities having investment characteristics of common stocks
(such as convertible securities) of "growth-type" companies. As a matter
of fundamental policy, under normal market conditions, the fund will
invest its total assets in securities of issuers traded in markets in at
least three different countries (which may include the United States).
The portfolio may also emphasize securities of cyclical industries and
"special situations" when the fund's manager believes that they present
opportunities for capital growth. The remainder of the fund's invested
assets will be invested in securities for liquidity purposes.
Peoples Index Fund, Inc.
Investment Objective: Seeks to provide investment results that correspond
to the price and yield performance of publicly-traded common stocks in
the aggregate, as represented by the Standard & Poor's 500 Composite
Stock Price Index. The fund's investment objective cannot be changed
without approval by the holders of a majority of the fund's outstanding
voting shares.
Phoenix Balanced Fund Series
Investment Objective: The Fund seeks reasonable income, long-term capital
growth and conservation of capital. It is intended that the Fund will
invest in common stocks and fixed
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income securities, with emphasis on income-producing securities which
appear to have some potential for capital enhancement.
Strong Total Return Fund, Inc.
Investment Objective: Seeks a combination of income and capital
appreciation which will produce the highest total return while assuming
reasonable risks. "Reasonable risks" refers to the advisor's judgment
that the risks of investing in the securities in the Total Return Fund's
portfolio are no greater than normal. The Total Return Fund invests in
common stocks and other equity-type securities; corporate bonds,
debentures, and notes; and short-term money market instruments. Common
stocks may be either growth or income oriented. Other equity-type
securities are limited to convertible bonds, preferred stocks, warrants,
and convertible preferred shares. Short-term money market instruments
include U.S. Treasury obligations, bank certificates of deposit,
commercial paper, and variable-rate master demand notes (floating-rate
debt instruments without a fixed maturity). The Total Return Fund may
also invest in debt securities issued or guaranteed by the U.S.
government and its agencies or instrumentalities.
Templeton Foreign Fund
Investment Objective: Seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized will be
incidental.
Twentieth Century Growth Investors
Investment Objective: Seeks capital growth through investment in
securities which the management considers to have better than average
prospects for appreciation of value. The fund's investment approach
identifies companies with accelerating earnings and revenues. As part of
its strategy, the fund remains essentially fully invested in stocks at
all times.
Twentieth Century International Equity Fund
Investment Objective: Seeks capital growth by investing in an
international portfolio of common stocks, primarily in developed markets;
stocks considered by the investment manager to have prospects for
appreciation. The fund will invest primarily in common stocks (defined to
include depository receipts for common stocks) and other equity
equivalents of such companies.
Twentieth Century Ultra Investors
Investment Objective: The investment objective of the fund is to seek
capital growth by investing primarily in common stocks that are
considered by management to have better-than-average prospects for
appreciation.
Twentieth Century U.S. Governments Short-Term
Investment Objective: To seek current income and limited price
volatility by maintaining an average weighted portfolio maturity of four
years or less. U.S. Governments invests in securities of the United
States government and its agencies.
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UNDERLYING MUTUAL FUND OPTIONS AVAILABLE FOR CONTRACTS
ISSUED ON OR AFTER DECEMBER 25, 1982 AND BEFORE JANUARY 1, 1993
For new Contracts issued on or after December 25, 1982, and before
January 1, 1993 Variable Account purchase payments may be allocated only to the
sub-accounts which consist of shares of the underlying Mutual Fund options
listed below:
Fidelity Capital & Income Fund (additional purchase payments or exchanges
may not be made to this fund on or after May 1, 1991. Not available for
Contracts issued on or after May 1, 1987)
Investment Objective: Seeks to provide a combination of income and
capital growth by investing primarily in debt instruments and common and
preferred stocks, with a focus on lower-quality debt securities of
companies with uncertain financial positions.
Fidelity Equity-Income Fund
Investment Objective: Seeks to obtain reasonable income from a portfolio
consisting primarily of income-producing equity securities. The fund
seeks a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price index. In
addition, consistent with the above objective, in managing its portfolio,
the fund will consider the potential for achieving capital appreciation.
Fidelity VIP High Income Portfolio (additional purchase payments or
exchanges may not be made to this Fund on or after December 1, 1993)
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, lower rated, high-yielding,
fixed-income securities, while also considering growth of capital. The
fund's manager will seek high current income normally by investing the
Portfolio's assets as follows:
- at least 80% in income-producing debt securities and preferred
stocks, including convertible securities; and
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities.
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or
lower by Moody's; BB or lower by Standard & Poor's and may be deemed to
be of a speculative nature. The Portfolio may also purchase lower-quality
bonds such as those rated Ca3 by Moody's or C- by Standard & Poor's which
provide poor protection for payment of principal and interest (commonly
referred to as "junk bonds"). For a further discussion of lower-rated
securities, please see the "Risks of Lower-Rated Debt Securities" section
of the Portfolio's prospectus.
MFS(R) World Governments Fund
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
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are prepared to accept the risks entailed in such investments which may
be higher than those associated with certain U.S. Investments.
Nationwide(R) Money Market Fund
Investment Objective: To provide as high a level of current income as is
consistent with the preservation of capital and maintenance of liquidity,
through a diversified portfolio of high quality money market instruments
maturing in one year or less.
Twentieth Century Growth Investors
Investment Objective: To seek capital growth through investment in
securities which the management considers to have better than average
prospects for appreciation of value. The fund's investment approach
identifies companies with accelerating earnings and revenues. As part of
it strategy, the fund remains essentially fully invested in stocks at all
times.
Twentieth Century U.S. Governments Short-Term
Investment Objective: To seek current income and limited price volatility
by maintaining an average weighted portfolio maturity of four years or
less. U.S. Governments invests in securities of the United States
government and its agencies.
UNDERLYING MUTUAL FUND OPTIONS AVAILABLE FOR CONTRACTS
ISSUED PRIOR TO DECEMBER 25, 1982
For Contracts issued prior to December 25, 1982, Variable Account
purchase payments may be allocated only to sub-accounts which consist of shares
of the four Mutual Funds listed below. Each of the underlying Mutual Fund
options listed below is a series of shares of Nationwide Investing Foundation
and receives investment advice from Nationwide Financial Services, Inc.
Nationwide(R) Bond Fund
Investment Objective: Seeks to generate a high level of income consistent
with capital preservation through investments in high quality bonds and
other fixed income securities. Through investment in long-term income
obligations, including corporate debt securities, United States and
Canadian government obligations and commercial paper, this fund seeks to
serve those who are less willing to accept the greater risk and higher
volatility of a common stock portfolio.
Nationwide(R) Fund
Investment Objective: Seeks to obtain a reasonable current income on
invested capital and possible growth of such income through timely
investments in common stocks, convertible issues or bonds. Major emphasis
in the selection of investments for this fund is placed on securities
which will provide a reasonable current return. Though growth of capital
considerations is secondary, an effort is made to select those securities
which, while paying a reasonable current return, also hold some promise
of long-term growth as well as possibilities of growth of income.
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Nationwide(R) Growth Fund
Investment Objective: Seeks to achieve reasonable growth of capital
through selective participation in the long-term progress of business
without emphasis on current return on invested capital. Major emphasis in
the selection of securities for this fund is placed on strong companies
which have capable management, and are in fields where social and
economic trends, technical developments and new processes or products
indicate greater than average growth.
Nationwide(R) Money Market Fund
Investment Objective: Seeks to provide as high a level of current income
as is consistent with the preservation of capital and maintenance of
liquidity, through a diversified portfolio of high quality money market
instruments maturing in one year or less.
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY THE NATIONWIDE VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the Prospectus
and should be read in conjunction with the Prospectus dated May 1, 1995. The
Prospectus may be obtained from Nationwide Life Insurance Company by writing P.
O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-848-6631, TDD
1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History....................................................................................... 1
Services.............................................................................................................. 1
Purchase of Securities Being Offered.................................................................................. 1
Underwriters.......................................................................................................... 2
Calculation of Yield Quotations of Money Market Sub-Accounts.......................................................... 2
Annuity Payments...................................................................................................... 2
Financial Statements.................................................................................................. 3
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide Variable Account ("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 Fund options.
The financial statements and schedule have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the authority
of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may, on written request, transfer up to 100% of the
Contract Value from the Variable Account to the Fixed Account. However, the
Company reserves the right to restrict transfers from the Variable Account to
25% of Contract Value in any 12 month period. 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 12 months of any prior transfer. Contract Owners
may at the maturity of an Interest Rate Guarantee Period transfer a portion of
the Contract Value of the Fixed Account to the Variable Account. Such portion
will be determined by the Company at its sole discretion, but will not be less
than 10% of the total value of the portion of the Fixed Account that is
maturing, and will be declared upon the expiration date of the then current
interest rate guarantee period. The Interest Rate Guarantee Period expires on
the final day of a calendar quarter; therefore the Interest Rate Guarantee
Period for deposits or transfers in the Fixed Account may continue for up to
three months after a one year period has expired. Transfers under this provision
must be made within 30 days after the expiration date of the guarantee period.
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
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43216, a wholly owned subsidiary of the Company. During the fiscal years
ended December 31, 1994, 1993 and 1992 no underwriting commissions were paid by
the Company to NFS.
CALCULATION OF YIELD QUOTATIONS OF MONEY MARKET SUB-ACCOUNTS
Current yield quotations of the Nationwide Money Market fund are based on
a seven calendar day historical yield, computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period, dividing
the net change in the account value by the value of the account at the beginning
of the base period to obtain a base period return and multiplying the base
period return by 365/7 (366/7 in a leap year). The resulting yield figure is
carried to at least the nearest hundredth of one percent. 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 any such additional
shares. The Fund's effective yield represents a compounding on an annualized
basis of the current yield quotations of the Fund.
The Fund's yield will fluctuate daily. Actual yields will depend on
factors such as the type of instruments in the Fund's portfolio, portfolio
quality and average maturity, changes in interest rates, and the Fund's
expenses.
Although the Fund determines its yield on the basis of a seven calendar
day period, it may use a different time span on occasion. The yield quotes may
reflect the expense limitation described under "Investment Manager and Other
Services" in the Fund prospectus.
There is no assurance that the yields quoted on any given occasion will
remain in effect for any period of time and there is no guarantee that the net
asset values will remain constant. It should be noted that a shareholder's
investment in the 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.
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Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide Variable Account
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account as of December 31, 1994,
and the related statements of operations and changes in contract owners' equity
for each of the years in the three year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, by correspondence with
the custodian and the transfer agents of the underlying mutual funds. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Variable Account
as of December 31, 1994, and the results of its operations and its changes in
contract owners' equity for each of the years in the three year period then
ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule I is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
KPMG Peat Marwick LLP
Columbus, Ohio
February 3, 1995
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<TABLE>
<CAPTION>
NATIONWIDE VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
December 31, 1994
ASSETS:
<S> <C>
Investments at market value:
Delaware Group Delchester High-Yield Bond Fund, Inc. -- Delchester Fund
Institutional Class (DeHyBd)
78,981 shares (cost $537,991)............................................................... $ 477,834
Dreyfus A Bonds Plus, Inc. (DryABds)
10,518 shares (cost $143,128)............................................................... 139,255
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
10,740 shares (cost $79,932)................................................................ 70,130
The Evergreen Total Return Fund (EvTotRet)
31,038 shares (cost $614,814)............................................................... 528,571
Fidelity Asset ManagerTM (FidAsMgr)
104,428 shares (cost $1,542,317)............................................................ 1,444,234
Fidelity Capital & Income Fund (FidCapIn)
179,336 shares (cost $1,404,831)............................................................ 1,547,671
Fidelity Equity-Income Fund (FidEqInc)
355,682 shares (cost $10,303,628)........................................................... 10,919,445
Fidelity Magellan(R) Fund (FidMgln)
55,001 shares (cost $3,759,696)............................................................. 3,674,073
Fidelity Puritan Fund (FidPurtn)
130,865 shares (cost $2,075,074)............................................................ 1,938,112
Fidelity VIP -- High Income Portfolio (FidHiInc)
51,607 shares (cost $590,615)............................................................... 555,293
Janus Twenty Fund (Jan20Fd)
21,508 shares (cost $507,007)............................................................... 488,441
MFS(R) World Governments Fund -- Class A (MFSWdGvt)
114,322 shares (cost $1,401,399)............................................................ 1,247,257
Nationwide(R) Bond Fund (NWBdFd)
131,666 shares (cost $1,275,646)............................................................ 1,109,942
Nationwide(R) Fund (NWFund)
101,607 shares (cost $1,490,941)............................................................ 1,477,364
Nationwide(R) Growth Fund (NWGroFd)
232,508 shares (cost $2,236,615)............................................................ 2,490,156
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Nationwide(R) Money Market Fund (NWMyMkt)
7,253,994 shares (cost $7,253,994).......................................................... 7,253,994
Neuberger & Berman Guardian Fund (NBGuard)
13,512 shares (cost $250,955)............................................................... 246,331
Neuberger & Berman Limited Maturity Bond Fund (NBLtdMat)
89,885 shares (cost $899,753)............................................................... 877,274
Neuberger & Berman Partners Fund (NBPartFd)
23,146 shares (cost $481,129)............................................................... 428,660
Oppenheimer Global Fund (OppGlob)
37,031 shares (cost $1,342,621 )............................................................ 1,182,773
Peoples Index Fund,(R) Inc. (PeoIxFd)
9,531 shares (cost $150,122)................................................................ 136,194
Phoenix Balanced Fund Series (PhxBalFd)
5,686 shares (cost $86,860)................................................................. 84,316
Strong Total Return Fund, Inc. (StTotRet)
9,924 shares (cost $242,162)................................................................ 234,396
Twentieth Century Growth Investors (TCGroInv)
664,003 shares (cost $14,853,843)........................................................... 12,443,422
Twentieth Century Ultra Investors (TCUltra)
52,591 shares (cost $1,074,647)............................................................. 1,049,192
Twentieth Century U.S. Governments Short-Term (TCUSGvt)
376,733 shares (cost $3,584,714)............................................................ 3,450,876
---------------
Total investments..................................................................... 55,495,206
Accounts receivable............................................................................... 1,215
---------------
Total assets.......................................................................... 55,496,421
ACCOUNTS PAYABLE..................................................................................... 565
---------------
CONTRACT OWNERS' EQUITY (NOTE 4) .................................................................... $ 55,495,856
===============
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends...................... $ 4,476,720 2,952,700 1,486,021
------------ ----------- -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares.......... 19,343,653 14,007,169 16,523,949
Cost of mutual fund shares sold.......................... (18,215,058) (11,941,205) (14,871,699)
------------ ----------- -----------
Realized gain on investments............................. 1,128,595 2,065,964 1,652,250
Change in unrealized (loss) on investments............... (5,977,389) (991,082) (1,616,627)
------------ ----------- -----------
Net gain (loss) on investments........................ (4,848,794) 1,074,882 35,623
------------ ----------- -----------
Net investment activity....................... (372,074) 4,027,582 1,521,644
------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners................................................... 16,078,025 5,555,624 2,131,494
Redemptions................................................. (5,989,583) (5,484,670) (4,871,513)
Annuity benefits............................................ (19,197) (19,218) (18,870)
Adjustments to maintain reserves............................ 1,593 2,272 1,098
------------ ----------- -----------
Net equity transactions....................... 10,070,838 54,008 (2,757,791)
------------ ----------- -----------
EXPENSES (NOTE 2):
Contract charges............................................ (735,120) (641,707) (640,890)
Contingent deferred sales charges........................... (50,816) (70,164) (44,137)
------------ ----------- -----------
Total expenses................................ (785,936) (711,871) (685,027)
------------ ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY.......................... 8,912,828 3,369,719 (1,921,174)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD.................... 46,583,028 43,213,309 45,134,483
------------ ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD.......................... $ 55,495,856 46,583,028 43,213,309
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 68
NATIONWIDE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Nationwide Variable Account (the Account) was established pursuant to
a resolution of the Board of Directors of Nationwide Life Insurance Company (the
Company) on March 3, 1976. The Account has been registered as a unit investment
trust under the Investment Company Act of 1940.
(b) The Contracts
Only flexible purchase payment contracts without a front-end sales charge,
but with a contingent deferred sales charge and certain other fees, are offered
for purchase. See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or the
payout phase may invest in the following:
Delaware Group Delchester High-Yield Bond Fund, Inc. -- Delchester
Fund Institutional Class (DeHyBd)
Dreyfus A Bonds Plus, Inc. (DryABds)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
The Evergreen Total Return Fund (EvTotRet)
Fidelity Asset Manager(TM) (FidAsMgr)
Fidelity Capital & Income Fund (FidCapIn)
(not available for additional purchase payments or exchanges after
May 1, 1991)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
Fidelity Puritan Fund (FidPurtn)
Portfolio of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP -- High Income Portfolio (FidHiInc) (not available for
additional purchase payments or exchanges after December 1, 1993)
Janus Twenty Fund (Jan20Fd)
MFS(R) World Governments Fund -- Class A (MFSWdGvt)
Nationwide(R) Bond Fund (NWBdFd) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Neuberger & Berman Limited Maturity Bond Fund (NBLtdMat)
Neuberger & Berman Partners Fund (NBPartFd)
Oppenheimer Global Fund (OppGlob)
Peoples Index Fund,(R) Inc. (PeoIxFd)
Phoenix Balanced Fund Series (PhxBalFd)
Strong Total Return Fund, Inc. (StTotRet)
Twentieth Century Growth Investors (TCGroInv)
Twentieth Century Ultra Investors (TCUltra)
Twentieth Century U.S. Governments Short-Term (TCUSGvt)
At December 31, 1994, contract owners have invested in all of the above
funds.
68 of 118
<PAGE> 69
The contract owners' equity is affected by the investment results of each
fund and certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining to the
variable portions of their contracts and exclude any purchase payments for fixed
dollar benefits, the latter being included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of investments is based on the closing bid prices at
December 31, 1994. The cost of investments sold is determined on a specific
identification basis. Investment transactions are accounted for on the trade
date (date the order to buy or sell is executed) and dividend income is recorded
on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the Internal
Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or withdrawal.
(2) Expenses
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of such
contracts is surrendered, the Company will, with certain exceptions, deduct from
a contract owner's contract value a contingent deferred sales charge. For
contracts issued prior to January 1, 1993, the contingent deferred sales charge
will be equal to 5% of the lesser of the total of all purchase payments made
within 96 months prior to the date of the request for surrender or the amount
surrendered. For contracts issued on or after January 1, 1993, the Company will
deduct a contingent deferred sales charge not to exceed 7% of the lesser of
purchase payments or the amount surrendered, such charge declining 1% per year,
to 0%, after the purchase payment has been held in the contract for 84 months.
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: (a) an
annual contract maintenance charge of $30, with certain exceptions, which is
satisfied by surrendering units; and (b) for contracts issued prior to January
1, 1993, 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; for
contracts issued on or after January 1, 1993, a mortality risk charge, an
expense risk charge and an administration charge assessed through the daily unit
value calculation equal to an annual rate of 0.80%, 0.45% and 0.05%,
respectively.
(3) Schedule I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented for each
series in the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gains and dividend distributions from the underlying
mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
fund.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, an expense risk charge and an
administration charge 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.
69 of 118
<PAGE> 70
(4) Components of Contract Owners' Equity
The following is a summary of contract owners' equity at December 31,
1994, for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
Contract owners' equity represented by: Units Unit Value
----- ----------
<S> <C> <C> <C>
Contracts in accumulation phase:
Delaware Group Delchester High-Yield
Bond Fund, Inc. -- Delchester Fund
InstitutionalClass:
Tax qualified.................................. 43,997 $ 10.867271 $ 478,127
Dreyfus A Bonds Plus, Inc.:
Tax qualified.................................. 15,283 9.110600 139,237
The Dreyfus Third Century Fund, Inc.:
Tax qualified.................................. 7,325 9.570659 70,105
The Evergreen Total Return Fund:
Tax qualified.................................. 51,305 10.301799 528,534
Fidelity Asset ManagerTM:
Tax qualified.................................. 150,536 9.589367 1,443,545
Fidelity Capital & Income Fund:
Tax qualified.................................. 47,236 32.589111 1,539,379
Fidelity Equity-Income Fund:
Tax qualified.................................. 306,544 35.576037 10,905,621
Fidelity Magellan(R) Fund:
Tax qualified.................................. 307,064 11.964387 3,673,833
Fidelity Puritan Fund:
Tax qualified.................................. 161,179 12.020413 1,937,438
Fidelity VIP -- High Income Portfolio:
Tax qualified.................................. 34,151 16.267014 555,535
Janus Twenty Fund:
Tax qualified.................................. 56,135 8.701036 488,433
MFS(R) World Governments Fund -- Class A:
Tax qualified.................................. 39,642 31.104159 1,233,031
Nationwide(R) Bond Fund:
Tax qualified.................................. 35,282 30.832258 1,087,824
Non-tax qualified.............................. 657 30.700082 20,170
Nationwide(R) Fund:
Tax qualified.................................. 32,311 45.095466 1,457,080
Non-tax qualified.............................. 259 46.971513 12,166
Nationwide(R) Growth Fund:
Tax qualified.................................. 48,009 51.535806 2,474,183
Non-tax qualified.............................. 121 54.415339 6,584
Nationwide(R) Money Market Fund:
Tax qualified - Pre 12/25/82................... 56,127 22.850271 1,282,517
Tax qualified.................................. 326,464 18.146709 5,924,247
Non-tax qualified.............................. 1,329 22.994681 30,560
Neuberger & Berman Guardian Fund:
Tax qualified.................................. 25,549 9.640402 246,303
Neuberger & Berman Limited Maturity Bond Fund:
Tax qualified.................................. 89,231 9.833352 877,440
Neuberger & Berman Partners Fund:
Tax qualified.................................. 38,329 11.183371 428,647
Oppenheimer Global Fund:
Tax qualified.................................. 87,590 13.503390 1,182,762
Peoples Index Fund,(R) Inc.:
Tax qualified.................................. 12,668 10.749166 136,170
Phoenix Balanced Fund Series:
Tax qualified.................................. 9,028 9.338434 84,307
Strong Total Return Fund, Inc.:
Tax qualified.................................. 19,727 11.881033 234,377
Twentieth Century Growth Investors:
Tax qualified.................................. 324,141 38.113717 12,354,218
Twentieth Century Ultra Investors:
Tax qualified.................................. 116,020 9.043121 1,049,183
Twentieth Century U.S. Governments Short-Term:
Tax qualified.................................. 183,649 18.748399 3,443,125
Reserves for annuity contracts in payout phase: ======= ==============
Tax qualified.................................. 171,175
-------------
$ 55,495,856
=============
</TABLE>
- -------------------------------------------------------------------------------
70 of 118
<PAGE> 71
Schedule I
NATIONWIDE VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
DeHyBd DryABds Dry3dCen EvTotRet
------ ------- -------- --------
<S> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $11.511092 10.000000 10.477293 11.153183
Reinvested capital gains
and dividends 1.272604 .673864 1.340681 .771284
Unrealized gain (loss) (1.770117) (1.452714) (2.117415) (1.484673)
Contract charges (.146308) (.110550) (.129900) (.137995)
Ending unit value - Dec. 31 $10.867271 9.110600 9.570659 10.301799
Percentage increase
(decrease) in
unit value* (a) (6)% (9)%(b) (9)% (8)%
1993
Beginning unit value - Jan. 1 $10.000000 ** 10.000000 10.000000
Reinvested capital gains
and dividends 1.182306 .763556 1.208371
Unrealized gain (loss) .471495 (.155922) .084471
Contract charges (.142709) (.130341) (.139659)
Ending unit value - Dec. 31 $11.511092 10.477293 11.153183
Percentage increase
(decrease) in
unit value* (a) 15%(b) 5%(b) 12%(b)
1992
Beginning unit value - Jan. 1 ** ** ** **
Reinvested capital gains
and dividends
Unrealized gain (loss)
Contract charges
Ending unit value - Dec. 31
Percentage increase
(decrease) in
unit value* (a)
<CAPTION>
FidAsMgr FidCapIn FidEqInc FidMgln FidPurtn
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 10.415849 34.612981 35.955883 12.346838 11.972512
Reinvested capital gains
and dividends .386944 2.899199 3.474735 .480494 .964375
Unrealized gain (loss) (1.082752) (4.479225) (3.384084) (.704119) (.757623)
Contract charges (.130674) (.443844) (.470497) (.158826) (.158851)
Ending unit value - Dec. 31 9.589367 32.589111 35.576037 11.964387 12.020413
Percentage increase
(decrease) in
unit value* (a) (8)% (6)% (1)% (3)% 0%
1993
Beginning unit value - Jan. 1 10.000000 28.076548 30.029661 10.000000 10.000000
Reinvested capital gains
and dividends .409348 2.810534 1.323037 1.173742 1.451507
Unrealized gain (loss) .034341 4.147502 5.040278 1.321301 .666192
Contract charges (.027840) (.421603) (.437093) (.148205) (.145187)
Ending unit value - Dec. 31 10.415849 34.612981 35.955883 12.346838 11.972512
Percentage increase
(decrease) in
unit value* (a) 4%(b) 23% 20% 23%(b) 20%(b)
1992
Beginning unit value - Jan. 1 ** $22.214568 26.531856 ** **
Reinvested capital gains
and dividends 2.087748 1.097562
Unrealized gain (loss) 4.120349 2.766580
Contract charges (.346117) (.366337)
Ending unit value - Dec. 31 $28.076548 30.029661
Percentage increase
(decrease) in
unit value* (a) 26% 13%
</TABLE>
*An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
**This investment option was not available or was not utilized.
71 of 118
<PAGE> 72
Schedule I, continued
NATIONWIDE VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
FidHiInc Jan20Fd MFSWdGvt NWBdFd NWFund NWGroFd
-------- ------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $16.739460 9.451097 33.728667 33.991130 45.422888 51.458079
Reinvested capital gains
and dividends 1.533862 .025710 1.658769 2.317590 4.420863 1.956402
Unrealized gain (loss) (1.790091) (.657508) (3.874555) (5.061696) (4.160340) (1.208860)
Contract charges (.216217) (.118263) (.408722) (.414766) (.587945) (.669815)
Ending unit value - Dec. 31 $16.267014 8.701036 31.104159 30.832258 45.095466 51.535806
Percentage increase
(decrease) in
unit value* (a) (3)% (8)% (8)% (9)% (1)% 0%
1993
Beginning unit value - Jan. 1 $14.073333 10.000000 28.864451 31.104546 43.104048 46.832151
Reinvested capital gains
and dividends 1.157225 .264912 3.190912 2.458273 3.251045 1.830294
Unrealized gain (loss) 1.712047 (.787472) 2.083311 .864801 (.371871) 3.434588
Contract charges (.203145) (.026343) (.410007) (.436490) (.560334) (.638954)
Ending unit value - Dec. 31 $16.739460 9.451097 33.728667 33.991130 45.422888 51.458079
Percentage increase
(decrease) in
unit value* (a) 19% (5)%(b) 17% 9% 5% 10%
1992
Beginning unit value - Jan. 1 $11.587552 ** 28.856612 29.186916 42.418147 44.639577
Reinvested capital gains
and dividends .981520 2.931651 2.522298 1.989329 1.831527
Unrealized gain (loss) 1.678568 (2.544051) (.214142) (.760657) .949775
Contract charges (.174307) (.379761) (.390526) (.542771) (.588728)
Ending unit value - Dec. 31 $14.073333 28.864451 31.104546 43.104048 46.832151
Percentage increase
(decrease) in
unit value* (a) 21% 0% 7% 2% 5%
<CAPTION>
NWMyMkt
Pre 12/25/82 NWMyMkt NBGuard
------------ ------- -------
<S> <C> <C> <C>
1994
Beginning unit value - Jan. 1 22.315407 17.721943 10.000000
Reinvested capital gains
and dividends .829315 .658609 .249418
Unrealized gain (loss) .000000 .000000 (.492915)
Contract charges (.294451) (.233843) (.116101)
Ending unit value - Dec. 31 22.850271 18.146709 9.640402
Percentage increase
(decrease) in
unit value* (a) 2% 2% (4)%(b)
1993
Beginning unit value - Jan. 1 22.042019 17.504831 **
Reinvested capital gains
and dividends .563931 .447841
Unrealized gain (loss) .000000 .000000
Contract charges (.290543) (.230729)
Ending unit value - Dec. 31 22.315407 17.721943
Percentage increase
(decrease) in
unit value* (a) 1% 1%
1992
Beginning unit value - Jan. 1 21.636991 17.183173 **
Reinvested capital gains
and dividends .691506 .549166
Unrealized gain (loss) .000000 .000000
Contract charges (.286478) (.227508)
Ending unit value - Dec. 31 22.042019 17.504831
Percentage increase
(decrease) in
unit value* (a) 2% 2%
</TABLE>
*An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
**This investment option was not available or was not utilized.
72 of 118
<PAGE> 73
<TABLE>
<CAPTION>
Schedule I, continued
NATIONWIDE VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1994, 1993 and 1992
NBLtdMat NBPartFd OppGlob PeoIxFd PhxBalFd StTotRet TCGroInv
-------- -------- ------- ------- -------- -------- --------
1994
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $ 9.995028 11.548721 14.119303 10.819026 10.000000 12.205201 39.197771
Reinvested capital gains
and dividends .555641 .945341 1.418589 1.169814 .295350 .172665 5.656730
Unrealized gain (loss) (.588488) (1.162325) (1.850696) (1.099729) (.843207) (.340340) (6.232359)
Contract charges (.128829) (.148366) (.183806) (.139945) (.113709) (.156493) (.508425)
Ending unit value - Dec. 31 $ 9.833352 11.183371 13.503390 10.749166 9.338434 11.881033 38.113717
Percentage increase
(decrease) in
unit value* (a) (2)% (3)% (4)% (1)% (7)%(b) (3)% (3)%
1993
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 ** 10.000000 38.275689
Reinvested capital gains
and dividends .190065 1.163476 1.251857 .620996 .191064 4.379740
Unrealized gain (loss) (.162079) .524641 3.014957 .332942 2.158921 (2.963789)
Contract charges (.032958) (.139396) (.147511) (.134912) (.144784) (.493869)
Ending unit value - Dec. 31 $ 9.995028 11.548721 14.119303 10.819026 12.205201 39.197771
Percentage increase
(decrease) in
unit value* (a) 0%(b) 15%(b) 41%(b) 8%(b) 22%(b) 2%
1992
Beginning unit value - Jan. 1 ** ** ** ** ** ** $40.518750
Reinvested capital gains
and dividends .566941
Unrealized gain (loss) (2.322093)
Contract charges (.487909)
Ending unit value - Dec. 31 $38.275689
Percentage increase
(decrease) in
unit value* (a) (6)%
<CAPTION>
TCUltra TCUSGvt
------- -------
1994
<S> <C> <C>
Beginning unit value - Jan. 1 9.505758 19.087872
Reinvested capital gains
and dividends .283163 .888205
Unrealized gain (loss) (.626504) (.981660)
Contract charges (.119296) (.246018)
Ending unit value - Dec. 31 9.043121 18.748399
Percentage increase
(decrease) in
unit value* (a) (5)% (2)%
1993
Beginning unit value - Jan. 1 10.000000 18.563845
Reinvested capital gains
and dividends .000000 .652799
Unrealized gain (loss) (.468221) .119394
Contract charges (.026021) (.248166)
Ending unit value - Dec. 31 9.505758 19.087872
Percentage increase
(decrease) in
unit value* (a) (5)%(b) 3%
1992
Beginning unit value - Jan. 1 ** 18.018283
Reinvested capital gains
and dividends .801196
Unrealized gain (loss) (.016609)
Contract charges (.239025)
Ending unit value - Dec. 31 18.563845
Percentage increase
(decrease) in
unit value* (a) 3%
</TABLE>
*An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) These investment options were not utilized
for the entire year indicated.
**This investment option was not available or was not utilized.
73 of 118
<PAGE> 74
- --------------------------------------------------------------------------------
Schedule I, continued
NATIONWIDE VARIABLE ACCOUNT
NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
NWBdFd NWFund NWGroFd NWMyMkt
------ ------ ------- -------
<S> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $33.845410 47.312558 54.333269 22.456439
- ------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 2.307668 4.604779 2.065716 .834547
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (5.040000) (4.333421) (1.276404) .000000
- ------------------------------------------------------------------------------------------------------------------------
Contract charges (.412996) (.612403) (.707242) (.296305)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $30.700082 46.971513 54.415339 22.994681
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* (9)% (1)% 0% 2%
========================================================================================================================
1993
Beginning unit value - Jan. 1 $30.971200 44.897247 49.448867 22.181323
- ------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 2.447737 3.386294 1.932560 .567483
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .861084 (.387333) 3.626496 .000000
- ------------------------------------------------------------------------------------------------------------------------
Contract charges (.434611) (.583650) (.674654) (.292367)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $33.845410 47.312558 54.333269 22.456439
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 9% 5% 10% 1%
========================================================================================================================
1992
Beginning unit value - Jan. 1 $29.061793 44.182806 47.133788 21.773734
- ------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 2.511492 2.072087 1.933862 .695865
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.213146) (.792298) 1.002838 .000000
- ------------------------------------------------------------------------------------------------------------------------
Contract charges (.388939) (.565348) (.621621) (.288276)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $30.971200 44.897247 49.448867 22.181323
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease) in
unit value* 7% 2% 5% 2%
========================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
See accompanying independent auditors' report.
- --------------------------------------------------------------------------------
74 of 118
<PAGE> 75
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholder's equity and cash flows for each of the years
in the three-year period ended December 31, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Participating insurance and the related surplus are discussed in note 13. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in note 2 to the consolidated financial statements, in 1994 the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 27, 1995
75 of 118
<PAGE> 76
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
<TABLE>
Consolidated Balance Sheets
December 31, 1994 and 1993
(000's omitted)
<CAPTION>
Assets 1994 1993
------ ----------- ----------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $8,318,865 in 1994) $ 8,045,906 -
Equity securities (cost $18,373 in 1994; $8,263 in 1993) 24,713 16,593
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310
in 1994; $10,886,820 in 1993) 3,688,787 10,120,978
Mortgage loans on real estate 4,222,284 3,871,560
Real estate 252,681 253,831
Policy loans 340,491 315,898
Other long-term investments 63,914 118,490
Short-term investments (note 14) 131,643 41,797
----------- -----------
16,770,419 14,739,147
----------- -----------
Cash 7,436 21,835
Accrued investment income 220,540 190,886
Deferred policy acquisition costs 1,064,159 811,944
Deferred Federal income tax 36,515 -
Other assets 790,603 636,161
Assets held in Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
$31,112,133 25,406,361
=========== ===========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 16,321,461 14,092,255
Policyholders' dividend accumulations 338,058 322,686
Other policyholder funds 72,770 71,959
Accrued Federal income tax (note 7):
Current 13,126 12,294
Deferred - 31,659
----------- -----------
13,126 43,953
----------- -----------
Other liabilities 235,778 217,952
Liabilities related to Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
29,203,654 23,755,193
----------- -----------
Shareholder's equity (notes 3, 4, 7 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Paid-in additional capital 622,753 422,753
Unrealized gains (losses) on securities available-for-sale, net of adjustment
to deferred policy acquisition costs of $82,525 ($0 in 1993) and net of
deferred Federal income tax benefit of $64,425 ($1,583 expense in 1993) (119,668) 6,747
Retained earnings 1,401,579 1,217,853
----------- -----------
1,908,479 1,651,168
----------- -----------
Commitments and contingencies (notes 9 and 16)
$31,112,133 25,406,361
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
76 of 118
<PAGE> 77
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues (note 17):
Traditional life insurance premiums $ 209,538 215,715 226,888
Accident and health insurance premiums 324,524 312,655 430,009
Universal life and investment product policy charges 239,021 188,057 148,464
Net investment income (note 5) 1,289,501 1,204,426 1,120,157
Net ceded commissions from disposition of credit life and
credit accident and health business (note 12) - - 27,115
Realized gains (losses) on investments (notes 5 and 14) (16,384) 113,673 (19,315)
---------- ---------- ----------
2,046,200 2,034,526 1,933,318
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,279,763 1,236,906 1,319,735
Provision for policyholders' dividends on participating
policies (note 13) 46,061 53,189 61,834
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Other operating costs and expenses 352,402 329,396 321,993
---------- ---------- ----------
1,772,970 1,721,625 1,802,759
---------- ---------- ----------
Income before Federal income tax and cumulative
effect of changes in accounting principles 273,230 312,901 130,559
---------- ---------- ----------
Federal income tax (note 7):
Current expense 79,847 75,124 47,402
Deferred expense (benefit) 9,657 31,634 (13,660)
---------- ---------- ----------
89,504 106,758 33,742
---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles 183,726 206,143 96,817
Cumulative effect of changes in accounting principles,
net of tax (note 3) - 5,365 -
---------- ---------- ----------
Net income $ 183,726 211,508 96,817
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
77 of 118
<PAGE> 78
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Paid-in on securities Total
Capital additional available-for- Retained shareholder's
shares capital sale, net earnings equity
--------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1992:
Balance, beginning of year $ 3,815 311,753 96,048 933,179 1,344,795
Dividends paid to shareholder - - - (5,846) (5,846)
Net income - - - 96,817 96,817
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (5,524) - (5,524)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 311,753 90,524 1,024,150 1,430,242
========= =========== ============== ========== =============
1993:
Balance, beginning of year 3,815 311,753 90,524 1,024,150 1,430,242
Capital contributions - 111,000 - - 111,000
Dividends paid to shareholder - - - (17,805) (17,805)
Net income - - - 211,508 211,508
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (83,777) - (83,777)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 422,753 6,747 1,217,853 1,651,168
========= =========== ============== ========== =============
1994:
Balance, beginning of year 3,815 422,753 6,747 1,217,853 1,651,168
Capital contribution - 200,000 - - 200,000
Net income - - - 183,726 183,726
Adjustment for change in
accounting for certain
investments in debt and
equity securities, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax (note 3) - - 216,915 - 216,915
Unrealized losses on securities
available-for-sale, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax - - (343,330) - (343,330)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 622,753 (119,668) 1,401,579 1,908,479
========= =========== ============== ========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
78 of 118
<PAGE> 79
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 183,726 211,508 96,817
Adjustments to reconcile net income to net cash provided by
operating activities:
Capitalization of deferred policy acquisition costs (264,434) (191,994) (177,928)
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Amortization and depreciation 6,207 11,156 5,607
Realized losses (gains) on invested assets, net 15,949 (113,648) 19,092
Deferred Federal income tax benefit (2,166) (6,006) (13,105)
Increase in accrued investment income (29,654) (4,218) (11,518)
(Increase) decrease in other assets (112,566) (549,277) 6,132
Increase in policyholder account balances 1,038,641 509,370 19,087
Increase in policyholders' dividend accumulations 15,372 17,316 18,708
Increase (decrease) in accrued Federal income tax payable 832 16,838 (15,723)
Increase in other liabilities 17,826 26,958 73,512
Other, net (19,303) (11,745) (10,586)
---------- ---------- ----------
Net cash provided by operating activities 945,174 18,392 109,292
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 579,067 - -
Proceeds from sale of securities available-for-sale 247,876 247,502 27,844
Proceeds from maturity of fixed maturities held-to-maturity 516,003 1,192,093 1,030,397
Proceeds from sale of fixed maturities - 33,959 123,422
Proceeds from repayments of mortgage loans on real estate 220,744 146,047 259,659
Proceeds from sale of real estate 46,713 23,587 22,682
Proceeds from repayments of policy loans and
sale of other invested assets 134,998 59,643 99,189
Cost of securities available-for-sale acquired (2,569,672) (12,550) (12,718)
Cost of fixed maturities held-to-maturity acquired (675,835) (2,016,831) (2,687,975)
Cost of mortgage loans on real estate acquired (627,025) (475,336) (654,403)
Cost of real estate acquired (15,962) (8,827) (137,843)
Policy loans issued and other invested assets acquired (118,012) (76,491) (97,491)
---------- ---------- ----------
Net cash used in investing activities (2,261,105) (887,204) (2,027,620)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from capital contributions 200,000 111,000 -
Dividends paid to shareholder - (17,805) (5,846)
Increase in universal life and investment product account balances 3,640,958 2,249,740 2,468,236
Decrease in universal life and investment product account balances (2,449,580) (1,458,504) (575,180)
---------- ---------- ----------
Net cash provided by financing activities 1,391,378 884,431 1,887,210
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 75,447 15,619 (31,118)
Cash and cash equivalents, beginning of year 63,632 48,013 79,131
---------- ---------- ----------
Cash and cash equivalents, end of year $ 139,079 63,632 48,013
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
79 of 118
<PAGE> 80
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(000 s omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned
subsidiary of Nationwide Corporation (Corp.). Wholly-owned
subsidiaries of NLIC include Financial Horizons Life Insurance
Company (FHLIC), West Coast Life Insurance Company (WCLIC), National
Casualty Company and subsidiaries (NCC), Nationwide Financial
Services, Inc. (NFS), and effective December 31, 1994, Employers Life
Insurance Company of Wausau and subsidiary (ELICW). NLIC and its
subsidiaries are collectively referred to as "the Company".
NLIC, FHLIC, WCLIC and ELICW are life and accident and health
insurers and NCC is a property and casualty insurer. The Company is
licensed in all 50 states, the District of Columbia, the Virgin
Islands and Puerto Rico. The Company offers a full range of life,
health and annuity products through exclusive agents and other
distribution channels and is subject to competition from other
insurers throughout the United States. The Company is subject to
regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal
or regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing
its products. That is, regulatory initiatives designed to
reduce insurer profits, new legal theories or insurance
company insolvencies through guaranty fund assessments may create
costs for the insurer beyond those recorded in the consolidated
financial statements. The Company mitigates this risk by offering
a wide range of products and by operating throughout the United
States, thus reducing its exposure to any single product or
jurisdiction, and also by employing underwriting practices
which identify and minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy, by
maintaining sound reinsurance and credit and collection policies
and by providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change
and cause a decrease in the value of an insurer's investments.
This change in rates may cause certain interest-sensitive
products to become uncompetitive or may cause disintermediation.
The Company mitigates this risk by charging fees for
non-conformance with certain policy provisions, by offering
products that transfer this risk to the purchaser, and/or by
attempting to match the maturity schedule of its assets with the
expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the consolidated
financial statements and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims and
those used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent in
these estimates, management believes the amounts provided are adequate.
80 of 118
<PAGE> 81
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(a) Consolidation Policy
--------------------
The December 31, 1994, 1993 and 1992 consolidated
financial statements include the accounts of NLIC and its
wholly owned subsidiaries FHLIC, WCLIC, NCC and NFS. The
December 31, 1994 consolidated balance sheet also
includes the accounts of ELICW, which was acquired by
NLIC effective December 31, 1994. See Note 14. All
significant intercompany balances and transactions have
been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
Prior to January 1, 1994, the Company classified fixed
maturities in accordance with the then existing accounting
standards, and accordingly, fixed maturity securities were
carried at amortized cost, adjusted for amortization of
premium or discount, since the Company had both the
ability and intent to hold those securities until
maturity. Equity securities were carried at fair value
with the unrealized gains and losses, net of deferred
Federal income tax, reported as a separate component of
shareholder's equity.
In May 1993, the Financial Accounting Standards Board
(FASB) issued STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES (SFAS 115). SFAS 115
requires fixed maturities and equity securities to be
classified as either held-to-maturity, available-for-sale,
or trading. The Company has no trading securities. The
Company adopted SFAS 115 as of January 1, 1994, with no
effect on consolidated net income. See note 3 regarding
the effect on consolidated shareholder's equity.
Fixed maturity securities are classified as held-to-
maturity when the Company has the positive intent
and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities
are classified as available-for-sale and are stated at
fair value, with the unrealized gains and losses, net of
adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate
component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change
in amortization of deferred policy acquisition costs that
would have been required as a charge or credit to
operations had such unrealized amounts been realized.
Mortgage loans on real estate are carried at the unpaid
principal balance less valuation allowances. The Company
provides valuation allowances for impairments of
mortgage loans on real estate based on a review by
portfolio managers. Loans in foreclosure and loans
considered in-substance foreclosed as of the balance
sheet date are placed on non-accrual status and written
down to the fair value of the existing property to
derive a new cost basis. Real estate is carried at
cost less accumulated depreciation and valuation
allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances.
Realized gains and losses on the sale of investments are
determined on the basis of specific security
identification. Estimates for valuation allowances and
other than temporary declines are included in realized
gains and losses on investments.
In May, 1993, the FASB issued STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 114 - ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN (SFAS 114). SFAS 114, which
was amended by STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 118 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND
DISCLOSURE in October, 1994, requires the measurement of
impaired loans be based on the present value of expected
future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The
impact on the consolidated financial statements of
adopting SFAS 114 as amended is not expected to be
material. Previously issued consolidated financial
statements shall not be restated. The Company will adopt
SFAS 114 as amended in 1995.
81 of 118
<PAGE> 82
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life
insurance products include those products with fixed and
guaranteed premiums and benefits and consist primarily of
whole life, limited-payment life, term life and certain
annuities with life contingencies. Premiums for
traditional life insurance products are recognized as
revenue when due and collected. Benefits and expenses
are associated with earned premiums so as to result in
recognition of profits over the life of the contract.
This association is accomplished by the provision for
future policy benefits and the deferral and amortization
of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life
products include universal life, variable universal life
and other interest-sensitive life insurance policies.
Investment products consist primarily of individual and
group deferred annuities, annuities without life
contingencies and guaranteed investment contracts.
Revenues for universal life and investment products
consist of cost of insurance, policy administration and
surrender charges that have been earned and assessed
against policy account balances during the period.
Policy benefits and claims that are charged to expense
include benefits and claims incurred in the period in
excess of related policy account balances and interest
credited to policy account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health
insurance premiums are recognized as revenue over the
terms of the policies. Policy claims are charged to
expense in the period that the claims are incurred.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally
commissions, certain expenses of the policy issue
and underwriting department and certain variable
agency expenses have been deferred. For traditional
life and individual health insurance products, these
deferred acquisition costs are predominantly being
amortized with interest over the premium paying period
of the related policies in proportion to the ratio of
actual annual premium revenue to the anticipated total
premium revenue. Such anticipated premium revenue was
estimated using the same assumptions as were used for
computing liabilities for future policy benefits. For
universal life and investment products, deferred policy
acquisition costs are being amortized with interest over
the lives of the policies in relation to the present
value of estimated future gross profits from projected
interest margins, cost of insurance, policy
administration and surrender charges. For years in
which gross profits are negative, deferred policy
acquisition costs are amortized based on the present
value of gross revenues. Beginning January 1, 1994,
deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on
fixed maturity securities available-for-sale. See note
2(b).
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent
contractholders' funds which have been segregated into
accounts with specific investment objectives. The
investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except
for the fees the Company receives for administrative
services and risks assumed.
(f) Future Policy Benefits
----------------------
Future policy benefits for traditional life and individual
health policies have been calculated using a net level
premium method based on estimates of mortality,
morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the
policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits for annuity policies in the
accumulation phase, universal life and variable universal
life policies have been calculated based on participants'
contributions plus interest credited less applicable
contract charges.
Future policy benefits and claims for group long-term
disability policies are the present value (primarily
discounted at 5.5%) of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred
but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on
other group health policies are not discounted.
82 of 118
<PAGE> 83
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 45%
(48% in 1993 and 1992) of the Company's ordinary
life insurance in force, 72% (72% in 1993; 71% in 1992)
of the number of policies in force, and 41% (45% in 1993
and 1992) of life insurance premiums. The provision for
policyholder dividends is based on current dividend
scales. Future dividends are provided for ratably in
future policy benefits based on dividend scales in effect
at the time the policies were issued. Dividend scales are
approved by the Board of Directors.
Income attributable to participating policies in excess
of policyholder dividends is accounted for as belonging to
the shareholder. See note 13.
(h) Federal Income Tax
------------------
NLIC, FHLIC, WCLIC and NCC file a consolidated Federal
income tax return with Nationwide Mutual Insurance Company
(NMIC), the majority shareholder of Corp. Through 1994,
ELICW filed a consolidated Federal income tax return with
Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW will file a separate Federal
income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109 - ACCOUNTING FOR INCOME
TAXES, which required a change from the deferred method
of accounting for income tax of APB Opinion 11 to the
asset and liability method of accounting for income tax.
Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future
tax consequences attributable to differences between
the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are
expected to be recovered or settled. Under this
method, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to
be realized.
Prior to 1993, the Company applied the deferred method
of accounting for income tax which recognized deferred
income tax for income and expense items that are reported
in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for
the year of calculation. Under the deferred method,
deferred tax is not adjusted for subsequent changes in tax
rates. See note 7.
The Company has reported the cumulative effect of the
change in method of accounting for income tax in the
1993 consolidated statement of income. See note 3.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries
on benefits and claims incurred are deducted from the
respective income and expense accounts. Assets and
liabilities related to reinsurance ceded are reported on
a gross basis.
(j) Cash Equivalents
----------------
For purposes of the consolidated statements of cash
flows, the Company considers all short-term investments
with original maturities of three months or less to be
cash equivalents.
(k) Reclassification
----------------
Certain items in the 1993 and 1992 consolidated financial
statements have been reclassified to conform to the 1994
presentation.
83 of 118
<PAGE> 84
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(3) Changes in Accounting Principles
--------------------------------
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of a new accounting standard by the FASB
as described in Note 2(b). As of January 1, 1994, the company
classified fixed maturity securities with amortized cost and fair value
of $6,593,844 and $7,024,736, respectively, as available-for-sale
and recorded the securities at fair value. Previously, these
securities were recorded at amortized cost. The effect as of January
1, 1994 has been recorded as a direct credit to shareholder's equity
as follows:
<TABLE>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
--------
$216,915
========
</TABLE>
During 1993, the Company adopted accounting principles in
connection with the issuance of two accounting standards by the FASB.
The effect as of January 1, 1993, the date of adoption, has been
recognized in the 1993 consolidated statement of income as the
cumulative effect of changes in accounting principles, as follows:
<TABLE>
<S> <C>
Asset/liability method of recognizing income tax (note 7) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296), (note 11) (20,979)
--------
Net cumulative effect of changes in accounting principles $ 5,365
========
</TABLE>
(4) Basis of Presentation
---------------------
The consolidated financial statements have been prepared in
accordance with GAAP. Annual Statements for NLIC and FHLIC, WCLIC,
ELICW and NCC, filed with the Department ofInsurance of the State of
Ohio, California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by
such regulatory authorities. Prescribed statutory accounting
practices include a variety of publications of the National Association
of Insurance Commissioners (NAIC), as well as state laws, regulations
and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed. The
Company has no material permitted statutory accounting practices.
The following reconciles the statutory net income of NLIC as
reported to regulatory authorities to the net income as shown
in the accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Statutory net income $ 76,532 185,943 33,812
Adjustments to restate to the basis of GAAP:
Consolidating statutory net income of subsidiaries 14,350 19,545 21,519
Increase in deferred policy acquisition costs, net 167,166 89,860 78,731
Future policy benefits (76,310) (70,640) (63,355)
Deferred Federal income tax (expense) benefit (9,657) (31,634) 13,660
Equity in earnings of affiliates 1,013 7,121 4,618
Valuation allowances and other than temporary
declines accounted for directly in surplus 6,275 (6,638) 3,402
Interest maintenance reserve (7,332) 13,754 7,588
Cumulative effect of changes in accounting principles,
net of tax - 5,365 -
Other, net 11,689 (1,168) (3,158)
-------- ------- -------
Net income per accompanying consolidated
statements of income $183,726 211,508 96,817
======== ======= =======
</TABLE>
84 of 118
<PAGE> 85
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The following reconciles the statutory capital shares and
surplus of NLIC as reported to regulatory authorities to the
shareholder's equity as shown in the accompanying consolidated
financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Statutory capital shares and surplus $1,262,861 992,631 647,307
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 1,064,159 811,944 722,084
Nonadmitted assets and furniture and equipment charged to
income in the year of acquisition, net of accumulated
depreciation 16,120 22,573 15,712
Asset valuation reserve 153,387 105,596 138,727
Interest maintenance reserve 18,843 21,069 7,315
Future policy benefits (310,302) (238,231) (167,591)
Deferred Federal income tax, including effect of changes in
accounting principles in 1993 36,515 (31,659) (82,724)
Cumulative effect of change in accounting principles for
postretirement benefits other than pensions, gross - (32,275) -
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross (272,959) - -
Other, net (60,145) (480) 149,412
---------- ---------- ----------
Shareholder's equity per accompanying consolidated
balance sheets $1,908,479 1,651,168 1,430,242
========== ========== ==========
</TABLE>
(5) Investments
-----------
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 674,346 - -
Equity securities 550 7,230 6,949
Fixed maturities held-to-maturity 193,009 800,255 754,876
Mortgage loans on real estate 376,783 364,810 334,769
Real estate 40,280 39,684 27,410
Short-term 6,990 5,080 7,298
Other 42,831 33,832 30,717
---------- -------- --------
Total investment income 1,334,789 1,250,891 1,162,019
Less investment expenses 45,288 46,465 41,862
---------- ---------- ----------
Net investment income $1,289,501 1,204,426 1,120,157
========== ========== ==========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ (703,851) - -
Equity securities (1,990) (128,837) (9,195)
Fixed maturities held-to-maturity (421,427) 223,392 17,774
----------- -------- --------
$(1,127,268) 94,555 8,579
=========== ======== ========
</TABLE>
85 of 118
<PAGE> 86
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
An analysis of realized gains (losses) on investments by investment
type follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Realized on disposition of investments:
Securities available-for-sale:
Fixed maturities $(13,720) - -
Equity securities 1,427 129,728 7,215
Fixed maturities - 21,159 13,399
Mortgage loans on real estate (16,130) (17,763) (30,334)
Real estate and other 5,765 (12,813) (12,997)
---------- -------- --------
(22,658) 120,311 (22,717)
---------- -------- --------
Valuation allowances:
Securities available-for-sale:
Fixed maturities 6,600 - -
Fixed maturities - (934) 1,792
Mortgage loans on real estate (4,332) (10,478) (5,969)
Real estate and other 4,006 4,774 7,579
---------- -------- --------
6,274 (6,638) 3,402
---------- -------- --------
$(16,384) 113,673 (19,315)
========== ======== ========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale and fixed maturities held-to-maturity were as
follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities:
US Treasury securities and obligations of US
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political
subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
----------- ---------- ---------- ----------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,373 6,636 (296) 24,713
----------- ---------- ---------- ----------
$8,337,238 77,887 (344,506) 8,070,619
=========== ========== ========== ==========
Fixed maturity securities held-to-maturity
------------------------------------------
Obligations of states and political
subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
----------- ---------- ---------- ----------
$3,688,787 34,383 (120,860) 3,602,310
=========== ========== ========== ==========
</TABLE>
86 of 118
<PAGE> 87
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of investments of fixed
maturity securities were as follows as of December 31, 1993:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 287,738 18,204 (392) 305,550
Obligations of states and political
subdivisions 16,519 2,700 (5) 19,214
Debt securities issued by foreign governments 137,092 7,719 (1,213) 143,598
Corporate securities 6,819,355 647,778 (15,648) 7,451,485
Mortgage-backed securities 2,860,274 121,721 (15,022) 2,966,973
----------- ---------- ---------- ----------
$10,120,978 798,122 (32,280) 10,886,820
=========== ========== ========== ==========
</TABLE>
As of December 31, 1993 the net unrealized gain on equity
securities, before providing for deferred Federal income tax, was
$8,330, comprised of gross unrealized gains of $8,345 and gross
unrealized losses of $15.
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale and fixed maturity securities
held-to-maturity as of December 31, 1994, by contractual maturity,
are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---------- -----------
<S> <C> <C>
Fixed maturity securities available-for-sale
--------------------------------------------
Due in one year or less $ 294,779 294,778
Due after one year through five years 2,553,825 2,490,886
Due after five years through ten years 1,382,311 1,327,089
Due after ten years 544,091 558,514
---------- -----------
4,775,006 4,671,267
Mortgage-backed securities 3,543,859 3,374,639
---------- -----------
$8,318,865 8,045,906
========== ===========
Fixed maturity securities held-to-maturity
------------------------------------------
Due in one year or less $ 333,517 333,000
Due after one year through five years 1,953,179 1,942,260
Due after five years through ten years 1,080,069 1,013,083
Due after ten years 322,022 313,967
---------- -----------
$3,688,787 3,602,310
========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during
1994 were $247,876, while proceeds from sales of investments in
fixed maturity securities during 1993 were $33,959 ($123,422 during
1992). Gross gains of $3,406 ($2,413 in 1993 and $3,194 in 1992) and
gross losses of $21,866 ($39 in 1993 and $513 in 1992) were realized
on those sales.
Investments that were non-income producing for the twelve month
period preceding December 31, 1994 amounted to $11,513 ($13,158 for
1993) and consisted of $11,111 ($10,907 in 1993) in real estate and
$402 ($2,251 in 1993) in other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$29,275 in 1994 ($24,717 in 1993) and valuation allowances of $27,330
in 1994 ($31,357 in 1993). Other valuation allowances are $0 in 1994
($6,680 in 1993) on fixed maturities and $47,892 in 1994 ($42,350 in
1993) on mortgage loans on real estate.
87 of 118
<PAGE> 88
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company generally initiates foreclosure proceedings on all
mortgage loans on real estate delinquent sixty days. Foreclosures
of mortgage loans on real estate were $37,187 in 1994 ($39,281 in
1993) and mortgage loans on real estate in process of foreclosure or
in-substance foreclosed as of December 31, 1994 totaled $19,878
($24,658 as of December 31, 1993), which approximates fair value.
Investments with an amortized cost of $11,137 and $11,383 as of
December 31, 1994 and 1993, respectively, were on deposit with various
regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for traditional life and
individual health policies has been established based upon the
following assumptions:
Interest rates: Interest rates vary as follows:
<TABLE>
<CAPTION>
Year of issue Life Health
------------- ---- ------
<S> <C> <C>
1994 7.2 %, not graded - permanent contracts with loan provisions; 5.0%
6.0%, not graded - all other contracts
1984-1993 7.4% to 10.5%, not graded 5.0% to 6%
1966-1983 6% to 8.1%, graded over 20 years to 4% to 6.6% 3.5% to 6%
1965 and prior generally lower than post 1965 issues 3.5% to 4%
</TABLE>
Withdrawals: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
Mortality: Mortality and morbidity rates are based on
published tables, modified for the Company's actual experience.
The liability for future policy benefits for investment contracts
(approximately 81% and 80% of the total liability for future policy
benefits as of December 31, 1994 and 1993, respectively) has been
established based on policy term, interest rates and various contract
provisions. The average interest rate credited on investment product
policies was 6.5%, 7.0% and 7.5% for the years ended December 31, 1994,
1993 and 1992, respectively.
Future policy benefits and claims for group long-term disability
policies are the present value (primarily discounted at 5.5%) of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve
discounting is not material. Future policy benefits and claims on
other group health policies are not discounted.
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Balance as of January 1 $591,258 760,312 672,581
Less reinsurance recoverables 429,798 547,786 445,934
--------- -------- --------
Net balance as of January 1 161,460 212,526 226,647
--------- -------- --------
Incurred related to:
Current year 273,299 309,721 360,545
Prior years (26,156) (26,248) (17,433)
--------- -------- --------
Total incurred 247,143 283,473 343,112
--------- -------- --------
Paid related to:
Current year 175,700 208,978 226,886
Prior years 73,889 125,561 130,347
--------- -------- --------
Total paid 249,589 334,539 357,233
--------- -------- --------
Unpaid claims of ELICW (note 14) 40,223 - -
--------- -------- --------
Net balance as of December 31 199,237 161,460 212,526
Plus reinsurance recoverables 457,694 429,798 547,786
--------- -------- --------
Balance as of December 31 $656,931 591,258 760,312
======== ======== ========
</TABLE>
88 of 118
<PAGE> 89
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
As a result of changes in estimates for insured events of prior
years, the provision for claims and claim adjustment expenses
decreased in each of the three years ended December 31, 1994 due to
lower-than-anticipated costs to settle accident and health claims.
(7) Federal Income Tax
------------------
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the
deferral from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was
accumulated in the Policyholders' Surplus Account (PSA). Management
considers the likelihood of distributions from the PSA to be remote;
therefore, no Federal income tax has been provided for such
distributions in the consolidated financial statements. The DRA
eliminated any additional deferrals to the PSA. Any distributions
from the PSA, however, will continue to be taxable at the then current
tax rate. The balance of the PSA is approximately $35,344 as of
December 31, 1994.
The Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
109 - ACCOUNTING FOR INCOME TAXES (SFAS 109), as of January 1, 1993.
See note 3. The 1992 consolidated financial statements have not
been restated to apply the provisions of SFAS 109.
The significant components of deferred income tax expense for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Deferred income tax expense (exclusive of the
effects of other components listed below) $9,657 29,930
Adjustments to deferred income tax assets and
liabilities for enacted changes in tax laws
and rates - 1,704
------ ------
$9,657 31,634
====== ======
</TABLE>
For the year ended December 31, 1992, the deferred income tax
benefit results from timing differences in the recognition of
income and expense for income tax and financial reporting purposes.
The primary sources of those timing differences were deferred policy
acquisition costs (deferred expense of $16,457) and reserves for future
policy benefits (deferred benefit of $32,045).
Total Federal income tax expense for the years ended December 31,
1994, 1993 and 1992 differs from the amount computed by applying the
U.S. Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Amount % Amount % Amount %
------- ---- -------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $95,631 35.0 $109,515 35.0 $44,390 34.0
Tax exempt interest and dividends
received deduction (194) (0.1) (2,322) (0.7) (4,172) (3.2)
Current year increase in U.S. Federal
income tax rate - - 1,704 0.5 - -
Real estate valuation allowance
adjustment - - - - (3,463) (2.7)
Other, net (5,933) (2.1) (2,139) (0.7) (3,013) (2.3)
------- ---- -------- ---- ------- ----
Total (effective rate of each
year) $89,504 32.8 $106,758 34.1 $33,742 25.8
======= ==== ======== ==== ======= ====
</TABLE>
Total Federal income tax paid was $87,576, $58,286 and $63,124 during
the years ended December 31, 1994, 1993 and 1992, respectively.
89 of 118
<PAGE> 90
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $124,044 129,995
Fixed maturity securities available-for-sale 95,536 -
Liabilities in Separate Accounts 94,783 64,722
Mortgage loans on real estate and real estate 25,632 24,020
Other policyholder funds 7,137 7,759
Other assets and other liabilities 57,528 41,390
-------- ---------
Total gross deferred tax assets 404,660 267,886
-------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 317,224 243,731
Fixed maturities, equity securities and other
long-term investments 3,620 11,137
Other 47,301 44,677
-------- ---------
Total gross deferred tax liabilities 368,145 299,545
-------- ---------
Net deferred tax asset (liability) $ 36,515 (31,659)
======== =========
</TABLE>
The Company has determined that valuation allowances are not
necessary as of December 31, 1994 and 1993 and January 1, 1993 (date of
adoption of SFAS 109) based on its analysis of future deductible
amounts. All future deductible amounts can be offset by future
taxable amounts or recovery of Federal income tax paid within the
statutory carryback period. In addition, for future deductible
amounts for securities available-for-sale, affiliates of the Company
which are included in the same consolidated Federal income tax return
hold investments that could be sold for capital gains that could offset
capital losses realized by the Company should securities
available-for-sale be sold at a loss.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of
fair value information about existing on and off-balance sheet financial
instruments. In cases where quoted market prices are not available,
fair value is based on estimates using present value or other valuation
techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities that
are classified as investment contracts, are specifically exempted from
SFAS 107 disclosures, estimated fair value of policy reserves on
insurance contracts are provided to make the fair value disclosures more
meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the balance sheets for these instruments
approximate their fair value.
90 of 118
<PAGE> 91
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
INVESTMENT SECURITIES: Fair value for fixed maturity
securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services
or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on quoted
market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices.
The fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on
real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans
to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is valued at the estimated fair
value of the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value
is the amount payable on demand. For investment contracts with
known or determined maturities, fair value is estimated using
discounted cash flow analysis. Interest rates used are similar
to currently offered contracts with maturities consistent with
those remaining for the contracts being valued.
POLICY RESERVES ON INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the
amount payable on demand. Also included are disclosures for the
Company's limited payment policies, which the Company has used
discounted cash flow analyses similar to those used for investment
contracts with known maturities to estimate fair value.
POLICYHOLDERS DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated
balance sheets for these instruments approximates their fair value.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on insurance contracts were as
follows as of December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $ 8,045,906 8,045,906 - -
Equity securities 24,713 24,713 16,593 16,593
Fixed maturities held-to-maturity 3,688,787 3,602,310 10,120,978 10,886,820
Mortgage loans on real estate 4,222,284 4,173,284 3,871,560 4,175,271
Policy loans 340,491 340,491 315,898 315,898
Short-term investments 131,643 131,643 41,797 41,797
Cash 7,436 7,436 21,835 21,835
Assets held in Separate Accounts 12,222,461 12,222,461 9,006,388 9,006,388
Liabilities
-----------
Investment contracts 12,189,894 11,657,556 10,332,661 10,117,288
Policy reserves on insurance contracts 3,170,085 2,934,384 2,945,120 2,873,503
Policyholders' dividend accumulations 338,058 338,058 322,686 322,686
Other policyholder funds 72,770 72,770 71,959 71,959
Liabilities related to Separate Accounts 12,222,461 11,807,331 9,006,388 8,714,586
</TABLE>
91 of 118
<PAGE> 92
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to
extend credit in the form of loans. These instruments involve, to
varying degrees, elements of credit risk in excess of amounts
recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and
the borrower's loan collateral. The underlying mortgage property
represents the collateral if the commitment is funded. The Company's
policy for new mortgage loans on real estate is to lend no more than
80% of collateral value. Should the commitment be funded, the
Company's exposure to credit loss in the event of nonperformance by
the borrower is represented by the contractual amounts of these
commitments less the net realizable value of the collateral. The
contractual amounts also represent the cash requirements for all
unfunded commitments. Commitments on mortgage loans on real estate
of $243,200 extending into 1995 were outstanding as of December 31,
1994.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (23% in 1993) in any geographic area and no more than 2%
(2% in 1993) with any one borrower. The summary below depicts loans
by remaining principal balance as of each December 31:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
-------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
-------- --------- --------- --------- ----------
$669,832 613,707 2,176,705 816,831 4,277,075
======== ========= ========= =========
Less valuation allowances and unamortized discount 54,791
----------
Total mortgage loans on real estate, net $4,222,284
==========
1993:
East North Central $109,208 108,478 470,755 158,964 847,405
East South Central 27,562 1,460 117,341 69,991 216,354
Mountain 3,228 4,742 105,560 23,065 136,595
Middle Atlantic 56,664 52,766 132,821 15,414 257,665
New England 10,565 48,398 142,530 8 201,501
Pacific 174,409 185,116 389,428 65,497 814,450
South Atlantic 112,640 58,165 391,102 238,337 800,244
West North Central 104,933 13,458 78,408 3,917 200,716
West South Central 50,955 47,103 183,420 161,033 442,511
-------- --------- ------- --------- ----------
$650,164 519,686 2,011,365 736,226 3,917,441
======== ========= ========= =========
Less valuation allowances and unamortized discount 45,881
----------
Total mortgage loans on real estate, net $3,871,560
==========
</TABLE>
92 of 118
<PAGE> 93
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
NLIC, FHLIC, WCLIC, NCC, and NFS participate together with other
affiliated companies, in a pension plan covering all employees who
have completed at least one thousand hours of service within a
twelve-month period and who have met certain age requirements. Plan
contributions are invested in a group annuity contract of NLIC.
Benefits are based upon the highest average annual salary of any
three consecutive years of the last ten years of service. The Company
funds pension costs accrued for direct employees plus an allocation of
pension costs accrued for employees of affiliates whose work efforts
benefit the Company.
Pension costs charged to operations by the Company during the years
ended December 31, 1994, 1993 and 1992 were $10,451, $6,702 and
$4,613, respectively.
The Company's net accrued pension expense as of December 31, 1994
and 1993 was $1,836 and $1,472, respectively.
The net periodic pension cost for the plan as a whole for the years
ended December 31, 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $64,740 47,694 44,343
Interest cost on projected benefit obligation 73,951 70,543 68,215
Actual return on plan assets (21,495) (105,002) (62,307)
Net amortization and deferral (62,150) 20,832 (24,281)
-------- -------- --------
Net periodic pension cost $55,046 34,067 25,970
======== ======== ========
Basis for measurements, net periodic pension cost:
Weighted average discount rate 5.75% 6.75% 7.25%
Rate of increase in future compensation levels 4.50% 4.75% 5.25%
Expected long-term rate of return on plan assets 7.00% 7.50% 8.00%
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 914,850 972,475
Nonvested 7,570 10,227
---------- ----------
$ 922,420 982,702
========== ==========
Projected benefit obligation for
services rendered to date 1,305,547 1,292,477
Plan assets at fair value 1,241,771 1,208,007
---------- ----------
Plan assets less than projected benefit
obligation (63,776) (84,470)
Unrecognized prior service cost 46,201 49,551
Unrecognized net losses 39,408 55,936
Unrecognized net assets at January 1, 1987 (21,994) (24,146)
---------- ----------
Net accrued pension expense $ (161) (3,129)
========== ==========
Basis for measurements, funded status of plan:
Weighted average discount rate 7.50% 5.75%
Rate of increase in future compensation levels 6.75% 4.50%
</TABLE>
93 of 118
<PAGE> 94
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, NLIC, FHLIC, WCLIC,
NCC and NFS participate with other affiliated companies in life and
health care defined benefit plans for qualifying retirees.
Postretirement life and health care benefits are contributory and
available to full time employees who have attained age 55 and
have accumulated 15 years of service with the Company after reaching
age 40. Postretirement life insurance contributions are based on age
and coverage amount of each retiree. Postretirement health care
benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. The accounting for the
health care plan anticipates future cost-sharing changes to the
written plan that are consistent with the Company's expressed intent
to increase the retiree contribution amount annually for expected
health care inflation. The Company's policy is to fund the cost of
health care benefits in amounts determined at the discretion of
management. The Company began funding in 1994. Plan assets are
invested in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106),
which requires the accrual method of accounting for postretirement
life and health care insurance benefits based on actuarially
determined costs to be recognized over the period from the date of
hire to the full eligibility date of employees who are expected to
qualify for such benefits. Postretirement benefit cost for 1992, which
was recorded on a cash basis, has not been restated.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly,
a noncash charge of $32,275 ($20,979 net of related income tax
benefit) was recorded in the consolidated statement of income as a
cumulative effect of a change in accounting principle. See note 3.
The adoption of SFAS 106, including the cumulative effect of the
change in accounting principle, increased the expense for
postretirement benefits by $35,277 to $36,544 in 1993. Net periodic
postretirement benefit cost for 1994 was $4,627. The Company's
accrued postretirement benefit obligation as of December 31, 1994 and
1993 was $36,001 and $35,277, respectively.
Actuarial assumptions for the measurement of the December 31, 1994
accumulated postretirement benefit obligation include a discount rate
of 8% and an assumed health care cost trend rate of 11%, uniformly
declining to an ultimate rate of 6% over 12 years.
Actuarial assumptions for the measurement of the December 31, 1993
accumulated postretirement benefit obligation and the 1994 net
periodic postretirement benefit cost include a discount rate of 7% and
an assumed health care cost trend rate of 12%, uniformly declining to
an ultimate rate of 6% over 12 years.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation as of January 1, 1993 and the 1993 net periodic
postretirement benefit cost include a discount rate of 8% and an
assumed health care cost trend rate of 14%, uniformly declining to an
ultimate rate of 6% over 12 years.
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 76,677 90,312
Fully eligible, active plan participants 22,013 24,833
Other active plan participants 59,089 84,103
--------- ---------
Accumulated postretirement benefit obligation 157,779 199,248
Plan assets at fair value 49,012 -
--------- ---------
Plan assets less than accumulated postretirement benefit
obligation (108,767) (199,248)
Unrecognized net (gains) losses (41,497) 15,128
--------- ---------
Accrued postretirement benefit obligation $(150,264) (184,120)
========= =========
</TABLE>
94 of 118
<PAGE> 95
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amount of net periodic postretirement benefit cost for the plan as
a whole for the years ended December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to employee service during the year $ 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,011 13,928
Actual return on plan assets (1,622) -
Net amortization and deferral 1,622 -
------- ------
Net periodic postretirement benefit cost $22,597 21,018
======= ======
</TABLE>
The health care cost trend rate assumption has a significant effect
on the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 by
$8,109 and $15,621, respectively, and the net periodic postretirement
benefit cost for the years ended December 31, 1994 and 1993 by $866 and
$2,377, respectively.
(12) Portfolio Transfer of Credit Life and Credit Accident and Health
----------------------------------------------------------------
On March 13, 1992, WCLIC entered into an assignment and assumption
agreement with American Bankers Life Assurance Company of Florida
(ABLAC) under which ABLAC assumed, by portfolio transfer, substantially
all of WCLIC's credit life and accident and health policies in force as
of January 1, 1992. A pre-tax loss of approximately $15,000 was
recognized from this transaction in 1992. The loss represents
approximately $34,000 of amortization of deferred policy acquisition
costs, less approximately $27,000 in ceded commissions earned, plus
death benefits incurred and other expenses. Under the terms defined in
the assignment and assumption agreement, WCLIC is contingently liable
for adverse development of claims activity up to a defined limit. As
of December 31, 1994, WCLIC has provided for a contingent liability
based on the development of claims experience through December 31,
1994. As of December 31, 1993, WCLIC had provided for the maximum
contingent liability in the absence of conclusive claims experience
development.
(13) Regulatory Risk-Based Capital, Retained Earnings and Dividend
-------------------------------------------------------------
Restrictions
------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The
formulas for determining the amount of risk-based capital specify
various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk.
Regulatory compliance is determined by a ratio of the company's
regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level risk-based capital, as defined by the NAIC.
Companies below specific trigger points or ratios are classified
within certain levels, each of which requires specified corrective
action. NLIC and each of its insurance subsidiaries exceed the minimum
risk-based capital requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, at the year-end shall
inure to the benefit of the shareholders. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall be
used only for the payment or apportionment of dividends to participating
policyholders at least to the extent required by statute or for the
purpose of making up any loss on participating policies.
In the opinion of counsel for the Company, the ultimate ownership of
the entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
95 of 118
<PAGE> 96
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable
to participating policies in excess of the amounts paid as dividends
to policyholders belong to the shareholder rather than the
policyholders, and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares
was $1,904,664, $1,647,353, and $1,426,427 as of December 31,
1994, 1993 and 1992, respectively. The amount thereof not
presently available for dividends to the shareholder due to the New
York restrictions and to adjustments relating to GAAP was $929,934,
$954,037 and $841,583 as of December 31, 1994, 1993 and 1992,
respectively.
Ohio law limits the payment of dividends to shareholders. The
maximum dividend that may be paid by the Company without prior
approval of the Director of the Department of Insurance of the State
of Ohio is limited to the greater of statutory gain from operations of
the preceding calendar year or 10% of statutory shareholder's surplus
as of the prior December 31. Therefore, $1,707,110, of shareholder's
equity, as presented in the accompanying consolidated financial
statements, is restricted as to dividend payments in 1995.
California law limits the payment of dividends to shareholders of
WCLIC. The maximum dividend that may be paid by WCLIC without
prior approval of the Commissioner of the State of California
Department of Insurance is limited to the greater of WCLIC's
statutory net income of the preceding calendar year or 10% of
WCLIC's statutory shareholder's surplus as of the prior December 31.
Therefore, $126,489 of WCLIC's shareholder's equity is restricted as
to dividend payments in 1995.
Wisconsin law limits the payment of dividends to shareholders of ELICW.
The maximum dividend that may be paid by ELICW without prior approval
of the Commissioner of the State of Wisconsin is limited to the greater
of ELICW's statutory net income of the preceding calendar year or 10%
of ELICW s statutory surplus as of the prior December 31, Therefore,
$135,369 of ELICW's shareholder's equity is restricted as to dividend
payments in 1995.
Michigan law limits the payment of dividends to shareholders of NCC.
The maximum dividend that may be paid by NCC without prior approval
of the Commissioner of the State of Michigan Bureau of Insurance is
limited to the greater of NCC's statutory net income, not including
realized capital gains, of the preceding calendar year or 10% of
NCC's statutory shareholder's surplus as of the prior December 31.
Therefore, $66,564 of NCC's shareholder's equity is restricted as to
dividend payments in 1995. In addition, prior approval is not required
for a dividend which does not increase gross leverage to a point in
excess of the United States consolidated industry average for the most
recent available year.
(14) Transactions With Affiliates
----------------------------
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of ELICW from Wausau Service Corporation (WSC) for an
amount approximating $165,000, subject to specified adjustments, if
any, subsequent to year end. NLIC transferred fixed maturity
securities and cash with a fair value of $155,000 to WSC on
December 28, 1994, which resulted in a realized loss of $19,239 on
the disposition of the securities. An accrual approximating $10,000
is reflected in the accompanying consolidated balance sheet. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share
home office, other facilities, equipment and common management and
administrative services with WSC.
The deferred compensation annuity line of business of the Company
is primarily sold through Public Employees Benefit Services
Corporation (PEBSCO). The Company paid PEBSCO commissions and
administrative fees of $26,699, $22,681 and $20,146 in 1994, 1993 and
1992, respectively. PEBSCO is a wholly owned subsidiary of Corp.
The Company and NEA Valuebuilder Investor Services, Inc. (NEAVIS) have
contracted with the National Education Association (NEA) to provide
individual annuity contracts to be marketed exclusively to members of
the NEA. The Company paid NEAVIS a marketing development fee of
$11,095, $9,229 and $6,426 in 1994, 1993 and 1992, respectively.
NEAVIS is a wholly owned subsidiary of Corp.
The Company shares home office, other facilities, equipment and
common management and administrative services with affiliates.
96 of 118
<PAGE> 97
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the
securities will be repurchased by the seller at the original sales
price plus a price differential. Transactions under the agreements
during 1994 and 1993 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC,
NLIC and WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and
ELICW as of December 31, 1994. These contracts are immaterial to
the consolidated financial statements.
NCC participates in several 100% quota share reinsurance agreements
with NMIC. NCC serves as the licensed insurer as required for an
affiliated excess and surplus lines company and cedes 100% of direct
written premiums to NMIC. In 1989, NCC transferred 100% of assets and
unearned premiums and loss reserves related to a discontinued block of
assumed reinsurance to NMIC (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%). Effective January 1, 1993, NCC entered into
a 100% quota share reinsurance agreement to cede to NMIC 100% of all
written premiums not subject to any other reinsurance agreements.
As a result of these agreements, and in accordance with STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 113 - ACCOUNTING AND REPORTING FOR
REINSURANCE OF SHORT-DURATION AND LONG-DURATION CONTRACTS, the
following amounts are included in the consolidated financial statements
as of December 31, 1994 and 1993 for reinsurance ceded:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Reinsurance recoverable $575,721 533,401
Unearned premium reserves (118,092) (102,644)
Loss and claim reserves (371,974) (352,303)
Loss and expense reserves (85,655) (78,454)
-------- --------
$ 0 0
======== ========
</TABLE>
The ceding of reinsurance does not discharge the original insurer
from primary liability to its policyholder. The insurer which assumes
the coverage assumes the related liability and it is the practice of
insurers to treat insured risks, to the extent of reinsurance ceded,
as though they were risks for which the original insurer is not liable.
Management believes the financial strength of NMIC reduces to an
acceptable level any risk to NCC under these intercompany reinsurance
agreements.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $92,531 and $28,683 at December 31,
1994 and 1993, respectively, and are included in short-term
investments on the accompanying consolidated balance sheets.
(15) Bank Lines of Credit
--------------------
As of December 31, 1994 and 1993, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization. Additionally, NFS had $27,000 of confirmed
but unused bank lines of credit.
97 of 118
<PAGE> 98
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) Contingencies
-------------
The Company is a defendant in various lawsuits. In the
opinion of management, the effects, if any, of such lawsuits
are not expected to be material to the Company's financial
position or results of operations.
(17) Major Lines of Business
-----------------------
The Company operates in the life and accident and health lines of
business in the life insurance and property and casualty insurance
industries. Life insurance operations include whole life, universal
life, variable universal life, endowment and term life insurance and
annuity contracts issued to individuals and groups. Accident and
health operations also provide coverage to individuals and groups.
The following table summarizes the revenues and income before Federal
income tax and cumulative effect of changes in accounting principles
for the years ended December 31, 1994, 1993 and 1992 and assets as of
December 31, 1994, 1993 and 1992, by line of business.
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Life insurance $ 1,577,809 1,479,956 1,406,417
Accident and health 345,544 339,764 475,290
Investment income allocated to capital and surplus 122,847 214,806 51,611
----------- --------- ---------
Total $ 2,046,200 2,034,526 1,933,318
=========== ========= =========
Income before Federal income tax and cumulative
effect of changes in accounting principles:
Life insurance 141,650 83,917 78,627
Accident and health 13,220 15,043 436
Investment income allocated to capital and surplus 118,360 213,941 51,496
----------- --------- ---------
Total $ 273,230 312,901 130,559
=========== ========= =========
Assets:
Life insurance 28,351,628 22,982,186 19,180,561
Accident and health 852,026 773,007 343,535
Capital and surplus 1,908,479 1,651,168 1,430,242
----------- --------- ---------
Total $31,112,133 25,406,361 20,954,338
=========== ========= =========
</TABLE>
Included in life insurance revenues are premiums from certain annuities
with life contingencies of $20,134 ($35,341 and $54,066 for the years
ended December 31, 1993 and 1992, respectively) as well as universal
life and investment product policy charges of $239,021 ($188,057 and
$148,464 for the years ended December 31, 1993 and 1992 respectively)
for the year ended December 31, 1994.
Allocations of investment income and certain general expenses were
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
Investment income and realized gains allocable to policyholders in 1994
were $1,193,292 and $1,775, respectively.
(18) Subsequent Event
----------------
On January 30, 1995, FHLIC received approval from the Ohio Secretary of
State to change its name to Nationwide Life and Annuity Insurance
Company.
98 of 118
<PAGE> 99
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE
<S> <C>
(a) Financial Statements:
(1) Financial statements and schedule included
in Prospectus
(Part A):
Condensed Financial Information for each of 20
the years in the ten year period ended
December 31, 1994.
(2) Financial statements and schedule included
in Part B:
Those financial statements and schedule 64
required by Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account:
Independent Auditors' Report. 64
Statement of Assets, Liabilities and Contract 65
Owners' Equity as of December 31, 1994.
Statements of Operations and Changes in 67
Contract Owners' Equity for the years ended
December 31, 1994, 1993 and 1992.
Notes to Financial Statements. 68
Schedule 1. 69
Nationwide Life Insurance Company:
Independent Auditors' Report. 75
Consolidated Balance Sheets as of December 76
31, 1994 and 1993.
Consolidated Statements of Income for the 77
years ended December 31, 1994, 1993 and
1992.
Consolidated Statements of Shareholder's 78
Equity for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for 79
the years ended December 31, 1994, 1993
and 1992.
Notes to Consolidated Financial Statements. 80
</TABLE>
99 of 118
<PAGE> 100
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
Post-Effective Amendment No. 19 to 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
100 of 118
<PAGE> 101
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Peter F. Frenzer President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson President and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
</TABLE>
101 of 118
<PAGE> 102
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Investment Product Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health, and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales
One Nationwide Plaza Financial Services
Columbus, OH 43215
Carl J. Santillo Senior Vice President
One Nationwide Plaza Life and Health Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
</TABLE>
102 of 118
<PAGE> 103
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic
One Nationwide Plaza Planning/Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
103 of 118
<PAGE> 104
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Nationwide Mutual Insurance Company Ohio Insurance Company
(Casualty)
Nationwide Mutual Fire Insurance Company Ohio Insurance Company
Nationwide Investing Foundation Michigan Investment Company
Nationwide Insurance Enterprise Foundation Ohio Membership Non-Profit
Corporation
Nationwide Insurance Golf Charities, Inc. Ohio Membership Non-Profit
Corporation
Farmland Mutual Insurance Company Iowa Insurance Company
F & B, Inc. Iowa Insurance Agency
Farmland Life Insurance Company Iowa Life Insurance Company
Nationwide Agribusiness Insurance Company Iowa Insurance Company
Colonial Insurance Company of California California Insurance Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Property & Casualty Insurance Ohio Insurance Company
Company
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Indemnity Company Ohio Insurance Company
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Neckura General Insurance Company Germany Insurance Company
Columbus Service, GMBH Germany Insurance Broker
Auto-Direkt Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative service for
Neckura Insurance Group
SVM Sales GMBH, Neckura Insurance Group Germany Sales support for Neckura
Insurance Group
</TABLE>
104 of 118
<PAGE> 105
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
Colonial County Mutual Insurance Company Texas Insurance Company
Nationwide Communications Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Redevelopment Ohio Redevelopment of blighted
Corporation areas within the City of
Columbus, Ohio
Insurance Intermediaries, Inc. Ohio Insurance Broker and
Insurance Agency
Nationwide Cash Management Company Ohio Investment Securities Agent
California Cash Management Company California Investment Securities Agent
Nationwide Development Company Ohio Owns, leases and manages
commercial real estate
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
Gates, McDonald & Company of New York New York Workers Compensation Claims
Administration
Nationwide Indemnity Company Ohio Reinsurance Company
NWE, Inc. Ohio Special Investments
</TABLE>
105 of 118
<PAGE> 106
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Nationwide Corporation Ohio Organized for the purpose of
acquiring, holding,
encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts of
other persons, associations,
corporations, domestic or
foreign and to form or
acquire the control of other
corporations
Nationwide Health Care Corporation Ohio Develops and operates
Managed Care Delivery System
InHealth, Inc. Ohio Health Maintenance
Organization (HMO)
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates
Managed Care Delivery System
**West Coast Life Insurance Company California Life Insurance Company
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance
Administration, Claims
Examining, and Data
Processing Services
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
Leber Direkt Insurance Company Germany Life Insurance Company
**Nationwide Life Insurance Company Ohio Life Insurance Company
</TABLE>
106 of 118
<PAGE> 107
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and
deals in Real Property.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and
Administrator
* Nationwide Separate Account Trust Massachusetts Investment Company
* Nationwide Investing Foundation II Massachusetts Investment Company
* Financial Horizons Investment Trust Massachusetts Investment Company
PEBSCO Securities Corp. Oklahoma Registered Broker-Dealer in
Deferred Compensation Market
** National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Public Employees Benefit Services Delaware Marketing and Administration
Corporation of Deferred Employee
Compensation Plans for
Public Employees
PEBSCO of Massachusetts Insurance Agency, Massachusetts Markets and Administers
Inc. Deferred Compensation Plans
for Public Employees
</TABLE>
107 of 118
<PAGE> 108
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation Plans
for Public Employees
Wausau Lloyds Texas Texas Lloyds Company
Wausau Service Corporation Wisconsin Holding Company
American Marine Underwriters, Inc. Florida Underwriting Manager
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and
Medicare Supplement Insurance
Wausau Business Insurance Company Illinois Insurance Company
Wausau Preferred Health Insurance Company Wisconsin Insurance and Reinsurance
Company
Wausau Insurance Co. Limited (U.K.) United Kingdom Insurance and Reinsurance
Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
Employers Life Insurance Company of Wausau Wisconsin Life Insurance Company
</TABLE>
108 of 118
<PAGE> 109
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
Wausau General Insurance Company Illinois Insurance Company
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
Wausau International Underwriters California Special Risks, Excess and
Surplus Lines Insurance
Underwriting Manager
Companies Agency, Inc. (Wisconsin) Wisconsin Insurance Broker
Companies Agency Insurance Services of California Insurance Broker
California, Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Key Health Plan, Inc. California Pre-paid health plans
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration,
record keeping and
consulting and compensation
consulting
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for
Policies placed through
Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Massachusetts, Inc. Massachusetts Insurance Broker
</TABLE>
109 of 118
<PAGE> 110
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C>
Companies Agency of New York, Inc. New York Insurance Broker
Nationwide Financial Institution Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Nationwide Financial Institution Distributors Delaware Insurance Agency
Agency, Inc.
Nationwide Financial Institution Distributors Ohio Insurance Agency
Agency of Ohio, Inc.
Landmark Financial Services of New York, New York Life Insurance Agency
Inc.
Nationwide Financial Institution Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Securities Corporation Oklahoma Broker Dealer
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Ohio, Ohio Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
Nationwide Financial Institution Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
Colonial General Insurance Agency, Inc. Arizona Insurance Agency
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Video Eagle, Inc. Ohio Operates Several Video Cable
Systems
</TABLE>
110 of 118
<PAGE> 111
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VA Separate Account-A Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Account Contracts
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide Variable Account-8 Ohio Nationwide Life Issuer of Annuity Contracts
Separate Account
</TABLE>
111 of 118
<PAGE> 112
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| |=================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | |
| | | | | WAUSAU LLOYDS |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | |
| ------------- Shares | | ------------- Shares |=============| |
| | | | | |
| Cost | | Cost | | |
| ---- | | ---- | | A TEXAS LLOYDS |
| Employers-- | | Employers-- | | |
| 100% $15,683,300 | | 100% $106,763,000 | | |
|_______________________________| |________________________________| |_____________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 5,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $11,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $24,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. (AMU) |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | (WISCONSIN) | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| NATIONWIDE ENTERPRISE INSURANCE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
===| NATIONWIDE MUTUAL |=============================================| NATIONWIDE MUTUAL |
| (CASUALTY) | | FIRE |
|_________________________________________| |___________________________|
| | | |__________________________________________________________________ :
| | | | | :
______________|__________ | | | _____________________________ _____________|_:____________________
| ALLNATIONS | | | | | NATIONWIDE | | NATIONWIDE |
| | | | | | GENERAL | | CORPORATION |
| Common Stock: 2,939 | | | | | | | |
| ------------- Shares | | | | | Common Stock: 20,000 Shares | | Common Stock: Control |
| | | | |___| ------------- | | ------------- ------- |
| Cost | | | | | | | $13,092,790 100% |
| ---- | | | | | Cost | | |
| Casualty-26% $88,320 | | | | | ---- | | Shares Cost |
| Fire-26% $88,463 | | | | | Casualty-100% $5,944,422 | | ----- ---- |
|_________________________| | | | |_____________________________| | Casualty $12,443,280 $710,293,557 |
| | | | Fire 649,510 24,007,936 |
_________________________ | | | _____________________________ | |
| FARMLAND MUTUAL | | | | | NATIONWIDE PROPERTY | | (See Page 2) |
| INSURANCE COMPANY | | | | | AND CASUALTY | |____________________________________|
| | | | | | |
| Guaranty Fund |____| | | | Common Stock: 60,000 Shares |
| ------------- |______| |___| ------------- |
| Certificate | | | |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | COLONIAL INS. CO. |
_______________|___________ | | OF CALIFORNIA |
| F & B, INC. | | | |
| | | | Common Stock: 1,750 Shares |
| Common Stock: 1 Share | |___| ------------- |
| ------------- | | | |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | SCOTTSDALE | | COLONIAL GENERAL |
| FARMLAND LIFE | | | INSURANCE COMPANY | | INSURANCE AGENCY, INC. |
| INSURANCE COMPANY | | | | | |
| | | | Common Stock: 30,136 Shares | | Common Stock: 1 Share |
| Common Stock: 1,000,000 |___|___| ------------- |______| ------------ |
| ------------- Shares | | | | | |
| | | | Cost | | Cost |
| Cost | | | ---- | | ---- |
| ---- | | | Casualty-100% $150,000,000 | | Scottsdale- $1,082,336 |
| Casualty-100% $23,826,196 | | |_____________________________| | 100% |
|____________________________| | |__________________________|
| _____________________________
| | NATIONWIDE AGRIBUSINESS |
| | INS. CO. |
| | |
| | Common Stock: 1,000,000 |
| | ------------- Shares |
| | |
|___| Casualty- Cost |
| | 99.9% ---- |
| | $26,300,981 |
| | Other Capital: |
| | Casualty- |
| | Ptd. $713,567 |
| |_____________________________|
|
| _____________________________ ______________________________
| | NECKURA HOLDING CO. | | NECKURA |
| | (NECKURA) | | INSURANCE CO. |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | AUTO INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIRECT |
| | | INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE INDEMNITY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares | | Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | |______| |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty $5,000,000 | | Colonial $500,000 |
| | 100% | | Lone Star 150,000 |
| |_____________________________| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | CASH MANAGEMENT |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________ __________________________
| | CALIFORNIA | | VIDEO EAGLE INC. |
| | CASH MANAGEMENT | | |
| | | | Common Stock: 750 Shares |
| | Common Stock: 90 Shares | | ------------- |
|___| ------------- | ____| |
| | | | | Cost |
| | Cost | | | ---- |
| | ---- | | | NW Comm.- $0 |
| | Casualty-100% $9,000 | | | 100% |
| |_____________________________| | |__________________________|
| |
| |
| _____________________________ | __________________________
| | NATIONWIDE | | | THE BEAK AND |
| | COMMUNICATIONS INC. | | | WIRE CORPORATION |
| | | | | |
| | Common Stock: 14,750 Shares | | | Common Stock: 750 Shares |
|___| ------------- |__|___| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Associated Companies - Dotted Line
Contractural Association - Double Line
December 31, 1994
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|__________________
| NATIONWIDE LIFE |
| Common Stock: 3,814,779 |
| ------------- Shares |
| |
| NW Corp.- Cost |
| 100% ---- |
| $909,179,664 |
|______________________________|
|
_________________________________________________________________________________|
| | |
____________|____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | FINANCIAL HORIZONS |
| FINANCIAL SERVICES | | Common Stock: 100 Shares | | | LIFE |
| Common Stock: 7,676 | | ------------- | | | Common Stock: 66,000 |
______| ------------- Shares | _____| | |_______| ------------- Shares |
| ____| Cost | | | Cost | | | NW Life- Cost |
| | | ---- | | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |_________________________| | |___________________________| | |______________________________|
| | | | | |
| | _________________________ | ___________|_|_____________ |
| | | NATIONWIDE | | | | |
| | | INVESTOR SERVICES | | | | |
| | | Common Stock: 5 Shares | | | NCC OF AMERICA, | |
| |____| ------------- | | | INC. (INACTIVE) | | ______________________________
| | | | | | | | | WEST COAST LIFE |
| | | NW Fin. Serv.- Cost | | | | | | Common Stock: 1,000,000 |
| | | 100% ---- | | | | | | ------------- Shares |
| | | $5,000 | | | | |_______| Cost |
| | |_________________________| | |___________________________| | | ---- |
| | | | | NW Life-100% $92,762,014 |
| | _________________________ | ___________________________ | |______________________________|
| | | NATIONWIDE | | | HICKEY-MITCHELL | |
| | | INVESTING | | | INSURANCE AGENCY | |
| | | FOUNDATION | | | Common Stock: 101 Shares | |
| |____| | |_____| ----------- | |
| ____| | | | | ______________________________
| | | | | Cost | | | EMPLOYERS LIFE INSURANCE CO. |
| | | | | ---- | | | OF WAUSAU (EL) |
| | | COMMON LAW TRUST | | Nat. Cas.-100% $4,701,200 | | | |
| | |_________________________| |___________________________| | | Common Stock: 250,000 Shares |
| | | |_______| ------------- |
| | _________________________ ____________|______________ | | ---- |
| | | NATIONWIDE | | NATIONAL PREMIUM & | | | NW Life-100% $165,627,416 |
| | | INVESTING | | BENEFIT ADMINISTRATION | | |______________________________|
| |____| FOUNDATION II | | Common Stock: 10,000 | | |
| ____| | | ------------ Shares | | |
| | | | | Cost | | |
| | | | | Hickey- ---- | | ___________|_________________
| | | COMMON LAW TRUST | | Mitchell-100% $1,319,469 | | | WAUSAU PREFERRED |
| | |_________________________| |___________________________| | | HEALTH INS. CO. |
| | | | |
| | | | Common Stock: 200 Shares |
| | _________________________ | | ------------- |
| | | NATIONWIDE | | | EL -- 100% Cost |
| |____| SEPARATE ACCOUNT | | | ---- |
| ____| TRUST | | | $51,413,193 |
| | | COMMON LAW TRUST | | |_____________________________|
| | |_________________________| |
| | |
| | |
| | _________________________ |
| | | FINANCIAL HORIZONS | | ______________________________
| |____| INVESTMENT TRUST | | | NATIONWIDE |
|______| TRUST | | | PROPERTY MANAGEMENT |
| COMMON LAW TRUST | | | Common Stock: 59 Shares |
|_________________________| |_______| ------------- |
| | |
| | Cost |
| | ---- |
| | NW Life-100% $1,907,896 |
| |______________________________|
| |
| |
| |
| |
| ____________|_________________
| | MRM INVESTMENTS, INC. |
| | Common Stock: 1 Share |
| | ------------ |
| | |
| | Cost |
| | Nat. Prop. ---- |
| | Mgmt.-100% $550,000 |
| |______________________________|
|
|
| ___________________________
| | NWE, INC. |
| | |
| | Common Stock: 100 Shares |
|_______| |
| NW Life-100% Cost |
| ---- |
| $35,971,375 |
|___________________________|
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| (CASUALTY) |___________________________________________________________
| |
|_______________________________________|
| _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
__________________|______________|___
| NATIONWIDE CORPORATION |
| Common Stock: Control: |
| ------------- ------- |
| 13,092,790 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty $12,443,280 $710,293,557 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_______________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES | | GATES, McDONALD | | FINANCIAL HORIZONS |
| BENEFIT SERV. CORP. | | & COMPANY (GATES) | | DISTRIBUTORS AGY., INC. |
______| Common Stock: 236,494 | | Common Stock: 254 Shares | | Common Stock: 1,000 Shares|
| ____| ------------- Shares | | ------------- |___ _____| ------------- |
| | | Cost | | | | | ___| |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $12,830,936 | | ---- | | | | | NW Corp. ---- |
| | |___________________________| | MW Corp.- $22,126,323 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- Shares | | | | | |___| Common Stock: 10,000 |
| | | Cost | | Cost | | | | | ----------- Shares |
| | | Pub. Emp. Ben. ---- | | ---- | | | | | Cost |
| | | Serv.Corp.-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |___________________________| | | | | | | FHDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | NEW MEXICO | | | | | | | LANDMARK FINANCIAL |
| | | Common Stock: 1,000 | | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____| ------------- Shares | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | ---- | | | | ------------- Shares |
| | | Serv.Corp.-100% $1,000 | | $93,750 | | | | Cost |
| | |___________________________| |___________________________| | | | ---- |
| | | | | FHDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 | | | | FINANCIAL HORIZONS |
| |____| ------------- Shares | | | | SECURITIES CORP. |
| | | Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | | | ------------- Shares |
| | | Serv.Corp. 100% $500 | | | | Cost |
| | |___________________________| | | | ---- |
| | | | | FHDAI-100% $153,000 |
| | | | |___________________________|
| | | |
| | ___________________________ | |
| | | PEBSCO OF | ___________________________ | |
| | | MONTANA | | AFFILIATE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 500 | | | | | | |
| | | ------------- Shares | | Common Stock: 100 Shares |__ | | | FINANCIAL HORIZONS |
| | | Cost | | | | |___| DISTRIBUTORS |
| | | Pub. Emp. Ben. ---- | | FHDAI-100% Cost | | ___| AGENCY OF TEXAS, |
| | | Serv.Corp.-100% $500 | | ---- | | | | INC. |
| | |___________________________| | $100 | | | |___________________________|
| | |___________________________| | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | ALABAMA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 100,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OHIO, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ---- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | MASSACHUSETTS | | | | |
| | | INSURANCE AGENY, INC. | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 1,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ----- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____ AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS | | |
|___________________________| |___________________________|
</TABLE>
112 of 118
<PAGE> 116
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE (FIRE) |
| |
|_______________________________________|
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | INHEALTH, INC. |
| INVESTOR SERVICES, INC. | | | Common Stock: 100 |
_______| Common Stock: 500 | | | ------------ Shares |
| _____| ------------- Shares | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $12,046,413 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | NATIONWIDE |
| | | INVESTOR SERVICES | | | HEALTH CARE |
| |_____| OF ALABAMA, INC. | |_____| Common Stock: 15 Shares |
| | | Common Stock: 500 | _____| ------------ |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW Corp.- ---- |
| | | NEA-100% $5,000 | | | 100% $16,850,000 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MGT. |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| | | OF OHIO, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 100 | |_____| ------------- |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ----- | | | NW Health ---- |
| | | NEA-91% $5,000 | | | Care-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | | | | INHEALTH |
| | | | | | AGENCY, INC. |
| | | NEA VALUEBUILDER | | | Common Stock: 99 Shares |
| |_____| INVESTOR SERVICES | |_____| ------------- |
| | | OF TEXAS, INC. | | Cost |
| | | | | NW Health ---- |
| | | | | Corp.-99% $116,077 |
| | |___________________________| |___________________________|
| |
| | ___________________________
| | | |
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
<FN>
Subsidiary Companies -- Solid Line
Associated Companies -- Dotted Line
Contractual Association -- Double Line
December 31, 1994
</TABLE>
Page 2
113 of 118
<PAGE> 117
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of February 17, 1995 was 555 and 0, 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) Nationwide Financial Services, Inc. ("NFS") acts as general
distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, NACo Variable Account
and the Nationwide Variable Account, all of which are
separate investment accounts of the Company or its
affiliates.
NFS also acts as principal underwriter for the Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide
Investing Foundation II, which are open-end management
investment companies.
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 E. Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
</TABLE>
114 of 118
<PAGE> 118
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
Peter F. Frenzer Vice Chairman, President
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Director
1247 Stafford Road
Darlington, MD 21034
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
D. Richard McFerson President and
One Nationwide Plaza Chief Executive Officer--Nationwide
Columbus, OH 43215 Insurance Enterprise and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Chairman of the Board of Directors
14282 King Road
Bowling Green, OH 43402
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
</TABLE>
115 of 118
<PAGE> 119
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager and Treasurer
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Financial
Services,
Inc.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Gary E. Berndt
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Internal Revenue Code of 1986, as amended, is issued by the
Registrant in reliance upon, and in compliance with, the
Securities and Exchange Commission's no-action letter to the
American Council of Life Insurance (publicly available November
28, 1988) which permits withdrawal restrictions to the extent
necessary to comply with IRC Section 403(b)(11).
116 of 118
<PAGE> 120
PROSPECTUS
MAY 1, 1995
NATIONWIDE
VARIABLE ACCOUNT
INDIVIDUAL DEFERRED
VARIABLE ANNUITY CONTRACTS
OFFERED BY
NATIONWIDE
LIFE INSURANCE COMPANY
117 of 118
<PAGE> 121
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NATIONWIDE 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 14th
day of December, 1995.
NATIONWIDE 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 14th day
of December, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ------------------------------
Lewis J. Alphin
WILLARD J. ENGEL Director
- ------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ------------------------------
Fred C. Finney
PETER F. FRENZER President/Chief
- ------------------------------ Operating Officer and Director
Peter F. Frenzer
CHARLES L. FUELLGRAF, JR. Director
- ------------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman of the Board
- ------------------------------ and Director
Henry S. Holloway
D. RICHARD McFERSON Chief Executive Officer
- ------------------------------ and Director
D. Richard McFerson
DAVID O. MILLER Director
- ------------------------------
David O. Miller
C. RAY NOECKER Director
- ------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------ Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By: JOSEPH P. RATH
- ------------------------------ --------------------------------
James F. Patterson Joseph P. Rath, Attorney-in-Fact
ROBERT H. RICKEL Director
- ------------------------------
Robert H. Rickel
ARDEN L. SHISLER Director
- ------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ------------------------------
Harold W. Weihl
</TABLE>
118 of 118
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as directors
and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation,
which has filed or will file with the Securities and Exchange Commission under
the provisions of the Securities Act of 1933, as amended, various Registration
Statements and amendments thereto for the registration under said Act of
Individual Deferred Variable Annuity Contracts in connection with the MFS
Variable Account. Nationwide Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Fidelity Advisor Variable Account and Nationwide Multi-Flex Variable Account;
and the registration of fixed interest rate options subject to a market value
adjustment offered under some or all of the aforementioned Individual Variable
Annuity Contracts in connection with the Nationwide Multiple Maturity Separate
Account; and the registration of Group Flexible Fund Retirement Contracts in
connection with the Nationwide DC Variable Account and the NACo Variable
Account; and the registration of Group Common Stock Variable Annuity Contracts
in connection with Separate Account No. 1; and the registration of variable
life insurance policies in connection with the Nationwide VLI Separate
Account, Nationwide VLI Separate Account-2 and Nationwide VLI Separate
Account-3 of Nationwide Life Insurance Company, hereby consitutues and
appoints D. Richard McFerson, Peter F. Frenzer, Gordon E. McCutchan, W. Sidney
Druen, and Joseph P. Rath, and each of them with power to act without the
others, his/her attorney, with full power of substitution and resubstitution,
for and in his/her name, place and stead. In any and all capacities, to
approve, and sign such Registration Statements and any and all amendments
thereto, with power to alter the corporate seal of said corporation thereto and
to attest said seal and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby granting unto said attorneys, and each of them, full power and authority
to do and perform all and every act and thing requisite to all intents and
purposes as he/she might or could do in person, hereby ratifying and
confirming that which said attorneys, or any of them, may lawfully do or cause
to be done by virtue hereof. This instrument may be executed in one or more
counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this fifth day of April, 1995.
<TABLE>
<S> <C>
/s/ Lewis J. Alphin /s/ C. Ray Noecker
- --------------------------------------------------- -------------------------------------------------
Lewis J. Alphin, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- --------------------------------------------------- -------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Senior Vice President and Chief
Financial Officer
/s/ Fred C. Finney
- --------------------------------------------------- /s/ James F. Patterson
Brad C. Finney, Director -------------------------------------------------
James F. Patterson, Director
/s/ Peter F. Frenzer
- --------------------------------------------------- /s/ Robert H. Rickel
Peter F. Frenzer, President, Chief Operating -------------------------------------------------
Officer and Director Robert H. Rickel, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- --------------------------------------------------- -------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Henry S. Holloway /s/ Robert L. Stewart
- --------------------------------------------------- -------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Robert L. Stewart, Director
/s/ D. Richard McFerson /s/ Nancy C. Thomas
- ------------------------------------------------ -------------------------------------------------
D. Richard McFerson, Chief Executive Officer and Nancy C. Thomas, Director
Director
/s/ Harold W. Weihl
/s/ David O. Miller ------------------------------------------------
- ------------------------------------------------ Harold W. Weihl, Director
David O. Miller, Director
</TABLE>
