<PAGE> 1
As filed with the Securities and Exchange Commission.
`33 Act File No. 33-60239
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES [X]
ACT OF 1933
Post-Effective Amendment No. 2
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3
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, the Statement of Additional Information and the
Financial Statements.
It is proposed that this filing will become effective (check appropriate
space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on May 1, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing 60 pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] this post-effective amendment designates a new effective date for
previously filed post-effective amendment.
The registrant has registered an indefinite number of securities by
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, 1996 on February 25,
1997.
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NATIONWIDE VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
Caption in Prospectus and Statement of Additional Information and Other
Information
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page.................................................................................3
Item 2. Definitions................................................................................4
Item 3. Synopsis or Highlights....................................................................12
Item 4. Condensed Financial Information..........................................................N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies.....................13
Item 6. Deductions and Expenses...................................................................14
Item 7. General Description of Variable Annuity Contracts.........................................15
Item 8. Annuity Period............................................................................18
Item 9. Death Benefit and Distributions...........................................................19
Item 10. Purchases and Contract Value..............................................................19
Item 11. Redemptions...............................................................................24
Item 12. Taxes.....................................................................................25
Item 13. Legal Proceedings.........................................................................27
Item 14. Table of Contents of the Statement of Additional Information..............................27
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page................................................................................34
Item 16. Table of Contents.........................................................................34
Item 17. General Information and History...........................................................34
Item 18. Services..................................................................................34
Item 19. Purchase of Securities Being Offered......................................................34
Item 20. Underwriters..............................................................................35
Item 21. Calculation of Performance Information....................................................35
Item 22. Annuity Payments..........................................................................36
Item 23. Financial Statements......................................................................37
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.........................................................78
Item 25. Directors and Officers of the Depositor...................................................79
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant................................................................................81
Item 27. Number of Contract Owners.................................................................90
Item 28. Indemnification...........................................................................90
Item 29. Principal Underwriter.....................................................................90
Item 30. Location of Accounts and Records..........................................................92
Item 31. Management Services.......................................................................92
Item 32. Undertakings..............................................................................92
</TABLE>
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NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE
P.O. BOX 16609
COLUMBUS, OHIO 43216-6609, 1-800-848-6331
TDD 1-800-238-3035
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VARIABLE ACCOUNT
OF NATIONWIDE LIFE INSURANCE COMPANY
The Individual Modified Single Premium Deferred Variable Annuity
Contracts described in this prospectus are modified single premium payment
contracts (collectively referred to as the "Contracts"). The Contracts, by
themselves, do not qualify for tax-deferral under federal tax rules governing
Non-Qualified Annuities and Individual Retirement Annuities. The Contracts are,
however, issued to custodians of Individual Retirement Accounts ("IRAs") for
the benefit of individual IRA account holders. Such account holders shall be
the Annuitant under these Contracts. The Contracts may also be issued to the
trustee(s) of Qualified Plans which qualify for favorable tax treatment under
Sections 401(a) or 403(a) of the Internal Revenue Code (the "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 is divided into Sub-Accounts, each of
which invests in shares of one of the underlying Mutual Fund options described
below:
<TABLE>
<S> <C>
- -American Century: Benham Short-Term -Fidelity Puritan Fund
Government -Janus Twenty Fund
- -American Century: Twentieth Century Growth -MFS(R) World Governments Fund
- -American Century: Twentieth Century International -Nationwide(R) Bond Fund
Growth -Nationwide(R) Fund
- -American Century: Twentieth Century Ultra -Nationwide(R) Growth Fund
- -Delchester Fund-Institutional Class -Nationwide(R) Money Market Fund
- -Dreyfus A Bonds Plus, Inc. -Neuberger & Berman Guardian Fund, Inc.
- -Dreyfus S & P 500 Index Fund (Formerly, Peoples -Neuberger & Berman Limited Maturity Bond
Index Fund, Inc.) Fund
- -The Dreyfus Third Century Fund, Inc. -Neuberger & Berman Partners Fund, Inc.
- -Evergreen Income and Growth Fund -Oppenheimer Global Fund
- -Fidelity Asset Manager(TM) -Phoenix Balanced Fund Series
- -Fidelity Equity-Income Fund -Strong Total Return Fund, Inc.
- -Fidelity Magellan(R) Fund -Templeton Foreign Fund-Class I
</TABLE>
This prospectus provides you with the basic information you should know
about the Individual Modified Single Premium 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, 1997 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 1-800-848-6331, 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, 1997 IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 25 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
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<PAGE> 4
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person designated to receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of Contract issuance, unless
the Company has approved a request for an Annuitant of greater age. Although
not the Owner of the Contract, the Annuitant may exercise rights of ownership
in the Contract, if so authorized by the holder of the Contract (an IRA
custodian or Qualified Plan trustee(s)).
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract, and is subject to change by the Owner (or Annuitant, if so
authorized).
ANNUITY PAYMENT OPTION- The chosen form of 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 Annuitant prior to the
Annuitization Date. The Beneficiary can be changed by the Contract Owner as set
forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Annuitant.
CONTRACT- The Individual Modified Single Premium Deferred Variable Annuity
Contract described in this prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner shall be an IRA custodian, or
Qualified Plan trustee(s). Contractual rights, however, may be exercised by the
Annuitant pursuant to authorization by the Owner. (Such ownership rights
include the right to change the allocation of investment options, or
designations of the Beneficiary, Contingent Beneficiary, the Annuity Payment
Options or the Annuity Commencement Date.)
CONTRACT VALUE- The sum of the value of all Variable Account Accumulation Units
attributable to the Contract plus any amount held under the Contract in the
Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit payable upon the death of the Annuitant prior to 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.
DISTRIBUTION- Any payment of part or all of the Contract Value.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in the Variable Account or any other segregated asset account of the
Company.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
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INDIVIDUAL RETIREMENT ACCOUNT (IRA)- A custodial account which qualifies for
favorable tax treatment under Section 408 of the Code. The Contracts described
in this prospectus may be purchased as assets of such account.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time during which an interest rate credited to the Fixed Account
under the Contract is guaranteed to remain the same. For new Purchase Payments
to 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 (but not more than 15 months) 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 (FUND)- A registered management investment company in which the
assets of the Sub-Accounts of the Variable Account will be invested.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and Fixed
Account, or among the Sub-Accounts.
QUALIFIED PLANS- Retirement Plans which receive favorable tax treatment under
Sections 401 or 403(a) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office 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- The Nationwide Separate Account, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in shares of a separate underlying Mutual Fund.
VARIABLE ANNUITY- An annuity providing for payments which vary in amount with
the investment experience of the Variable Account.
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS....................................................................................2
SUMMARY OF CONTRACT EXPENSES.................................................................................5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES.......................................................................6
SYNOPSIS....................................................................................................10
NATIONWIDE LIFE INSURANCE COMPANY...........................................................................11
THE VARIABLE ACCOUNT........................................................................................11
Underlying Mutual Fund Options.....................................................................11
Voting Rights......................................................................................11
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS...........................................12
Mortality Risk Charge..............................................................................12
Expense Risk Charge................................................................................12
Contingent Deferred Sales Charge...................................................................12
Administration Charge..............................................................................13
Premium Taxes......................................................................................13
Expenses of Variable Account.......................................................................13
Investments of the Variable Account................................................................13
Right to Revoke....................................................................................14
Transfers..........................................................................................14
Loan Privilege.....................................................................................14
Beneficiary Provisions.............................................................................16
Ownership Provisions...............................................................................16
Substitution of Securities.........................................................................16
Inquiries..........................................................................................16
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT.....................................................................16
Value of an Annuity Unit...........................................................................16
Assumed Investment Rate............................................................................17
Frequency and Amount of Annuity Payments...........................................................17
Annuitization Date.................................................................................17
Change in Annuitization Date.......................................................................17
Change in Form of Annuity..........................................................................17
Annuity Payment Options............................................................................17
Death of Annuitant Prior to the Annuitization Date.................................................18
Death of Annuitant After the Annuitization Date....................................................18
Required Distributions for IRA Accounts............................................................18
Required Distribution for Qualified Contracts......................................................19
Generation-Skipping Transfers......................................................................19
GENERAL INFORMATION.........................................................................................20
Services...........................................................................................20
Statements and Reports.............................................................................21
Allocation of Purchase Payments and Contract Value.................................................21
Value of a Variable Account Accumulation Unit......................................................22
Net Investment Factor..............................................................................22
Valuation of Assets................................................................................22
Determining the Contract Value.....................................................................22
Surrender (Redemption).............................................................................22
Taxes..............................................................................................23
IRAs...............................................................................................23
Advertising........................................................................................24
LEGAL PROCEEDINGS...........................................................................................25
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION....................................................25
APPENDIX A..................................................................................................26
APPENDIX B..................................................................................................28
</TABLE>
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SUMMARY OF CONTRACT EXPENSES
Maximum Contingent Deferred Sales Charge(1)............................. 7%
- --------------------------------------------------------------------------------
RANGE OF CONTINGENT DEFERRED SALES CHARGE OVER TIME
<TABLE>
<CAPTION>
Number of Completed Years from Contingent Deferred Sales Load
Date of Purchase Payment Percentage
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- --------------------------------------------------------------------------------
</TABLE>
VARIABLE ACCOUNT ANNUAL EXPENSES
<TABLE>
<S> <C>
Mortality and Expense Risk Charges........................... 1.25 %
Administration Charge........................................ 0.15 %
Total Variable Account Annual Expenses..................... 1.40 %
--------
</TABLE>
1 Each Contract Year, the Owner (or Annuitant, if so authorized) may withdraw
without a Contingent Deferred Sales Charge (CDSC) an amount equal to 10% of
the total sum of all Purchase Payments made to the Contract at the time of
withdrawal. In addition, any amount withdrawn in order for the Contract to
meet minimum Distribution requirements under the Code shall be free of
CDSC. Withdrawals may be restricted for Contracts issued pursuant to the
terms of a Tax Sheltered Annuity. This CDSC-free withdrawal privilege is
non-cumulative, that is, free amounts not taken during any given Contract
Year cannot be taken as free amounts in a subsequent Contract Year (see
"Contingent Deferred Sales Charge").
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<PAGE> 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(2)
(AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Management Other 12 b-1 Total Portfolio
Fees Expenses Fees Expenses
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century: Benham Short-Term Government 0.70% 0.00% 0.00% 0.70%
- -------------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 1.00% 0.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International 1.45% 0.00% 0.00% 1.45%
Growth
- -------------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 1.00% 0.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
Delchester Fund-Institutional Class 0.57% 0.20% 0.00% 0.77%
- -------------------------------------------------------------------------------------------------------------------------------
Dreyfus A Bonds Plus, Inc. 0.65% 0.28% 0.00% 0.93%
- -------------------------------------------------------------------------------------------------------------------------------
Dreyfus S & P 500 Index Fund (Formerly Peoples Index 0.30% 0.25% 0.00% 0.55%
Fund(R), Inc.)
- -------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century Fund, Inc. 0.75% 0.36% 0.00% 1.11%
- -------------------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 0.98% 0.21% 0.00% 1.19%
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager 0.68% 0.27% 0.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 0.45% 0.23% 0.00% 0.68%
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 0.47% 0.21% 0.00% 0.68%
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 0.46% 0.28% 0.00% 0.74%
- -------------------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 0.66% 0.24% 0.00% 0.90%
- -------------------------------------------------------------------------------------------------------------------------------
MFS(R)World Governments Fund 0.90% 0.36% 0.25% 1.51%
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 0.50% 0.20% 0.00% 0.70%
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 0.50% 0.11% 0.00% 0.61%
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 0.50% 0.14% 0.00% 0.64%
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market 0.45% 0.15% 0.00% 0.60%
- -------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 0.70% 0.12% 0.00% 0.82%
- -------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Limited Maturity Bond Fund 0.51% 0.19% 0.00% 0.70%
- -------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. 0.74% 0.10% 0.00% 0.84%
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund 0.71% 0.28% 0.18% 1.17%
- -------------------------------------------------------------------------------------------------------------------------------
Phoenix Balanced Fund Series 0.51% 0.26% 0.25% 1.02%
- -------------------------------------------------------------------------------------------------------------------------------
Strong Total Return Fund, Inc. 0.80% 0.28% 0.00% 1.08%
- -------------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund-Class I 0.90% 0.37% 0.00% 1.27%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2 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. The following funds are subject to fee waivers or
expense reimbursement arrangements:
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT
REIMBURSEMENT OR WAIVER
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Fidelity Equity-Income Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been 0.68%.
- ------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R) Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been 0.95%.
- ------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund The Fund has entered into arrangements with its
custodian and transfer agent whereby interest
earned on uninvested cash balances is used to
reduce custodian and transfer agent expenses.
Including these reductions, the total operating
expenses presented in the table would have been 0.69%.
- ------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund The Fund will waive 0.05% of the total 0.50%
management fee until further notice.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The information relating to the underlying Mutual Fund expenses was
provided by the underlying Mutual Fund and was not independently
verified by the Company.
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<PAGE> 10
EXAMPLE
The following chart depicts the dollar amount of expenses that would be
incurred under this Contract assuming a $1000 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.
<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>
American Century: Benham 85 113 144 250 22 68 117 250 68 117 250
Short-Term Government *
- --------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth 88 122 159 282 25 77 132 282 * 77 132 282
Century Growth
- --------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth 93 137 183 328 30 92 156 328 92 156 328
Century International Growth *
- --------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth 88 122 159 282 25 77 132 282 77 132 282
Century Ultra *
- --------------------------------------------------------------------------------------------------------------------------
Delchester Fund-Inst'l 86 115 147 258 23 70 120 258 * 70 120 258
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus A Bonds Plus 87 120 156 275 24 75 129 275 * 75 129 275
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus S & P 500 Index Fund 83 108 136 234 20 63 109 234 63 109 234
(Formerly Peoples Index Fund, *
Inc.)
- --------------------------------------------------------------------------------------------------------------------------
The Dreyfus Third Century 89 126 165 293 26 81 138 293 * 81 138 293
Fund, Inc.
- --------------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth 90 128 169 302 27 83 142 302 * 83 142 302
Fund
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Asset ManagerTM 88 121 157 277 25 76 130 277 * 76 130 277
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 85 112 143 248 22 67 116 248 * 67 116 248
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Magellan Fund 85 112 143 248 22 67 116 248 * 67 116 248
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 85 114 146 255 22 69 119 255 * 69 119 255
- --------------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 87 119 154 272 24 74 127 272 * 74 127 272
- --------------------------------------------------------------------------------------------------------------------------
MFS(R)World Governments Fund 91 131 173 309 28 86 146 309 * 86 146 309
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 85 113 144 250 22 68 117 250 * 68 117 250
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 84 110 139 241 21 65 112 241 * 65 112 241
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 84 111 140 244 21 66 113 244 * 66 113 244
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 84 110 138 240 21 65 111 240 * 65 111 240
- --------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian 86 117 150 263 23 72 123 263 * 72 123 263
Fund, Inc.
- --------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Limited 85 113 144 250 22 68 117 250 68 117 250
Maturity Bond Fund *
- --------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners 87 117 151 265 24 72 124 265 72 124 265
Fund, Inc. *
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund 88 122 159 281 25 77 132 281 * 77 132 281
- --------------------------------------------------------------------------------------------------------------------------
Phoenix Balanced Fund Series 86 115 147 257 23 70 120 257 * 70 120 257
- --------------------------------------------------------------------------------------------------------------------------
Strong Total Return Fund, Inc. 89 125 164 290 26 80 137 290 * 80 137 290
- --------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 87 118 153 268 24 73 126 268 * 73 126 268
- --------------------------------------------------------------------------------------------------------------------------
</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 depict the
various costs and expenses that will be borne 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 complete descriptions of the
expenses of the Nationwide Variable Account, see "Variable Account Charges,
Purchase Payments, and Other Deductions." For more complete information
regarding expenses paid out of the assets of a particular underlying Mutual
Fund, 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").
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<PAGE> 11
SYNOPSIS
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct
from the Contract 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. 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").
The Company will also assess an Administration Charge equal to an annual
rate of 0.15% of the daily net asset value of the Variable Account. This charge
is to reimburse the Company for administrative expenses related to the issue
and maintenance of the Contracts. The Company does not expect to recover from
this charge an amount in excess of accumulated administrative expenses (see
"Administration Charge").
The Company deducts a Mortality Risk Charge 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% of the daily net asset value of the Variable Account as compensation for
the Company's risk in undertaking not to increase administrative charges on the
Contracts regardless of the actual administrative costs (see "Expense Risk
Charge").
The initial Purchase Payment must be at least $15,000 and subsequent
Purchase Payments, if any, must be at least $1,000. Subsequent Purchase
Payments are not permitted for Contracts purchased in the states of New York,
Oregon, and Washington. The cumulative total of all Purchase Payments under
Contracts issued on the life of any one Designated Annuitant may not exceed
$1,000,000 without the prior consent of the Company (see "Allocation of
Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $5000, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $50, the Company shall have the right
to change the frequency of payments to such intervals as will result in
payments of at least $50. In no event, however, will annuity payments be made
less frequently than annually (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts (see "Premium Taxes"). If any such premium taxes are payable by
the Company at the time Purchase Payments are made, an equal premium tax
deduction will be made from the Contract prior to the allocation of any
Purchase Payment to any underlying Mutual Fund option.
To be sure that the Owner (or Annuitant, if the Annuitant has been
authorized to exercise ownership rights under the Contract) is satisfied with
the Contract, the Owner (or Annuitant, if so authorized) 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 (see "Right to Revoke").
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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 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 options.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners (or Annuitants, if so authorized) may choose from among
a number of different Sub-Account options (see Appendix B which contains a
summary of investment objectives for each underlying Mutual Fund held in the
Sub-Accounts). More detailed information may be found in the current prospectus
for each underlying Mutual Fund offered. Such a prospectus for the underlying
Mutual Fund option(s) being considered must accompany this prospectus and
should be read in conjunction herewith. A copy of each prospectus may be
obtained 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.
The underlying Mutual Fund options are available to the general public.
Based on the Company's marketing plan for the Contracts (the Contracts will be
exclusively marketed through IRA custodial accounts or as Qualified Plan
Investments), the Company does not anticipate any disadvantages to this. There
is, however, a possibility that a material conflict may arise between those
with interests in the Variable Account and the various individuals and entities
holding shares of the Mutual Funds. A conflict may occur due to a change in law
affecting the operations of variable annuity separate accounts, differences in
the voting instructions of the Contract Owners (or Annuitants, if so
authorized) and others maintaining a voting interest in the underlying Mutual
Funds, or some other reason. In the event of conflict, the Company will take
any steps necessary to protect those with interests in the Contracts including
withdrawal of the Variable Account from participation in the underlying Mutual
Fund(s) 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 Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual
Funds. These shares will be voted in accordance with instruction received from
Contract Owners who have an interest in the Variable Account. If the Investment
Company Act of 1940 or any regulation thereunder should be amended or if the
present interpretation thereof should change, and as result the Company
determines that it is permitted to vote the shares of the underlying Mutual
Funds in its own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares held in the Variable Account which are
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in the Variable Account by the net asset value of the
applicable shares of the underlying Mutual Funds. The number of shares which a
Contract Owner has the right to vote will be
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determined as of a date chosen by the Company not more than 90 days prior to
the meeting of the underlying Mutual Fund and voting instructions will be
solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which
no timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having a voting interest in the Variable Account will
receive periodic reports relating to the underlying Mutual Fund, proxy material
and a form with which to give such voting instructions.
In those cases in which ownership rights may be exercised by the
Annuitant, the Company will accept voting instructions from the Annuitant and
provide all necessary information to the Annuitant as if he or she was the
Contract Owner.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated into the Contract which cannot be changed regardless of the death
rates of persons receiving annuity payments or of the general population.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis and
is equal on to an annual rate of 0.80% of the daily net asset value of the
Variable Account. The Company expects to generate a profit through assessing
this charge.
EXPENSE RISK CHARGE
The Company will not increase charges for administration of the
Contracts regardless of its actual expenses. For assuming this expense risk,
the Company deducts an Expense Risk Charge from the Variable Account. This
amount is computed on a daily basis and is equal to an annual rate of 0.45% of
the daily net asset value of the Variable Account. The Company expects to
generate a profit through assessing this charge.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for
these Contracts. However, if any part of the Contract Value of such Contracts
is surrendered, the Company will, with certain exceptions, deduct from the
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. The Contingent
Deferred Sales Charge, when it is applicable, will be used to cover expenses
relating to the sale of the Contracts, including commissions paid to sales
personnel, the costs of preparation of sales literature and other promotional
activity. 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 from these charges. The maximum amount
that may be paid to a selling agent on the sale of these Contracts is 6.25% of
Purchase Payments.
If part or all of the Contract Value is surrendered, a Contingent
Deferred Sales Charge may be deducted by the Company. The Contingent Deferred
Sales Charge is calculated by multiplying the applicable Contingent Deferred
Sales Charge percentages noted below by the Purchase Payments that are
surrendered. For purposes of calculating the Contingent Deferred Sales Charge,
surrenders are considered to come first from the oldest Purchase Payment made
to the Contract, then the next oldest Purchase Payment and so forth, with any
earnings attributable to such Purchase Payments considered only after all
Purchase Payments made to the Contract have been considered. For tax purposes,
a surrender is usually treated as a withdrawal of earnings first. This charge
will apply in the amounts set forth below to Purchase Payments within the time
periods set forth.
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The Contingent Deferred Sales Charge applies to Purchase Payments as
follows:
<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>
Each Contract Year, the Owner (or Annuitant, if so authorized) may
withdraw without a Contingent Deferred Sales Charge (CDSC) an amount equal to
10% of the total sum of all Purchase Payments made to the Contract at the time
of withdrawal. In addition, any amount withdrawn in order for the Contract to
meet minimum Distribution requirements under the Code shall be free of CDSC.
Withdrawals may be restricted for Contracts issued pursuant to the terms of a
Tax Sheltered Annuity. This CDSC-free withdrawal privilege is non-cumulative,
that is, free amounts not taken during any given Contract Year cannot be taken
as free amounts in a subsequent Contract Year (see "Contingent Deferred Sales
Charge").
No Contingent Deferred Sales Charge will be deducted: (1) upon the
Annuitization of Contracts which have been in force for at least two years, (2)
upon payment of a death benefit pursuant to the death of the Designated
Annuitant, or (3) from any values which have been held under Contract for at
least 84 months. In addition, no Contingent Deferred Sales Charge applies upon
the transfer of value amount the Sub-Accounts or between the Fixed Account and
the Variable Account and vice-versa.
When a Contract described in this prospectus is exchanged for another
Contract issued by the Company or any of its affiliate insurance companies, 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.
ADMINISTRATION CHARGE
The Company assesses an Administration Charge equal on an annual basis
to 0.15% of the daily net asset value of the Variable Account. The
Administration Charge is designed only to reimburse the Company for
administrative expenses related to the issuance and maintenance of the
Contract. The Company will monitor this charge to ensure that it does not
exceed annual administration expenses.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon Purchase
Payments received by the Company. Premium taxes currently imposed by certain
jurisdictions range from 0% to 3.5%. This range is subject to change. The
method used to recoup premium tax expense will be determined by the Company at
its sole discretion and in compliance with applicable state law. The Company
currently deducts such charges from an Annuitant's Contract Value either: (1)
at the time the Contract is surrendered, (2) at Annuitization, or (3) at such
earlier date as the Company may become subject to such taxes.
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of
expenses: (1) administrative expenses relating to the issuance and maintenance
of the Contract; (2) mortality risk charge associated with guaranteeing the
annuity purchase rates at issue for the life of the Contracts; and (3) expense
risk charge associated with guaranteeing that the Mortality Risk, Expense Risk
and Administration Charges described in this prospectus will not be changed
regardless of actual expenses. If these charges are insufficient to cover these
expenses, the loss will be borne by the Company.
Deductions from and expenses paid out of the assets of the underlying
Mutual Funds are described in each of the underlying Mutual Funds'
prospectuses.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase, Purchase Payments are allocated among one or
more of the Sub-Accounts which consist of shares in the underlying Mutual
Funds. Shares of the respective underlying Mutual are purchased at net asset
value for the respective Sub-Account(s) and converted into Accumulation Units.
At the
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time of purchase, the Owner (or Annuitant, if applicable) designates the
underlying Mutual Funds to which he or she desires to have Purchase Payments
allocated. The election as to allocation of Purchase Payments or the election
to exchange amounts among the Sub-Account options are subject to such terms and
conditions applicable to such transactions as may be imposed by each of the
underlying Mutual Funds, in addition to those set forth in the Contracts.
RIGHT TO REVOKE
The Owner (or Annuitant, if so authorized) may revoke the Contract at
any time between the Date of Issue and the date 10 days after receipt of the
Contract and receive a refund of the Contract Value unless otherwise required
by state and/or federal law. 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 will be paid by the Company.
TRANSFERS
The Company currently allows transfers of up to 100% of the Contract
Value from the Variable Account to the Fixed Account without penalty or
adjustment. However, the Company reserves the right to restrict transfers from
the Variable Account to the Fixed Account to 10% of the Variable Account
Contract Value for any 12 month period. All amounts transferred to the Fixed
Account must remain on deposit in the Fixed Account until the expiration of the
Interest Rate Guarantee Period. Transfers from the Fixed Account may not be
made prior to the first Contract Anniversary. The Interest Rate Guarantee
Period for any amount allocated to the Fixed Account expires on the final day
of a calendar quarter during which the one year anniversary of the allocation
of the Fixed Account occurs. Transfers must also be made prior to the
Annuitization Date. For all transfers involving the Variable Account, the
Annuitant'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 refuse transfers or Purchase Payments into the Fixed
Account if the Fixed Account is greater than or equal to 30% of the Contract
Value.
At the maturity of an Interest Rate Guarantee Period, a portion of the
value of the Fixed Account may be transferred to the Variable Account. The
amount 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 Interest Rate Guarantee Period. Transfers from the
Fixed Account must be made within 45 days after the expiration date of the
Interest Rate Guarantee Period. If a Dollar Cost Averaging agreement with the
Company (see "Dollar Cost Averaging") has been established the terms of that
agreement will govern transfers from the Fixed Account to the Variable Account.
Transfers may be made either in writing or, in states allowing such
transfers, by telephone. This telephone exchange privilege is made available
without any affirmative election of 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
Annuitant (or Owner, if applicable) and any agent of record, at the last
address of record. The Company will not be liable for following instructions
communicated by telephone which it reasonably believes to be genuine. Any
losses incurred pursuant to actions taken by the Company in reliance on
telephone instructions reasonably believed to be genuine shall not be borne by
the Company. The Company may withdraw the telephone exchange privilege upon 30
days written notice to Annuitants.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified may receive a
loan from the Contract Value subject to the terms of the Contract, the Plan,
and the Code, which may impose restrictions on loans.
Loans from Qualified Contracts 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
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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 Qualified Contracts, loans may only be secured by
the Contract Value. For loans from Qualified Contracts the Company reserves the
right to limit a loan to 50% of the Contract Value subject to the acceptance by
the Contract Owner of the Company's loan agreement. Where permitted, the
Company may require other named collateral where the loan from a Contract
exceeds 50% of the Contract Value.
All loans are made from a collateral fixed account. An amount equal to
the principal amount of the loan will be transferred to the collateral fixed
account. Unless instructed to the contrary by the Contract Owner, the Company
will first transfer to the collateral fixed account the Variable Account units
from the Contract Owner's investment options in proportion to the assets in
each option until the required balance is reached or all such variable units
are exhausted. The remaining required collateral will next be transferred from
the Fixed Account. No withdrawal charges are deducted at the time of the loan,
or on the transfer from the Variable Account to the collateral fixed account.
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 the Code.
If a loan payment is not made when due, interest will continue to
accrue. A grace period may be available under the terms of the loan agreement.
If a loan payment is not made when due, or by the end of the applicable grace
period, then that payment, which may be a single periodic payment or payment of
the entire loan, will be treated as a deemed Distribution, as permitted by law,
may be taxable to the borrower, and may be subject to the early withdrawal tax
penalty. Interest which subsequently accrues on defaulted amounts may also be
treated as additional deemed Distributions each year. Any defaulted amounts,
plus accrued interest, will be deducted from the Contract when the Participant
becomes eligible for a Distribution of at least that amount, and this amount
may again be treated as a Distribution where required by law. Additional loans
may not be available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions
under the terms of the employer's plan. Loans permitted under this Contract may
still be taxable in whole or part if the Participant has additional loans from
other plans or contracts. The Company will calculate the maximum nontaxable
loan based on the information provided by the Participant or the Employer.
Loan repayments must be identified as such or 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 associated with the loan in the event of a change in the laws or
regulations relating to the treatment of loans. The Company also reserves the
right to assess a loan processing fee. Individual Retirement Annuities and
Non-Qualified Contracts are not eligible for loans.
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BENEFICIARY PROVISIONS
The Beneficiary is the person or persons who may receive certain
benefits under the Contract in the event the Annuitant dies prior to the
Annuitization Date. If more than one Beneficiary survives the Annuitant, each
will share equally unless otherwise specified in the Beneficiary designation.
If no Beneficiary survives the Annuitant, all rights and interest of the
Beneficiary shall vest in the Contingent Beneficiary, and if more than one
Contingent Beneficiary survives, each will share equally unless otherwise
specified in the Contingent Beneficiary designation. If a Contingent
Beneficiary is not named or predeceases the Annuitant, all rights and interest
of the Contingent Beneficiary will vest with the Annuitant's estate. The
Annuitant may change the Beneficiary or Contingent Beneficiary from time to
time, by written notice to the Company. The change, upon receipt by the
Company at its Home Office, will take effect as of the time the written notice
was signed, whether or not 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.
OWNERSHIP PROVISIONS
Unless otherwise provided, the Owner has all rights under the Contract.
The Owner may, however, authorize the Annuitant to exercise some or all of the
rights under the Contract. The exercise of any ownership right in the Contract
(including the right to surrender or partially surrender the Contract, to
change the Beneficiary, the Contingent Beneficiary, the Annuity Payment Option
or the Annuitization Date) shall require a written indication of an intent to
exercise that right, which must be signed by the Annuitant.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Funds 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 the Company eliminate
Sub-Accounts, combine two or more Sub-Accounts, or substitute one or more
underlying Mutual Fund for other 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.
INQUIRIES
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 and the amount of the first such payment
shall be determined in accordance with the Annuity Table in the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month.
The dollar amount of each subsequent payment is determined by multiplying the
fixed number of Annuity Units by the Annuity Unit Value for the Valuation
Period in which the payment is due. The Company guarantees that the dollar
amount of each payment after the first will not be affected by variations in
mortality experience from mortality assumptions used to determine the first
payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an Annuity
Unit for a Sub-Account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
(see "Net Investment Factor").
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ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables
contained in the Contracts. A higher assumption would mean a higher initial
payment but more slowly rising or more rapidly falling subsequent payments. A
lower assumption would have the opposite effect. If the actual investment rate
is at the annual rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Payment Option is less than
$5,000, 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 $50, the Company shall have the right
to change the frequency of payments to such intervals as will result in
payments of at least $50. In no event will the Company make payment sunder an
annuity option less frequently than annually.
ANNUITIZATION DATE
The Annuitization Date is selected at the time of application. Such date
may be the first day of a calendar month or any other agreed upon date and must
be at least 2 years after the Date of Issue.
CHANGE IN ANNUITIZATION DATE
Upon prior written notice to the Company, the Annuitization Date may be
changed. The date to which such a change may be made shall be the first day of
a calendar month.
If requested in writing (see "Ownership Provisions"), and the Company
approves the request, the Annuitization Date may be deferred. The amount of the
Death Benefit will be limited to the Contract Value if the Annuitization Date
is postponed beyond the first day of the calendar month after the Annuitant's
86th birthday.
CHANGE IN FORM OF ANNUITY
Upon prior written notice to the Company, at any time prior to the
Annuitization Date, any one of the Annuity Payment Options may be elected.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options 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 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 the Annuitant is the payee, any guaranteed annuity payments
will be continued during the remainder of the selected period to
such recipient as chosen by the Annuitant at the time the Annuity
Payment Option was selected. In the alternative, the recipient
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 someone other than the Annuitant is the 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
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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 Annuitant 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 Annuitant fails to elect an Annuity Payment Option, the Contract
Value will continue to accumulate. Individual Retirement Accounts and Annuities
are subject to the minimum Distribution requirements set forth in the Internal
Revenue Code.
DEATH OF ANNUITANT PRIOR TO THE ANNUITIZATION DATE
If the Annuitant dies prior to the Annuitization Date, a Death Benefit
is payable to the Beneficiary. If no Beneficiary is named (or if the
Beneficiary predeceases the Annuitant), then the Death Benefit is payable to
the Contingent Beneficiary. If no Contingent Beneficiary is named (or if the
Contingent Beneficiary predeceases the Annuitant), then the Death Benefit will
be paid to the Annuitant's estate.
The value of the Death Benefit will be determined as of the Valuation
Date coincident with or next following the date the Company receives in
writing: (1) due proof of the Annuitant's death, (2) an election for either a
single sum payment or an Annuity Payment Option, and (3) any form required by
state insurance laws. If a single sum payment 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 requested, election
must 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 commencing with the date written notice is
received by the Company, the Death Benefit will be paid in a single sum
payment. If the Annuitant dies prior to his or her 86th birthday, the value of
the Death Benefit will be the greater of (1) the sum of all Purchase Payments,
made to the Contract less any amounts surrendered, (2) the Contract Value, or
(3) the Contract Value as of the most recent five-year Contract Anniversary,
less any amounts surrendered since the most recent five-year Contract
Anniversary. If the Annuitant dies on or after his or her 86th birthday, then
the Death Benefit will be equal to the Contract Value.
As an alternative to the death benefit described above, the beneficiary
may choose a Distribution that is consistent with the Distribution at death
rules set forth below in "Required Distributions for IRA Accounts."
DEATH OF ANNUITANT 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 selected.
IRASIRED DISTRIBUTIONS FOR IRA ACCOUNTS
Distribution from an IRA must begin not later than April 1 of the
calendar year following the calendar year in which the IRA account holder (the
Annuitant) attains age 70 1/2. Distribution may be accepted in a lump sum or in
nearly equal payments over: (a) the Annuitant's life or the lives of the
Annuitant and the Annuitant's spouse or designated beneficiary, or (b) a period
not extending beyond the life expectancy of the Annuitant and the Annuitant's
spouse or designated beneficiary.
If the Annuitant dies prior to the commencement of the Distribution, the
interest in the Annuity held by the custodial account must be distributed by
December 31 of the calendar year in which the fifth anniversary of the
Annuitant's death occurs unless:
(a) The Annuitant has named his or her surviving spouse as the designated
beneficiary and such spouse elects to:
(i) treat the annuity as an asset of an IRA established for his or
her benefit; or
(ii) receive Distribution of the Contract in nearly equal payments
over his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Annuitant would have attained age 70 1/2; or
(b) The Annuitant 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 the Annuitant dies.
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If the Annuitant dies after Distribution has commenced, the Distribution
must continue at least as rapidly as under the schedule being used prior to the
Annuitant's 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) of this provision.
If the amounts distributed to the Annuitant are less than those
mentioned above, a penalty tax of 50% is levied on the amount that should have
been distributed for that year.
All or a portion of each Distribution will be included in the gross
income of the person receiving the Distribution and taxed at ordinary income
tax rates. The portion of the Distribution which is taxable is based on the
ratio between the amount by which non-deductible Purchase Payments exceed prior
non-taxable Distributions and total account balances at the time of the
Distribution. The Annuitant must annually report the amount of non-deductible
Purchase Payments, the amount of any Distribution, the amount by which
non-deductible Purchase Payments for all years exceed non-taxable Distributions
for all years, and the total balance of all IRAs.
IRA Distributions will not receive the benefit of the tax treatment of a
lump sum Distribution from a Qualified Plan. If the Annuitant dies prior to the
time Distribution of the Annuitant's interest in the annuity is completed, the
balance will also be included in the Annuitant's gross estate.
REQUIRED DISTRIBUTION FOR QUALIFIED CONTRACTS
The entire interest of an Annuitant under a Qualified Contract will be
distributed in a manner consistent with the Minimum Distribution and Incidental
Benefit (MDIB) provisions of Section 401(a)(9) of the Code and regulations
thereunder, as applicable, and will be paid, notwithstanding anything else
contained herein, to the Owner/Annuitant under the Annuity Payments Option
selected, over a period not exceeding:
A. the life of the Owner/Annuitant or the lives of the Owner/
Annuitant and the Owner/Annuitant's Designated Beneficiary; or
B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and
the Owner/Annuitant's Designated Beneficiary provided that, for
Tax Sheltered Annuity Contracts, no Distributions will be
required from this Contract if Distributions otherwise required
from this Contract are being withdrawn from another Tax Sheltered
Annuity Contract of the Annuitant.
If the Owner/Annuitant's entire interest is to be distributed in equal
or substantially equal payments over a period described in A or B, such
payments will commence not later than the first day of April following the
calendar year in which the Owner/Annuitant attains age 70 1/2 (the Required
Beginning Date). In the case of a governmental plan (as defined in Code
Section 414(d), or 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 must be distributed by
December 31 of the year in which the fifth anniversary of his or her death
occurs unless the Owner names a Beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a Distribution of the account in
nearly equal payments over his or her life (or a period not exceeding his or
her life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner/Annuitant dies after Distribution has commenced,
Distribution must continue at least as rapidly as under the schedule being used
prior to his or her death, except that a surviving spouse may treat a Tax
Sheltered Annuity as his or her own to the extent permitted by law.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or 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.
GENERATION-SKIPPING TRANSFERS
The Company may determine whether the Death Benefit or any other payment
constitutes a direct skip as defined in Section 2612 of the Code, and the
amount of the tax on the generation-skipping transfer resulting
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from such direct skip. If applicable, the payment will be reduced by any tax
the Company is required to pay by Section 2603 of the Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Annuitant.
GENERAL INFORMATION
SERVICES
ASSET REBALANCING - The Owner (or Annuitant, if so authorized) 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. A
financial adviser should be consulted with respect to the use of Asset
Rebalancing.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Annuitants, however, any discontinuation
will not affect Asset Rebalancing programs which have already commenced. The
Company also reserves the right to assess a processing fee for this service.
DOLLAR COST AVERAGING- The Owner (or Annuitant, if so authorized) may
direct the Company to automatically transfer a specified amount from the Money
Market Fund Sub-Account, the Limited Maturity Bond Portfolio 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 for Dollar Cost Averaging, a long-term
investment program which provides for regular, level investments over time. The
Company makes no guarantees that Dollar Cost Averaging will result in a profit
or protect against loss in a declining market. Transfers for purposes of Dollar
Cost Averaging can only be made from the Money Market Fund Sub-Account, the
Limited Maturity Bond Portfolio 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
in order to begin transfers. Once elected, transfers from the Money Market Fund
Sub-Account, the Limited Maturity Bond Portfolio Sub-Account or the Fixed
Account will be processed monthly until either the value in the Money Market
Fund Sub-Account, the Limited Maturity Bond Portfolio Sub-Account or the Fixed
Account is completely depleted or the Annuitant 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, however, any discontinuation will not
affect Dollar Cost Averaging programs already commenced. The Company also
reserves the right to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS- The Owner (or Annuitant, if so authorized) may
elect in writing on a form provided by the Company to take Systematic
Withdrawals of 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 of the Sub-Accounts in which an interest is maintained, and the Fixed
Account. A Contingent Deferred Sales Charge may apply to Systematic Withdrawals
in accordance with the considerations set forth in the "Contingent Deferred
Sales Charge" section. Each Systematic Withdrawal is subject to federal income
taxes on the taxable portion. In addition, a 10% federal penalty tax may be
assessed on Systematic Withdrawals if the recipient is under age 59 1/2. If so
directed, the Company will withhold federal income taxes from each Systematic
Withdrawal. A Systematic Withdrawal program will terminate automatically at
the end of each Contract Year and may be reinstated only pursuant to a new
request. Systematic Withdrawals may be discontinued at any time by notifying
the Company in writing.
If amounts are withdrawn pursuant to a Systematic Withdrawal program,
then each year the greater of the following amounts may be withdrawn free of
CDSC: (i) 10% of the total sum of all Purchase Payments made to the Contract at
the time of withdrawal, less any Purchase Payments previously withdrawn that
were subject to a CDSC, or (ii) the specified percentage of the Contract Value
based on the Annuitant's age, as shown in the following table:
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<TABLE>
<CAPTION>
Annuitant's Percentage of
Age Contract Value
<S> <C>
Under 59-1/2 5%
59-1/2 to 70-1/2 7%
70-1/2 to 75 9%
75 and Over 13%
</TABLE>
If the total amounts withdrawn in any Contract Year exceed the CDSC-free
amount as calculated under the Systematic Withdrawal method described above,
then such total withdrawn amounts will be eligible only for the 10% of Purchase
Payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section, and the total amount of CDSC charged during the Contract
Year will be determined in accordance with that provision.
The Contract Value and the Annuitant's age for purposes of applying the
CDSC-free withdrawal percentage described above are determined as of the date
the request for a Systematic Withdrawal program is received and recorded by the
Company at its Home Office. The election to take such CDSC-free amounts may
only be made once each Contract Year. This CDSC-free withdrawal privilege for
Systematic Withdrawals is non-cumulative, that is, free amounts not taken
during any given Contract Year cannot be taken as free amounts in a subsequent
Contract Year.
Systematic Withdrawals are not available prior to the expiration of the
ten day free look provision of the Contract. The Company also reserves the
right to assess a processing fee for this service.
STATEMENTS AND REPORTS
The Company will mail to Owners (or Annuitants, as applicable), at their
last known address of record, any statements and reports required by applicable
law or regulation. Annuitants should therefore give the Company prompt notice
of any address change. The Company will send a confirmation statement each time
a transaction is made affecting the 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 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, confirmation of such
transactions in quarterly statements may be received. Information in these
statements should be reviewed carefully. All errors or corrections must be
reported to the Company immediately to assure proper crediting to the Contract.
The Company will assume all transactions are accurately reported on quarterly
statements or confirmation statements unless otherwise notified within 30 days
after receipt of the statement. The Company will also send 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
Funds by the Owner (or Annuitant, if so authorized), and converted into
Accumulation Units.
The initial Purchase Payment must be at least $15,000. Subsequent
Purchase Payments, if any, must be at least $1,000. Subsequent Purchase
Payments are not permitted in the states of New York, Oregon, and Washington.
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 initial Purchase Payment allocated to designated Sub-Accounts of the
Variable Account will be priced not later than 2 business days after receipt of
an order to purchase, if the application and all information necessary for
processing the purchase order are complete upon receipt by the Company. The
Company may, however, retain the Purchase Payment for up to 5 business days
while attempting to complete an incomplete application. If the application
cannot be made complete within 5 days, the prospective purchaser will be
informed of the reasons for the delay and the Purchase Payment will be returned
immediately unless the prospective purchaser specifically consents to the
Company retaining the Purchase Payment until the application is made complete.
Thereafter, subsequent Purchase Payments will be priced on the basis of the
Accumulation Unit Value next computed for the appropriate Sub-Account after the
additional Purchase Payment is received.
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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 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 of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately
preceding Valuation Period, plus or minus,
(2) The per share charge or credit, if any, for any taxes reserved for
in the immediately preceding Valuation Period.
(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 1.40% 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 (the Nationwide Money Market Fund), 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.
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. If part or all of the
Contract Value is surrendered or charges or deductions are made against the
Contract Value, an appropriate number of Accumulation Units from the Variable
Account and an appropriate amount from the Fixed Account will be deducted in
the same proportion that the amounts in the Variable Account and the Fixed
Account bear to the total Contract Value.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Annuitant, the Company will, upon proper
written application deemed by the Company to be in good order, allow the
surrender of a portion or all of the Contract Value. "Proper written
application" means a request for
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the surrender in writing and includes the Contract. The Company may require
that signature(s) be guaranteed by a member firm of a major stock exchange or
other depository institution qualified to give such a guaranty.
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 Annuitant 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 amounts in the
Sub-Accounts and Fixed Account bear 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") 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 an Annuitant, depending on the market value of the
underlying Mutual Fund shares.
TAXES
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF
A PERSONAL TAX ADVISER.
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts. The Contracts, by
themselves, do not qualify for tax-deferral under the federal tax rules
governing Non-Qualified Annuities and Individual Retirement Annuities. Instead,
the Contracts have been designed to be purchased as assets of IRA custodial
accounts pursuant to certain regulations under section 408 of the Code.
Annuitants should consult their financial or tax consultants to discuss in
detail their 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 State 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.
IRAS
The Contract is intended to be purchased as an asset of IRA custodial
accounts established pursuant to regulations 1.408-2(b)(2)(ii) and 1.408-2(d)
under Section 408 of the Code. Because the Contract's minimum initial and
subsequent Purchase Payments are greater than the maximum yearly contribution
permitted an IRA, the Contract may be purchased only in connection with a
"rollover" (including a direct trustee-to-trustee transfer, where permitted).
Specifically, Contracts may be purchased only in connection with a rollover or
transfer (if applicable) of amounts from a Qualified Plan, Tax-Sheltered
Annuity, IRA or Individual Retirement Annuity. The Annuitant should seek
competent advice as to the tax consequences associated with the use of this
Contract.
Recent changes to the Code permit the rollover of most Distributions
from Qualified Plans to other Qualified Plans or Individual Retirement
Accounts. Most Distributions from Tax-Sheltered Annuities may be rolled into
another Tax-Sheltered Annuity or an IRA. Distributions which may not be rolled
over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the employee,
b) the joint lives (or joint life expectancies) of the employee and
the employee's designated beneficiary, or c) for a specified period of
ten years or more, or
2. a required minimum Distribution.
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Any Distribution from a Qualified Plan or Tax Sheltered Annuity that is
eligible for rollover will be subject to federal tax withholding at a rate of
twenty percent (20%) unless the Distribution is transferred directly to an
appropriate plan as described above.
Individual Retirement Accounts may not provide life insurance benefits.
If the Death Benefit associated with the Contracts offered hereunder 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 Service
could determine that the Individual Retirement Account does not qualify for the
desired tax treatment.
ADVERTISING
A "yield" and "effective yield" may be advertised for the Nationwide
Money Market Fund Sub-Account. "Yield" is a measure of the net dividend and
interest income earned over a specific seven-day period (which period will be
stated in the advertisement) expressed as a percentage of the offering price of
the Sub-Account's units. Yield is an annualized figure, which means that it is
assumed that the Sub-Account generates the same level of net income over a
52-week period. The "effective yield" is calculated similarly but includes the
effect of assumed compounding, calculated under rules prescribed by the
Securities and Exchange Commission. The effective yield will be slightly higher
than yield due to this compounding effect.
The Company may also from time to time advertise the performance of the
Sub-Account of the Variable Account relative to the performance of other
variable annuity Sub-Accounts or underlying Mutual Funds with similar or
different objectives, or the investment industry as a whole. Other investments
to which the Sub-Accounts may be compared include, but are not limited to:
precious metals, real estate, stocks and bonds, closed-end funds, CDs, bank
money market deposit accounts and passbook savings, and the Consumer Price
Index.
The Sub-Accounts of the Variable Account may also be compared to certain
market indexes, which may include, but are not limited to: the S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2 Year CD Rates; and
Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent
tracking services and publications of general interest including, but not
limited to: Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar,
Donoghue's; magazines such as Money, Forbes, Kiplinger's Personal Finance
Magazine, Financial World, Consumer Reports, Business Week, Time, Newsweek,
National Underwriter, U.S. News and World Report; rating services such as
LIMRA, Value, Best's Agent Guide, Western Annuity Guide, Comparative Annuity
Reports; and other publications such as the Wall Street Journal, Barron's,
Investor's Daily, and Standard & Poor's Outlook. In addition, Variable Annuity
Research & Data Service (The VARDS Report) is an independent rating service
that ranks over 500 variable annuity Funds based upon total return performance.
These rating services and publications rank the performance of the underlying
Mutual Funds against all underlying Mutual Funds over specified periods and
against Funds in specified categories. The rankings may or may not include the
effects of sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company. The
purpose of these ratings is to reflect the financial strength or claims-paying
ability of the Company. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. The Company may
advertise these ratings from time to time. In addition, the Company may include
in certain advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend the Company or the Contracts.
Furthermore, the Company may occasionally include in advertisements comparisons
of currently taxable and tax deferred investment programs, based on selected
tax brackets, or discussions of alternative investment vehicles and general
economic conditions.
The Company may from time to time advertise several types of historical
performance for the Sub-Accounts of the Variable Account. The Company may
advertise for the Sub-Accounts standardized "average annual total return,"
calculated in a manner prescribed by the Securities and Exchange Commission,
and nonstandardized "total return." "Average annual total return" will show the
percentage rate of return of a hypothetical initial investment of $1,000 for at
least the most recent one, five and ten year period, or for a period covering
the time the underlying Mutual Fund option held in the Sub-Account has been in
existence, if the underlying Mutual Fund option has not been in existence for
one of the prescribed periods. This calculation
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reflects the deduction of all applicable charges made to the Contracts except
for premium taxes, which may be imposed by certain states.
Nonstandardized "total return" will be calculated in a similar manner
and for the same time periods as the average annual total return except total
return will assume an initial investment of $10,000 and will not reflect the
deduction of any applicable Contingent Deferred Sales Charge, which, if
reflected, would decrease the level of performance shown. The Contingent
Deferred Sales Charge is not reflected because the Contracts are designed for
long term investment. An assumed initial investment of $10,000 will be used
because that figure more closely approximates the size of a typical Contract
than does the $1,000 figure used in calculating the standardized average annual
total return quotations.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and nonstandardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE
COMPANY IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR GUARANTEE
FUTURE RESULTS. AN ANNUITANT'S CONTRACT VALUE AT REDEMPTION MAY BE MORE OR LESS
THAN ORIGINAL COST.
LEGAL PROCEEDINGS
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is
expected to have a material adverse effect on the Company.
In recent years, life insurance companies have been named as
defendants in lawsuits, including class action lawsuits, relating to life
insurance pricing and sales practices. A number of these lawsuits have
resulted in substantial jury awards or settlements. In October 1996, a
policyholder of Nationwide Life filed a complaint in Alabama state court
against Nationwide Life and an agent of Nationwide Life (Wayne M. King v.
Nationwide Life Insurance Company and Danny Nix), related to the sale of a
whole life policy on a "vanishing premium" basis and seeking unspecified
compensatory and punitive damages. In February 1997, Nationwide Life was
named as a defendant in a lawsuit filed in New York Supreme Court also
related to the sale of whole life policies on a "vanishing premium" basis
(John H. Snyder v. Nationwide Mutual Insurance Company, Nationwide Mutual
Insurance Co. and Nationwide Life Insurance Co.). The plaintiff in such
lawsuit seeks to represent a national class of Nationwide Life
policyholders and claims unspecified compensatory and punitive damages.
This lawsuit is in an early stage and has not been certified as a class
action. Nationwide Life intends to defend these cases vigorously. There
can be no assurance that any future litigation relating to pricing and
sales practices will not have a material adverse effect on the Company.
The General Distributor, Nationwide Advisory Services, Inc., is not
engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.....................................1
Services............................................................1
Purchase of Securities Being Offered................................1
Underwriters........................................................2
Calculations of Performance.........................................2
Fund Performance Summary..........................................N/A
Annuity Payments....................................................3
Financial Statements................................................4
</TABLE>
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APPENDIX A
FIXED ACCOUNT
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 Variable Account and any other segregated asset
account. Fixed Account Purchase Payments will be allocated to the Fixed
Account by election of the Annuitant 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 (or 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 ANNUITANT 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 transferred from the Variable Sub-Accounts to the Fixed
Account and amounts maturing in the Fixed Account at 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 Annuitant 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
Annuitants may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of 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. Transfers must be made within 45 days after the expiration date of the
guarantee period. Annuitants who have
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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 5 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.
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APPENDIX B
PARTICIPATING FUNDS
American Century: Benham Short-Term Government
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. American Century Investment
Services, Inc. serves as the Fund's investment advisor.
American Century: Twentieth Century Growth
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. American Century Investment Services, Inc. serves as the
Fund's investment advisor.
American Century: Twentieth Century International Growth
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. American Century Investment
Services, Inc. serves as the Fund's investment advisor.
American Century: Twentieth Century Ultra
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. American Century Investment Services, Inc. serves as the
Fund's investment advisor.
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. Delaware Management Company, Inc.
serves as the Fund's investment advisor.
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
Corporation serves as the Fund's investment advisor.
Dreyfus S & P 500 Index Fund (Formerly 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. The Dreyfus Corporation serves as the Fund's
investment advisor.
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 Dreyfus Corporation
serves as the Fund's investment advisor.
Evergreen Income and Growth Fund (formerly 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
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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. Evergreen Asset Management Corp. serves as the Fund's
investment advisor.
Fidelity Asset Manager(TM)
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 Management & Research Company serves as the Fund's
investment advisor.
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 Management & Research Company serves as the
Fund's investment advisor.
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 Management & Research
Company serves as the Fund's investment advisor.
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 Management &
Research Company serves as the Fund's investment advisor.
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. Janus Capital Corporation serves as the Fund's investment
advisor.
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. Massachusetts Financial Services Company serves as
the Fund's investment advisor.
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 Advisory
Services, Inc. serves as the Fund's investment advisor.
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
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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 Advisory Services, Inc. serves as the Fund's
investment advisor.
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 Advisory
Services, Inc. serves as the Fund's investment advisor.
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. Nationwide Advisory Services,
Inc. serves as the Fund's investment advisor.
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 Management Incorporated serves as the Fund's
investment advisor.
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 Management Incorporated serves as the Fund's investment
advisor.
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.
Neuberger&Berman Management Incorporated serves as the Fund's investment
advisor.
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.
Oppenheimer Management Corporation serves as the Fund's investment
advisor.
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 income securities, with emphasis
on income-producing securities which appear to have some potential for
capital enhancement. Phoenix Investment Counsel, Inc. serves as the
Fund's investment advisor.
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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. Strong Capital
Management, Inc. serves as the Fund's investment advisor.
Templeton Foreign Fund-Class I
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. Templeton Investment Counsel, Inc. serves as the Fund's
investment advisor.
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
INDIVIDUAL MODIFIED SINGLE PREMIUM 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,
1997. The Prospectus may be obtained from Nationwide Life Insurance Company by
writing P.O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-243-6295,
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
Calculations of Performance.....................................2
Fund Performance Summary......................................N/A
Annuity Payments................................................3
Financial Statements............................................4
</TABLE>
GENERAL INFORMATION AND HISTORY
Nationwide 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 Financial Services, Inc. (NFS"), a holding company. NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. Nationwide Corporation is a holding company as well. All
of its common stock is held by Nationwide Mutual Insurance Company (95.3%) and
Nationwide Mutual Fire Insurance Company (4.7%), the ultimate controlling
persons of Nationwide Insurance Enterprise.
SERVICES
The Company, which has responsibility for administration of the
Contracts and the Variable Account, maintains records of the name, address,
taxpayer identification number, and other pertinent information for each
Annuitant and the number and type of Contracts issued to each such Annuitant
and records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of
the underlying Mutual Funds. The Company, or affiliates of the Company, have
entered into agreements with either the investment adviser or distributor for
several of the underlying Mutual Funds. The agreements relate to administrative
services provided by the Company or an affiliate of the Company and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular underlying Mutual Funds.
These fees in no way affect the net asset value of the underlying Mutual Funds
or fees paid by the Contract Owner.
The financial statements and schedules have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
public accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the
authority of said firm as experts in accounting and auditing.
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 Annuitant may transfer up to 100% of the Contract Value from the
Variable Account to the Fixed Account. However, the Company, at its sole
discretion, reserves the right to limit such transfers to 25% of the Contract
Value for any 12 month period. Annuitants may at the maturity of an Interest
Rate Guarantee Period
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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. Transfer under this provision
must be made within 45 days after the termination date of the guarantee period.
Annuitants who have entered into a Dollar Cost Averaging agreement with the
Company may transfer from the Fixed Account under the terms of that agreement.
Transfers from the Fixed and Variable Accounts may not be made prior to
the first Contract Anniversary. Transfers from the Fixed Account may not be
made within 12 months of any prior Transfer. Transfers must also be made prior
to the Annuitization Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus,
Ohio 43216, a wholly owned subsidiary of the Company. During the fiscal years
ended December 31, 1996, 1995 and 1994, no underwriting commissions were paid
by the Company to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Nationwide Money Market Fund
Sub-Account, subject to Rule 482 of the Securities Act of 1933, shall consist
of a seven calendar day historical yield, carried at least to the nearest
hundredth of a percent. The yield shall be calculated by determining the net
change, exclusive of capital changes, in the value of hypothetical pre-existing
account having a balance of one accumulation unit at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions from Annuitant
accounts, and dividing the net change in account value by the value of the
account at the beginning of the period to obtain a base period return, and
multiplying the base period return by (365/7) or (366/7) in a leap year.
The Nationwide Money Market Fund Sub-Account's yield and effective yield
will fluctuate daily. Actual yields will depend on factors such as the type of
instruments in the Nationwide Money Market Fund's portfolio, portfolio quality
and average maturity, changes in interest rates, and the Fund's expenses.
Although the Sub-Account determines its yield on the basis of a seven calendar
day period, it may use a different time period on occasion. The yield quotes
may reflect the expense limitation described "Investment Manager and Other
Services" in the Fund's Statement of Additional Information. 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 an Annuitant's investment in the
Nationwide Money Market Fund Sub-Account is not guaranteed or insured. Yield of
other money market funds may not be comparable if a different base period or
another method of calculation is used.
All performance advertising shall also include quotations of
standardized average annual total return, calculated in accordance with a
standard method prescribed by rules of the Securities and Exchange Commission,
to facilitate comparison with standardized Average annual total return
advertised for a specific period is found by first taking a hypothetical $1,000
investment in each of the Sub-Accounts' units on the first day of the period at
the offering price, which is the Accumulation Unit Value per unit ("initial
investment") and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The redeemable value is then divided
by the initial investment and this quotient is taken to the Nth root (N
represents the number of years in the period) and 1 is subtracted from the
result which is then expressed as a percentage, carried to at least the nearest
hundredth of a percent. Standardized average annual total return reflects the
deduction of a 1.40% Mortality, Expense Risk and Administration Charge. The
redeemable value also reflects the effect of any applicable Contingent Deferred
Sales Charge that may be imposed at the end of the period (See "Contingent
Deferred Sales Charge" located in the prospectus). No deduction is made for
premium taxes which may be assessed by certain states. Nonstandardized total
return may also be advertised, and is calculated in a manner similar to
standardized average annual total return except the nonstandardized total
return is based on a hypothetical initial investment of $25,000 and does not
reflect the deduction of any applicable Contingent Deferred Sales Charge.
Reflecting the Contingent Deferred Sales Charge would decrease the level of the
performance advertised. The Contingent Deferred Sales Charge is not reflected
because the Contract is designed for long term investment. An assumed initial
investment of $25,000 will be used because that figure more closely
approximates the size of a typical Contract than does the $1,000 figure used in
calculating the standardized average annual total return quotations.
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The standardized average annual total return and nonstandardized total
return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. Both
the standardized average annual return and the nonstandardized total return
will be based on rolling calendar quarters and will cover periods of one, five,
and ten years, or a period covering the time the underlying Mutual Fund option
held in the Sub-Account has been in existence, if the underlying Mutual Fund
option has not been in existence for one of the prescribed periods. For those
underlying Mutual Fund options which have not been held as Sub-Accounts within
the Variable Account for one of the quoted periods, the standardized average
annual total return and nonstandardized total return quotations will show the
investment performance such underlying Mutual Fund options would have achieved
(reduced by the applicable charges) had they been held as Sub-Accounts within
the Variable Account for the period quoted.
Quotations of standardized average annual total return and
non-standardized total return are based upon historical earnings and will
fluctuate. Any quotation of performance, therefore, would not be considered a
guarantee of future performance. Factors affecting a Sub-Account's performance
include general market conditions, operating expenses and investment
management. An Annuitant's account when redeemed may be more or less than
original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity payments" located in the
prospectus.
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<PAGE> 1
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account as of December 31, 1996,
and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the
three year period then ended. These financial statements and schedules of
changes in unit value are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
schedules of changes in unit value are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996, by correspondence
with the transfer agents of the underlying mutual funds. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and schedules of changes in
unit value referred to above present fairly, in all material respects, the
financial position of Nationwide Variable Account as of December 31, 1996,
and the results of its operations and its changes in contract owners'
equity and the schedules of changes in unit value for each of the years in
the three year period then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments at market value:
American Century: Benham Short-Term Government Fund (ACBenSTGvt)
352,166 shares (cost $3,329,420) $ 3,327,970
American Century: Income & Growth Fund (ACIncGro)
9,549 shares (cost $201,878) 192,507
American Century: Twentieth Century Growth Fund (ACTCGro)
443,122 shares (cost $9,134,062) 9,695,503
American Century: Twentieth Century International Growth Fund (ACTCIntlGr)
62,812 shares (cost $508,980) 499,981
American Century: Twentieth Century Ultra Fund (ACTCUltra)
260,938 shares (cost $6,797,299) 7,329,751
Delaware Group Delchester High-Yield Bond Fund, Inc. --
Delchester Fund Institutional Class (DeHYBd)
151,175 shares (cost $941,293) 958,452
Dreyfus A Bonds Plus, Inc. (DryABds)
128,688 shares (cost $1,853,340) 1,854,392
Dreyfus S&P 500 Index Fund (Dry500Ix)
147,661 shares (cost $3,174,622) 3,281,018
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
37,828 shares (cost $338,693) 333,646
The Evergreen Total Return Fund -- Class Y (EvTotRet)
42,997 shares (cost $839,111) 917,131
Federated Investment Series Funds, Inc. -- Federated Bond Fund -- Class F (FedBdFd)
10,243 shares (cost $100,765) 99,873
Fidelity Advisor Equity-Income Fund -- Class T (FAEqInc)
31,182 shares (cost $656,849) 683,504
Fidelity Advisor Growth Opportunities Fund -- Class T (FAGrOpp)
60,241 shares (cost $2,078,053) 2,126,506
Fidelity Advisor High Yield Fund -- Class T (FAHiYld)
65,372 shares (cost $791,211) 797,539
Fidelity Advisor Income & Growth Fund -- Class T (FAIncGr)
1,824 shares (cost $29,613) 29,871
Fidelity Asset Manager(TM) (FidAsMgr)
184,830 shares (cost $2,829,942) 3,044,154
Fidelity Capital & Income Fund (FidCapInc)
132,273 shares (cost $1,191,344) 1,238,072
Fidelity Equity-Income Fund (FidEqInc)
333,029 shares (cost $11,426,729) 14,263,635
Fidelity Magellan(R) Fund (FidMgln)
144,985 shares (cost $11,657,388) 11,693,067
Fidelity Puritan(R) Fund (FidPurtn)
451,817 shares (cost $7,460,394) 7,789,321
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Fidelity VIP -- High Income Portfolio (FidVIPHI)
21,554 shares (cost $242,137) 269,853
Janus Fund (JanFund)
65,811 shares (cost $1,679,627) 1,609,086
Janus Twenty Fund (Jan20Fd)
123,753 shares (cost $3,576,224) 3,399,499
Janus Worldwide Fund (JanWrldwde)
13,815 shares (cost $488,922) 465,425
MFS(R) World Governments Fund -- Class A (MFSWdGvt)
92,422 shares (cost $1,061,998) 1,044,368
Nationwide(R) Bond Fund (NWBdFd)
174,036 shares (cost $1,645,444) 1,616,791
Nationwide(R) Fund (NWFund)
123,198 shares (cost $2,028,689) 2,488,606
Nationwide(R) Growth Fund (NWGroFd)
276,926 shares (cost $3,089,203) 3,683,114
Nationwide(R) Money Market Fund (NWMyMkt)
7,642,255 shares (cost $7,642,255) 7,642,255
Nationwide(R) U.S. Government Income Fund (NWUSGvt)
6,582 shares (cost $65,768) 65,816
Neuberger & Berman Guardian Fund (NBGuard)
203,903 shares (cost $4,851,586) 5,226,045
Neuberger & Berman Limited Maturity Bond Fund (NBLtdMat)
82,284 shares (cost $820,121) 821,194
Neuberger & Berman Partners Fund (NBPartFd)
164,590 shares (cost $3,903,279) 4,146,017
Oppenheimer Global Fund -- Class A (OppGlob)
105,470 shares (cost $3,788,490) 4,116,503
Phoenix Balanced Fund Series -- Class A (PhxBalFd)
33,488 shares (cost $563,195) 532,116
Strong Total Return Fund, Inc. (StTotRet)
39,285 shares (cost $1,130,346) 1,069,724
Templeton Foreign Fund -- Class I (TemForFd)
332,378 shares (cost $3,231,735) 3,443,435
Warburg Pincus Emerging Growth Fund -- Common Shares (WPEmGro)
89,232 shares (cost $2,900,286) 2,964,301
------------
Total investments 114,760,041
Accounts receivable 33,220
------------
Total assets 114,793,261
Accounts payable 4,844
------------
Contract owners' equity (note 4) $114,788,417
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Investment activity:
Reinvested capital gains and dividends $ 8,358,915 5,403,676 4,476,720
Mortality, expense and administration charges (note 2) (1,250,216) (828,380) (666,881)
------------ ----------- -----------
Net investment activity 7,108,699 4,575,296 3,809,839
------------ ----------- -----------
Proceeds from mutual fund shares sold 32,882,395 19,494,999 19,343,653
Cost of mutual fund shares sold (30,480,861) (19,182,917) (18,215,058)
------------ ----------- -----------
Realized gain (loss) on investments 2,401,534 312,082 1,128,595
Change in unrealized gain (loss) on investments 2,414,112 6,984,871 (5,977,389)
------------ ----------- -----------
Net gain (loss) on investments 4,815,646 7,296,953 (4,848,794)
------------ ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations 11,924,345 11,872,249 (1,038,955)
------------ ----------- -----------
Equity transactions:
Purchase payments received from contract owners 36,936,853 21,817,759 16,078,025
Redemptions (11,033,070) (11,831,829) (5,989,583)
Annuity benefits (22,282) (18,792) (19,197)
Annual contract maintenance charge (note 2) (82,641) (70,366) (68,239)
Contingent deferred sales charges (note 2) (162,303) (43,999) (50,816)
Adjustments to maintain reserves 1,139 5,498 1,593
------------ ----------- -----------
Net equity transactions 25,637,696 9,858,271 9,951,783
------------ ----------- -----------
Net change in contract owners' equity 37,562,041 21,730,520 8,912,828
Contract owners' equity beginning of period 77,226,376 55,495,856 46,583,028
------------ ----------- -----------
Contract owners' equity end of period $114,788,417 77,226,376 55,495,856
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) Summary of Significant Accounting Policies
(a) Organization and Nature of Operations
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.
The Company offers Individual Deferred Variable Annuity Contracts
through the Account. As of December 25, 1982, only tax qualified
contracts are issued. The primary distribution for the contract is
through the Company for Individual Retirement Account rollovers;
however, other distributors may be utiized.
(b) The Contracts
Only 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 charges.
With certain exceptions, contract owners in either the
accumulation or the payout phase may invest in the following:
American Century: Benham Short-Term Government Fund (ACBenSTGvt)
(formerly Twentieth Century Investors, Inc. -- U.S. Governments
Short-Term (TCUSGvt))
American Century: Income & Growth Fund (ACIncGro)
American Century: Twentieth Century Growth Fund (ACTCGro)
(formerly Twentieth Century Investors, Inc. -- Growth Investors
(TCGroInv))
American Century: Twentieth Century International Growth Fund
(ACTCIntlGr) (formerly Twentieth Century World Investors, Inc. --
International Equity (TCIntlEq))
American Century: Twentieth Century Ultra Fund (ACTCUltra)
(formerly Twentieth Century Investors, Inc. -- Ultra Investors
(TCUltra))
Delaware Group Delchester High-Yield Bond Fund, Inc. -- Delchester
Fund Institutional Class (DeHYBd)
Dreyfus A Bonds Plus, Inc. (DryABds)
Dreyfus S&P 500 Index Fund (Dry500Ix) (formerly Peoples Index Fund(R),
Inc. (PeoIxFd))
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
The Evergreen Total Return Fund -- Class Y (EvTotRet)
Federated Investment Series Funds, Inc. -- Federated Bond Fund --
Class F (FedBdFd)
Fidelity Advisor Equity-Income Fund -- Class T (FAEqInc)
Fidelity Advisor Growth Opportunities Fund -- Class T (FAGrOpp)
Fidelity Advisor High Yield Fund - Class T (FAHiYld)
Fidelity Advisor Income & Growth Fund -- Class T (FAIncGr)
Fidelity Asset Manager(TM) (FidAsMgr)
Fidelity Capital & Income Fund (FidCapInc)
(not available for additional purchase payments or exchanges after
May 1, 1991)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
<PAGE> 6
Fidelity Puritan(R) Fund (FidPurtn)
Portfolio of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - High Income Portfolio (FidVIPHI)
(not available for additional purchase payments or exchanges after
December 1, 1993)
Janus Fund (JanFund)
Janus Twenty Fund (Jan20Fd)
Janus Worldwide Fund (JanWrldwde)
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)
Nationwide(R) U.S. Government Income Fund (NWUSGvt)
(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 -- Class A (OppGlob)
Phoenix Balanced Fund Series -- Class A (PhxBalFd)
Strong Total Return Fund, Inc. (StTotRet)
Templeton Foreign Fund -- Class I (TemForFd)
Warburg Pincus Emerging Growth Fund -- Common Shares (WPEmGro)
At December 31, 1996, contract owners have invested in all of the
above funds. The contract owners' equity is affected by the
investment results of each fund, equity transactions by contract
owners and certain contract expenses (see note 2). The accompanying
financial statements include only contract owners' purchase
payments pertaining to the variable portions of their contracts
and exclude any purchase payments for fixed dollar benefits, the
latter being included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the
closing net asset value per share at December 31, 1996. The cost of
investments sold is determined on the 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.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities, if any, at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(f) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with
the current year presentation.
<PAGE> 7
(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 contract 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 in the following format:
* Beginning unit value - Jan. 1
* Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gains and dividend distributions from the underlying
mutual funds.)
* Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit
value resulting from the market appreciation (depreciation) of
the underlying mutual funds.)
* Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and 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.
<PAGE> 8
(4) Components of Contract owners's equity
The following is a summary of contract owners' equity at December 31,
1996, 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:
American Century: Benham Short-Term Government Fund:
Tax qualified 157,941 $21.012508 $3,318,737
American Century: Income & Growth Fund:
Tax qualified 18,133 10.551440 191,329
American Century: Twentieth Century Growth Fund:
Tax qualified 186,518 51.389039 9,584,981
American Century: Twentieth Century International
Growth Fund:
Tax qualified 37,683 13.268469 499,996
American Century: Twentieth Century Ultra Fund:
Tax qualified 530,842 13.807925 7,329,827
Delaware Group Delchester High-Yield Bond Fund, Inc. --
Delchester Fund Institutional Class:
Tax qualified 70,363 13.618147 958,214
Dreyfus A Bonds Plus, Inc.:
Tax qualified 169,248 10.958199 1,854,653
Dreyfus S&P 500 Index Fund:
Tax qualified 187,389 17.509385 3,281,066
The Dreyfus Third Century Fund, Inc.:
Tax qualified 21,194 15.742432 333,645
The Evergreen Total Return Fund -- Class Y:
Tax qualified 65,357 14.032960 917,152
Federated Investment Series Funds, Inc. --
Federated Bond Fund - Class F:
Tax qualified 9,873 10.117861 99,894
Fidelity Advisor Equity-Income Fund -- Class T:
Tax qualified 59,163 11.552736 683,495
Fidelity Advisor Growth Opportunities Fund -- Class T:
Tax qualified 177,245 11.997760 2,126,543
Fidelity Advisor High Yield Fund -- Class T:
Tax qualified 70,939 11.241941 797,492
Fidelity Advisor Income & Growth Fund -- Class T:
Tax qualified 2,740 10.890814 29,841
Fidelity Asset Manager(TM):
Tax qualified 244,667 12.442308 3,044,222
Fidelity Capital & Income Fund:
Tax qualified 29,770 41.287772 1,229,137
Fidelity Equity-Income Fund:
Tax qualified 257,747 55.285184 14,249,590
Fidelity Magellan(R) Fund:
Tax qualified 656,562 17.810611 11,693,770
Fidelity Puritan(R) Fund:
Tax qualified 475,617 16.377974 7,789,643
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Fidelity VIP -- High Income Portfolio:
Tax qualified 12,382 21.793257 269,844
Janus Fund:
Tax qualified 133,123 12.087447 1,609,117
Janus Twenty Fund:
Tax qualified 230,288 14.762398 3,399,603
Janus Worldwide Fund:
Tax qualified 45,099 10.317427 465,306
MFS(R) World Governments Fund -- Class A:
Tax qualified 28,013 36.879814 1,033,114
Nationwide(R) Bond Fund:
Tax qualified 42,476 37.842928 1,607,416
Non-tax qualified 194 37.680696 7,310
Nationwide(R) Fund:
Tax qualified 34,681 70.764576 2,454,186
Non-tax qualified 314 73.708492 23,144
Nationwide(R) Growth Fund:
Tax qualified 48,441 75.405663 3,652,726
Non-tax qualified 230 79.618909 18,312
Nationwide(R) Money Market Fund:
Tax qualified -- Pre 12/25/82 49,431 24.656210 1,218,781
Tax qualified 327,248 19.580907 6,407,813
Non-tax qualified 1,317 24.812035 32,677
Nationwide(R) U.S. Government Income Fund:
Tax qualified 6,372 10.324818 65,790
Neuberger & Berman Guardian Fund:
Tax qualified 357,346 14.625126 5,226,230
Neuberger & Berman Limited Maturity Bond Fund:
Tax qualified 74,163 11.068501 820,873
Neuberger & Berman Partners Fund:
Tax qualified 222,551 18.631249 4,146,403
Oppenheimer Global Fund -- Class A:
Tax qualified 228,413 18.022572 4,116,590
Phoenix Balanced Fund Series -- Class A:
Tax qualified 43,659 12.187868 532,110
Strong Total Return Fund, Inc.:
Tax qualified 63,801 16.766964 1,069,749
Templeton Foreign Fund -- Class I:
Tax qualified 266,447 12.923758 3,443,497
Warburg Pincus Emerging Growth Fund --
Common Shares:
Tax qualified 250,912 11.814248 2,964,337
======= =========
Reserves for annuity contracts in payout phase:
Tax qualified 190,262
------------
$114,788,417
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 10
SCHEDULE I
NATIONWIDE VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
ACBenSTGvt ACIncGro ACTCGro ACTCIntlGr ACTCUltra
----------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 $20.449954 10.000000 45.274141 11.748911 12.289075
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.108203 .745798 .989050 1.366595 .784229
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.274998) (.171142) 5.759350 .314097 .906054
- ----------------------------------------------------------------------------------------------------
Contract charges (.270651) (.023216) (.633502) (.161134) (.171433)
- ----------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $21.012508 10.551440 51.389039 13.268469 13.807925
- ----------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 3% 6%(b) 14% 13% 12%
====================================================================================================
1995
Beginning unit
value - Jan. 1 $18.748399 ** 38.113717 10.000000 9.043121
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.086234 6.277505 .010869 .581551
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) .873119 1.457594 1.867440 2.805900
- ----------------------------------------------------------------------------------------------------
Contract charges (.257798) (.574675) (.129398) (.141497)
- ----------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $20.449954 45.274141 11.748911 12.289075
- ----------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 9% 19% 17%(b) 36%
====================================================================================================
1994
Beginning unit
value - Jan. 1 $19.087872 ** 39.197771 ** 9.505758
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .888205 5.656730 .283163
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.981660) (6.232359) (.626504)
- ----------------------------------------------------------------------------------------------------
Contract charges (.246018) (.508425) (.119296)
- ----------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $18.748399 38.113717 9.043121
- ----------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) (2)% (3)% (5)%
=====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DeHYBd DryABds Dry500Ix Dry3dCen EvTotRet
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 12.257125 10.819193 14.505515 12.829548 12.594984
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.289054 .647812 .780714 2.175909 .700093
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) .240682 (.368674) 2.430685 .924520 .909855
- ----------------------------------------------------------------------------------------------------
Contract charges (.168714) (.140132) (.207529) (.187545) (.171972)
- ----------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 13.618147 10.958199 17.509385 15.742432 14.032960
- ----------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 11% 1% 21% 23% 11%
====================================================================================================
1995
Beginning unit
value - Jan. 1 10.867271 9.110600 10.749166 9.570659 10.301799
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.215468 .658102 .397253 .897413 .668749
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) .327407 1.181188 3.524795 2.507797 1.773798
- ----------------------------------------------------------------------------------------------------
Contract charges (.153021) (.130697) (.165699) (.146321) (.149362)
- ----------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 12.257125 10.819193 14.505515 12.829548 12.594984
- ----------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 13% 19% 35% 34% 22%
====================================================================================================
1994
Beginning unit
value - Jan. 1 11.511092 10.000000 10.819026 10.477293 11.153183
- ----------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.272604 .673864 1.169814 1.340681 .771284
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.770117) (1.452714) (1.099729) (2.117415) (1.484673)
- ----------------------------------------------------------------------------------------------------
Contract charges (.146308) (.110550) (.139945) (.129900) (.137995)
- ----------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 10.867271 9.110600 10.749166 9.570659 10.301799
- ----------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) (6)% (9)%(b) (1)% (9)% (8)%
=====================================================================================================
</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 being utilized
for the entire year indicated.
**This investment option was not being utilized or was not available.
<PAGE> 11
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
FedBdFd FAEqInc FAGrOpp FAHiYld FAIncGr
---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 $10.000000 10.213719 10.325686 10.057673 10.177458
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .119423 .480953 .638324 1.033892 .403927
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .020151 .998707 1.176512 .290378 .443422
- -------------------------------------------------------------------------------------------------------
Contract charges (.021713) (.140643) (.142762) (.140002) (.133993)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.117861 11.552736 11.997760 11.241941 10.890814
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 1%(b) 13% 16% 12% 7%
=======================================================================================================
1995
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)
=======================================================================================================
1994
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)
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FidAsMgr FidCapInc FidEqInc FidMgIn FidPurtn
---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 11.183603 37.550944 46.285491 16.158074 14.410892
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .974182 3.350435 3.536178 2.629260 1.859609
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .437258 .903646 6.122667 (.758693) .307268
- -------------------------------------------------------------------------------------------------------
Contract charges (.152735) (.517253) (.659152) (.218030) (.199795)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 12.442308 41.287772 55.285184 17.810611 16.377974
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 11% 10% 19% 10% 14%
- -------------------------------------------------------------------------------------------------------
1995
Beginning unit
value - Jan. 1 $9.589367 32.589111 35.576037 11.964387 12.020413
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .319835 3.427571 2.721500 .938243 .761762
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.408821 2.006467 8.520244 3.445891 1.800691
- -------------------------------------------------------------------------------------------------------
Contract charges (.134420) (.472205) (.532290) (.190447) (.171974)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $11.183603 37.550944 46.285491 16.158074 14.410892
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 17% 15% 30% 35% 20%
- -------------------------------------------------------------------------------------------------------
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%
=======================================================================================================
</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 being utilized for the entire
year indicated.
**This investment option was not being utilized or was not available.
<PAGE> 12
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
FidVIPHI JanFund Jan20Fd JanWrldwde MFSWdGvt
--------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 $19.364421 10.239338 11.699046 10.000000 35.454983
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.765562 1.372042 2.474450 .631391 .996797
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .933745 .623531 .763449 (.292087) .893467
- -------------------------------------------------------------------------------------------------------
Contract charges (.270471) (.147464) (.174547) (.021877) (.465433)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $21.793257 12.087447 14.762398 10.317427 36.879814
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 13% 18% 26% 3%(b) 4%
=======================================================================================================
1995
Beginning unit
value - Jan. 1 $16.267014 ** 8.701036 ** 31.104159
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.177771 1.991385 4.432437
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.155057 1.142737 .359301
- -------------------------------------------------------------------------------------------------------
Contract charges (.235421) (.136112) (.440914)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $19.364421 11.699046 35.454983
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 19% 34% 14%
=======================================================================================================
1994
Beginning unit
value - Jan. 1 $16.739460 ** 9.451097 ** 33.728667
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.533862 .025710 1.658769
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.790091) (.657508) (3.874555)
- -------------------------------------------------------------------------------------------------------
Contract charges (.216217) (.118263) (.408722)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $16.267014 8.701036 31.104159
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) (3)% (8)% (8)%
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NWMyMkt
NWBdFd NWFund NWGroFd Pre 12/25/82 NWMyMkt
--------- -------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 37.782872 57.857937 65.471148 23.797066 18.898613
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 2.420301 5.294223 5.745821 1.177631 .935221
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.877444) 8.447372 5.102552 .000000 .000000
- -------------------------------------------------------------------------------------------------------
Contract charges (.482801) (.834956) (.913858) (.318487) (.252927)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 37.842928 70.764576 75.405663 24.656210 19.580907
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 0% 22% 15% 4% 4%
=======================================================================================================
1995
Beginning unit
value - Jan. 1 30.832258 45.095466 51.535806 22.850271 18.146709
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 2.340919 3.894595 6.923629 1.251864 .994176
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.062302 9.527720 7.791689 .000000 .000000
- -------------------------------------------------------------------------------------------------------
Contract charges (.452607) (.659844) (.779976) (.305069) (.242272)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 37.782872 57.857937 65.471148 23.797066 18.898613
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 23% 28% 27% 4% 4%
=======================================================================================================
1994
Beginning unit
value - Jan. 1 33.991130 45.422888 51.458079 22.315407 17.721943
- -------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 2.317590 4.420863 1.956402 .829315 .658609
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (5.061696) (4.160340) (1.208860) .000000 .000000
- -------------------------------------------------------------------------------------------------------
Contract charges (.414766) (.587945) (.669815) (.294451) (.233843)
- -------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 30.832258 45.095466 51.535806 22.850271 18.146709
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) (9)% (1)% 0% 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 being utilized for the entire
year indicated.
**This investment option was not being utilized or was not available.
<PAGE> 13
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT
TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NWUSGvt NBGuard NBLtdMat NBPartFd OppGlob
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 $10.124709 12.571028 10.735070 14.924653 15.538850
- ----------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .584669 .818924 .652728 1.883265 .840380
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.252576) 1.409253 (.177361) 2.039177 1.862683
- ----------------------------------------------------------------------------------------------------------
Contract charges (.131984) (.174079) (.141936) (.215846) (.219341)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $10.324818 14.625126 11.068501 18.631249 18.022572
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 2% 16% 3% 25% 16%
==========================================================================================================
1995
Beginning unit
value - Jan. 1 ** $9.640402 9.833352 11.183371 13.503390
- ----------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .546753 .635595 1.728556 .955752
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.533695 .401069 2.184589 1.269343
- ----------------------------------------------------------------------------------------------------------
Contract charges (.149822) (.134946) (.171863) (.189635)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $12.571028 10.735070 14.924653 15.538850
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 30% 9% 33% 15%
==========================================================================================================
1994
Beginning unit
value - Jan. 1 ** $10.000000 9.995028 11.548721 14.119303
- ----------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .249418 .555641 .945341 1.418589
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.492915) (.588488) (1.162325) (1.850696)
- ----------------------------------------------------------------------------------------------------------
Contract charges (.116101) (.128829) (.148366) (.183806)
- ----------------------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 $ 9.640402 9.833352 11.183371 13.503390
- ----------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) (4)%(b) (2)% (3)% (4)%
==========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
PhxBalFd StTotRet TemForFd WPEmGro
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1996
Beginning unit
value - Jan. 1 11.373217 14.893186 11.097523 10.895016
- ------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends 1.602292 2.715211 .541519 .024787
- ------------------------------------------------------------------------------------------
Unrealized gain (loss) (.635106) (.634729) 1.440934 1.044888
- ------------------------------------------------------------------------------------------
Contract charges (.152535) (.206704) (.156218) (.150443)
- ------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 12.187868 16.766964 12.923758 11.814248
- ------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 7% 13% 16% 8%
==========================================================================================
1995
Beginning unit
value - Jan. 1 9.338434 11.881033 10.000000 **
- ------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .913359 .793239 .700873
- ------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.255938 2.394151 .523675
- ------------------------------------------------------------------------------------------
Contract charges (.134514) (.175237) (.127025)
- ------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 11.373217 14.893186 11.097523
- -------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) 22% 25% 11%(b)
===========================================================================================
1994
Beginning unit
value - Jan. 1 10.000000 12.205201 ** **
- -------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .295350 .172665
- -------------------------------------------------------------------------------------------
Unrealized gain (loss) (.843207) (.340340)
- -------------------------------------------------------------------------------------------
Contract charges (.113709) (.156493)
- -------------------------------------------------------------------------------------------
Ending unit value -
Dec. 31 9.338434 11.881033
- -------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value*(a) (7)%(b) (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) This investment option was not being utilized for the entire
year indicated.
**This investment option was not being utilized or was not available.
<PAGE> 14
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT
NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NWBdFd NWFund NWGroFd NWMyMkt
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $37.620900 60.264917 69.129314 23.947460
- ---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 2.409921 5.514472 6.066865 1.185080
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.869397) 8.798796 5.387662 .000000
- ---------------------------------------------------------------------------------------------------------------------------
Contract charges (.480728) (.869693) (.964932) (.320505)
- ---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $37.680696 73.708492 79.618909 24.812035
- ---------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 0% 22% 15% 4%
===========================================================================================================================
1995
Beginning unit value - Jan. 1 $30.700082 46.971513 54.415339 22.994681
- ---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains and dividends 2.330893 4.056617 7.310483 1.259777
- ---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.040599 9.924079 8.227039 .000000
- ---------------------------------------------------------------------------------------------------------------------------
Contract charges (.450674) (.687292) (.823547) (.306998)
- ---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $37.620900 60.264917 69.129314 23.947460
- ---------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 23% 28% 27% 4%
===========================================================================================================================
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%
===========================================================================================================================
</TABLE>
*An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
See note 3.
<PAGE> 37
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company) as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
Assets 1996 1995
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------------- ----------------
18,306,921 17,778,860
----------------- ----------------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
$47,766,246 38,507,633
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------------- ----------------
192,382 281,928
----------------- ----------------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
45,628,372 35,879,121
----------------- ----------------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------------- ----------------
2,137,874 2,628,512
----------------- ----------------
$47,766,246 38,507,633
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
--------------- -------------- -------------
1,992,838 1,798,651 1,599,499
--------------- -------------- -------------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
--------------- -------------- -------------
1,677,341 1,511,079 1,357,641
--------------- -------------- -------------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
--------------- -------------- -------------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
--------------- -------------- -------------
110,889 99,808 78,589
--------------- -------------- -------------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
--------------- -------------- -------------
Net income $ 215,932 212,478 183,728
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
=========== ============= =============== ================= ===============
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
=========== ============= =============== ================= ===============
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
=========== ============= =============== ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
--------------- --------------- ---------------
Net cash provided by operating activities 346,159 187,633 39,880
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------------- --------------- ---------------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------------- --------------- --------------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------------- --------------- --------------
Net increase (decrease) in cash 34,329 5,832 (16,315)
---------------- --------------- ---------------
Cash, beginning of year 9,455 3,623 19,938
---------------- --------------- ---------------
Cash, end of year $ 43,784 9,455 3,623
================ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary
of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries
of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC),
Employers Life Insurance Company of Wausau and subsidiaries (ELICW),
National Casualty Company (NCC), West Coast Life Insurance Company
(WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide
Financial Services, Inc.), Nationwide Investment Services Corporation
(formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and
its subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in
November 1996 as a holding company for NLIC and the other companies of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. On January 27, 1997, Nationwide Corp.
contributed to NFS the common stock of NLIC and three marketing and
distribution companies. NFS is planning an initial public offering of
its Class A common stock during the first quarter of 1997.
In anticipation of the restructuring described above, on September 24,
1996, NLIC's Board of Directors declared a dividend payable January 1,
1997 to Nationwide Corp. consisting of the outstanding shares of common
stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer
or distribute long-term savings and retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and another affiliate effective January 1, 1996. These
subsidiaries and all accident and health and group life insurance
business have been accounted for as discontinued operations for all
periods presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC intends
to make an $850,000 distribution to NFS which will then make an
equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and retirement
products to retail and institutional customers and is subject to
competition from other financial services providers throughout the
United States. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives, new legal theories or
insurance company insolvencies through guaranty fund assessments
may create costs for the insurer beyond those currently recorded
in the consolidated financial statements. The Company mitigates
this risk by offering a wide range of products and by operating
throughout the United States, thus reducing its exposure to any
single product or jurisdiction, and also by employing underwriting
practices which identify and minimize the adverse impact of this
risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default or that other parties, including
reinsurers, which owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment
strategy, by maintaining reinsurance and credit and collection
policies and by providing for any amounts deemed uncollectible.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies that offer or distribute long-term savings and
retirement products. Prior to the contribution by Nationwide Corp. to
NFS of the outstanding common stock of NLIC and other companies, NLIC
effected certain transactions with respect to certain subsidiaries and
lines of business that were unrelated to long-term savings and
retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend to
Nationwide Corp. consisting of the outstanding shares of common stock
of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group
accident and health and group life insurance business and maintains it
offices in Wausau, Wisconsin. NCC is a property and casualty company
that serves as a fronting company for a property and casualty
subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate.
NCC maintains its offices in Scottsdale, Arizona. WCLIC writes high
dollar term life insurance policies and is located in San Francisco,
California. ELICW, NCC and WCLIC have been accounted for as
discontinued operations for all periods presented. NLIC did not
recognize any gain or loss on the disposal of these subsidiaries.
A summary of the combined results of operations, including the results
of the accident and health and group life insurance business ELICW
assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and
WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
During 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 13 for a
complete discussion of the reinsurance agreements. NLIC has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated companies
and will cease writing any new business prior to December 31, 1997.
NLIC's accident and health and group life insurance business is
accounted for as discontinued operations for all periods presented.
NLIC did not recognize any gain or loss on the disposal of the accident
and health and group life insurance business. The assets, liabilities,
results of operations and activities of discontinued operations are
distinguished physically, operationally and for financial reporting
purposes from the remaining assets, liabilities, results of operations
and activities of NLIC.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the results of operations, net of amounts ceded to ELICW
and NMIC in 1996, and assets and liabilities of NLIC's accident and
health and group life insurance business as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and its insurance
subsidiaries, filed with the department of insurance of each insurance
company's state of domicile, are prepared on the basis of accounting
practices prescribed or permitted by each department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
Subsidiaries Classified as Discontinued Operations" in the
accompanying consolidated balance sheets and "Income for
Discontinued Operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1996 or 1995.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate are included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
---------------------
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. Universal life insurance
products include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: Accident and health
insurance premiums are recognized as revenue over the terms of the
policies. Policy claims are charged to expense in the period that
the claims are incurred. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life products,
these deferred policy acquisition costs are predominantly being
amortized with interest over the premium paying period of the
related policies in proportion to the ratio of actual annual
premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 3(b).
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except for the
fees the Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits and claims for collectively renewable
long-term disability policies and group long-term disability
policies are the present value of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred but
unreported claims. The impact of reserve discounting is not
material. Future policy benefits and claims on other group health
insurance policies are not discounted. All health insurance
business is accounted for as discontinued operations. See note 2.
(g) Participating Business
----------------------
Participating business represents approximately 52% in 1996 (54%
in 1995 and 55% in 1994) of the Company's life insurance in force,
78% in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) of life insurance premiums. The provision for
policyholder dividends is based on current dividend scales. Future
dividends are provided for ratably in future policy benefits based
on dividend scales in effect at the time the policies were issued.
(h) Federal Income Tax
------------------
The Company, with the exception of ELICW, files a consolidated
federal income tax return with NMIC, the majority shareholder of
Nationwide Corp. The members of the consolidated tax return group
have a tax sharing arrangement which provides, in effect, for each
member to bear essentially the same federal income tax liability
as if separate tax returns were filed. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 2 and 13.
(j) Reclassification
----------------
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) Change in Accounting Principle
------------------------------
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,299,665
and $6,721,714, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded at
amortized cost. The effect as of January 1, 1994 has been recorded as a
direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
--------------
$ 212,553
==============
</TABLE>
(5) Investments
-----------
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ------------ ------------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ------------ ------------
$12,014,768 400,341 (51,339) 12,363,770
============ ========== ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
------------ ---------- ----------- ---------------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
------------ ---------- ----------- ---------------
$11,886,173 663,588 (34,244) 12,515,517
============ ========== =========== ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1996, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
--------------- --------------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
--------------- --------------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
--------------- --------------
$11,970,878 12,304,639
=============== ==============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
--------------- --------------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
--------------- --------------
$173,592 384,304
=============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------------- ------------- --------------
$(280,342) 951,932 (1,075,483)
=============== ============= ==============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996,
1995 and 1994 were $299,558, $107,345 and $228,308, respectively.
During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994,
respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995
and 1994, respectively) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of
$3,535.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995 the Company transferred all of its fixed maturity securities
previously classified as held-to-maturity to available-for-sale. As of
December 14, 1995, the date of transfer, the fixed maturity securities
had amortized cost of $3,320,093, resulting in a gross unrealized gain
of $155,940.
Investments that were non-income producing for the twelve month period
preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and
consisted of $248 ($6,982 in 1995) in fixed maturity securities,
$20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in
other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and
valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of
December 31, 1995).
The recorded investment of mortgage loans on real estate considered to
be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE)
as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995),
which includes $41,663 ($23,975 as of December 31, 1995) of impaired
mortgage loans on real estate for which the related valuation allowance
was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of
December 31, 1995) of impaired mortgage loans on real estate for which
there was no valuation allowance. During 1996, the average recorded
investment in impaired mortgage loans on real estate was approximately
$39,674 ($22,181 in 1995) and interest income recognized on those loans
was $2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------------- -------------
Allowance, end of year $51,038 49,128
============= ==============
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
--------------- ------------- --------------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
--------------- ------------- ---------------
Net investment income $1,357,759 1,294,033 1,210,811
=============== ============= ==============
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------------ ------------ ------------
$ (326) (1,724) (16,527)
============ ============ ============
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592
as of December 31, 1996 and 1995, respectively, were on deposit with
various regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for investment contracts
represents approximately 87% and 87% of the total liability for future
policy benefits as of December 31, 1996 and 1995, respectively. The
average interest rate credited on investment product policies was
approximately 6.3%, 6.6% and 6.5% for the years ended December 31,
1996, 1995 and 1994, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
Interest rates: Interest rates vary as follows:
--------------
<TABLE>
<CAPTION>
Year of issue Interest rates
----------------- ----------------------------------------
<S> <C>
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
WITHDRAWALS: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on
published tables, modified for the Company's actual
experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$240,451 and $245,255 as of December 31, 1996 and 1995, respectively.
The contract is immaterial to the Company's results of operations. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. Under the terms of the contract,
Franklin has established a trust as collateral for the recoveries. The
trust assets are invested in investment grade securities, the market
value of which must at all times be greater than or equal to 102% of
the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 13. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(7) Federal Income Tax
-------------------
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
----------------- ---------------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
----------------- ---------------
Net deferred tax assets 441,527 345,748
================= ===============
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
----------------- ---------------
Total gross deferred tax liabilities 603,739 592,375
----------------- ---------------
$162,212 246,627
================= ===============
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1996, 1995 and 1994.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
------------ -------- ------------- -------- ------------- --------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
============ ======== ============= ======== ============= ========
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239
during the years ended December 31, 1996, 1995 and 1994,
respectively.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
SFAS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(SFAS 107) requires disclosure of fair value information about existing
on and off-balance sheet financial instruments. SFAS 107 defines the
fair value of a financial instrument as the amount at which the
financial instrument could be exchanged in a current transaction
between willing parties. In cases where quoted market prices are not
available, fair value is based on estimates using present value or
other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts is provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analyses. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated balance
sheets for these instruments approximates their fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
Liabilities
-----------
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</TABLE>
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $327,456 extending into
1997 were outstanding as of December 31, 1996.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 21% (20% in 1995) in any geographic area and no more than 2% (2%
in 1995) with any one borrower as of December 31, 1996.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
------------- ------------- ------------- -------------- ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
============ ============= ============= =============
Less valuation allowances and unamortized discount 58,369
--------------
Total mortgage loans on real estate, net $5,272,119
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
------------ ------------ ------------- ------------- --------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
============ ============= ============= =============
Less valuation allowances and unamortized discount 57,948
--------------
Total mortgage loans on real estate, net $4,602,764
==============
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one thousand hours of service within a twelve-month period and who have
met certain age requirements. Benefits are based upon the highest
average annual salary of a specified number of consecutive years of the
last ten years of service. The Company funds pension costs accrued for
direct employees plus an allocation of pension costs accrued for
employees of affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan. Immediately prior to the merger, the plans were
amended to provide consistent benefits for service after January 1,
1996. These amendments had no significant impact on the accumulated
benefit obligation or projected benefit obligation as of December 31,
1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996 and
1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance Enterprise
Retirement Plan as a whole for the year ended December 31, 1996 and for
the Nationwide Insurance Companies and Affiliates Retirement Plan as a
whole for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
--------------- --------------- ---------------
$ 72,189 53,866 55,046
=============== =============== ===============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
--------------- ---------------
$1,349,703 1,263,233
=============== ===============
Net accrued pension expense:
Projected benefit obligation for services rendered to
date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
--------------- ---------------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
--------------- ---------------
$ (26,819) (21,592)
=============== ===============
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation; however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1996 and 1995 was $34,884 and $33,537, respectively, and the net
periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994
was $3,286, $3,132 and $4,284, respectively.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
----------- ----------- -----------
$17,875 19,076 23,165
=========== =========== ===========
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
--------------- ---------------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
--------------- ---------------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
--------------- ---------------
$(159,216) (152,734)
=============== ===============
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1996 by $701 and the NPPBC for the year ended December 31,
1996 by $83.
(12) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
---------------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance company subsidiaries exceed the minimum risk-based capital
requirements.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State of
Ohio (the Department). NLIC's dividend of the outstanding shares of
common stock of certain companies which was declared on September 24,
1996 and the anticipated $850,000 dividend (as discussed in note 1) are
deemed extraordinary under Ohio insurance laws. As a result of such
dividends, any dividend paid by NLIC during the 12-month period
immediately following the $850,000 dividend would also be an
extraordinary dividend under Ohio insurance laws. Accordingly, no such
dividend could be paid without prior regulatory approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its stockholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(13) Transactions With Affiliates
----------------------------
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the
Company made lease payments to NMIC and its subsidiaries of $9,065,
$8,986 and $8,133, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $101,584, $107,112, and $100,601 in 1996,
1995 and 1994, respectively. The allocations are based on techniques
and procedures in accordance with insurance regulatory guidelines.
Measures used to allocate expenses among companies include individual
employee estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
intercompany agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $15,111 and $1,186 as of December 31, 1996 and 1995,
respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1996 and
1995 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance contracts exist between NLIC and, respectively
NMIC and ELICW whereby all of NLIC's accident and health and group life
insurance business is ceded on a modified coinsurance basis. NLIC
entered into the reinsurance agreements during 1996 because the
accident and health and group life insurance business was unrelated to
NLIC's long-term savings and retirement products. Accordingly, the
accident and health and group life insurance business has been
accounted for as discontinued operations for all periods presented.
Under modified coinsurance agreements, invested assets are retained by
the ceding company and investment earnings are paid to the reinsurer.
Under the terms of NLIC's agreements, the investment risk associated
with changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee is
paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC's
retention of such risk. The agreements will remain in force until all
policy obligations are settled. However, with respect to the agreement
between NLIC and NMIC, either party may terminate the contract on
January 1 of any year with prior notice. The ceding of risk does not
discharge the original insurer from its primary obligation to the
policyholder. NLIC believes that the terms of the modified coinsurance
agreements are consistent in all material respects with what NLIC could
have obtained with unaffiliated parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and NCC,
are summarized in note 2. Amounts ceded to ELICW in 1996 include
premiums of $224,224, net investment income and other revenue of
$14,833, and benefits, claims and other expenses of $246,641. Amounts
ceded to NMIC in 1996 include premiums of $97,331, net investment
income of $10,890, and benefits, claims and other expenses of $100,476.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $4,789 and $9,654 as of December 31,
1996 and 1995, respectively, and are included in short-term investments
on the accompanying consolidated balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the outstanding
shares, with shareholder equity value of $30, of NISC to NLIC. NLIC
contributed an additional $500 to NISC on August 30, 1996.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46,918. As discussed in note 2, WCLIC is
accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock of ELICW from Wausau Service Corporation (WSC)
for $155,000. NLIC transferred fixed maturity securities and cash with
a fair value of $155,000 to WSC on December 28, 1994, which resulted in
a realized loss of $19,239 on the disposition of the securities. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share home
office, other facilities, equipment and common management and
administrative services with WSC. As discussed in note 2, ELICW is
accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Nationwide Corp. Total commissions and
fees paid to these affiliates for the years ended December 31, 1996,
1995 and 1994 were $76,922, $57,280 and $50,168, respectively.
(14) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, established a $600,000 revolving
credit facility which provides for a $600,000 loan over a five year
term on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by either NLIC or NMIC. NLIC
and NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. All previously existing line of
credit agreements were canceled.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Contingencies
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(16) Segment Information
-------------------
The Company has three primary segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Life Insurance segment consists of
insurance products that provide a death benefit and may also allow the
customer to build cash value on a tax-deferred basis. In addition, the
Company reports corporate expenses and investments, and the related
investment income supporting capital not specifically allocated to its
product segments in a Corporate and Other segment. In addition, all
realized gains and losses, investment management fees and other revenue
earned from mutual funds, other than the portion allocated to the
variable annuities and life insurance segments, are reported in the
Corporate and Other segment.
During 1996, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1996, 1995 and 1994 and assets as of December 31, 1996,
1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
----------------- --------------- ---------------
$ 1,992,838 1,798,651 1,599,499
================= =============== ===============
Income from continuing operations before federal income tax
expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
----------------- --------------- ---------------
$ 315,497 287,572 241,858
================= =============== ===============
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
----------------- --------------- ---------------
$47,766,246 38,507,633 29,246,024
================= =============== ===============
</TABLE>
<PAGE> 25
<TABLE>
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Summary of Investments -
Other Than Investments in Related Parties
As of December 31, 1996
($000's omitted)
<CAPTION>
- --------------------------------------------------------------- --------------- -------------- -----------------
Column A Column B Column C Column D
- --------------------------------------------------------------- --------------- -------------- -----------------
Amount at which
shown in the
consolidated
Type of Investment Cost Market value balance sheet
- --------------------------------------------------------------- --------------- -------------- -----------------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale:
Bonds:
U.S. Government and government agencies and authorities $ 3,757,887 3,834,762 3,834,762
States, municipalities and political subdivisions 6,242 6,690 6,690
Foreign governments 100,656 101,940 101,940
Public utilities 1,798,736 1,843,938 1,843,938
All other corporate 6,307,357 6,517,309 6,517,309
--------------- -------------- -----------------
Total fixed maturity securities available-for-sale 11,970,878 12,304,639 12,304,639
--------------- -------------- -----------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 43,501 50,405 50,405
Non-redeemable preferred stock 389 8,726 8,726
--------------- -------------- -----------------
Total equity securities available-for-sale 43,890 59,131 59,131
--------------- -------------- -----------------
Mortgage loans on real estate, net 5,327,317 5,272,119 (1)
Real estate, net:
Investment properties 253,383 217,611 (1)
Acquired in satisfaction of debt 57,933 48,148 (1)
Policy loans 371,816 371,816
Other long-term investments 27,370 28,668 (2)
Short-term investments 4,789 4,789
--------------- ----------------
Total investments $18,057,376 18,306,921
=============== ================
<FN>
- ----------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 5 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains of investments
in limited partnerships.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 26
<TABLE>
<CAPTION>
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplemental Insurance Information
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
- ----------------------------------- -------------- ------------------ ----------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------- -------------- ------------------ ----------------- ----------------- ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
acquisition claims and Unearned premiums benefits payable Premium
Segment costs loss expenses (1) (2) revenue
- ----------------------------------- -------------- ------------------ ----------------- ---------------- --------------
<C> <C> <C> <C> <C> <C>
1996: Variable Annuities $ 791,611 - - -
Fixed Annuities 242,421 14,952,877 687 24,030
Life Insurance 414,417 1,995,802 395,739 174,612
Corporate and Other (81,940) 230,381 25,048 -
-------------- ------------------ ---------------- --------------
Total $1,366,509 17,179,060 421,474 198,642
============== ================== ================ ==============
1995: Variable Annuities 571,283 - - -
Fixed Annuities 221,111 14,221,622 455 32,774
Life Insurance 366,876 1,898,641 383,983 166,332
Corporate and Other (138,914) 238,351 28,886 -
-------------- ------------------ ---------------- --------------
Total $1,020,356 16,358,614 413,324 199,106
============== ================== ================ ==============
1994: Variable Annuities 395,397 - - -
Fixed Annuities 198,639 12,633,253 240 20,134
Life Insurance 327,079 1,806,762 371,984 156,524
Corporate and Other 74,445 233,569 26,927 -
-------------- ------------------ ---------------- --------------
Total $ 995,560 14,673,584 399,151 176,658
============== ================== ================ ==============
<CAPTION>
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Column A Column G Column H Column I Column J Column K
- ----------------------------------- -------------- ------------------- ----------------- ---------------- --------------
Net Amortization Other
investment Benefits, claims, of deferred operating
income losses and policy expenses Premiums
Segment (3) settlement expenses acquisition costs (3) written
- ----------------------------------- -------------- ------------------- ----------------- ----------------- --------------
1996: Variable Annuities $ (21,449) 4,624 57,412 132,357
Fixed Annuities 1,050,557 838,533 38,635 79,737
Life Insurance 174,002 211,386 37,347 78,965
Corporate and Other 154,649 106,037 - 51,335
-------------- ------------------- ----------------- -----------------
Total $1,357,759 1,160,580 133,394 342,394
============== =================== ================= =================
1995: Variable Annuities (17,640) 2,881 26,264 109,089
Fixed Annuities 1,002,718 804,980 29,499 80,260
Life Insurance 171,255 201,986 31,021 68,832
Corporate and Other 137,700 105,646 (4,089) 14,773
-------------- ------------------- ----------------- -----------------
Total $1,294,033 1,115,493 82,695 272,954
============== =================== ================= =================
1994: Variable Annuities (13,415) 2,277 22,135 83,701
Fixed Annuities 903,572 702,082 29,849 69,975
Life Insurance 166,329 191,006 29,495 69,861
Corporate and Other 154,325 97,302 4,089 17,115
-------------- ------------------- ----------------- -----------------
Total $1,210,811 992,667 85,568 240,652
============== =================== ================= =================
<FN>
- ----------
(1) Unearned premiums are included in Column C amounts.
(2) Column E agrees to the sum of the Balance Sheet captions, Policyholders'
dividend accumulations and Other policyholder funds.
(3) Allocations of net investment income and certain general expenses are based
on a number of assumptions and estimates, and reported operating results
would change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 27
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
As of December 31, 1996, 1995 and 1994
and for each of the years then ended
($000's omitted)
<TABLE>
<CAPTION>
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Column A Column B Column C Column D Column E Column F
- ------------------------------- ----------------- ----------------- ---------------- ---------------- ---------------
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
----------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
1996:
Life insurance in force $47,071,264 6,633,567 288,593 40,726,290 0.7%
================= ================= ================ ================ ===============
Premiums:
Life insurance 225,615 29,282 2,309 198,642 1.2%
Accident and health insurance 291,871 305,789 13,918 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 517,486 335,071 16,227 198,642 8.2%
================= ================= ================ ================ ===============
1995:
Life Insurance in force $41,087,025 8,935,743 391,174 32,542,456 1.2%
================= ================= ================ ================ ===============
Premiums:
Life insurance 221,257 24,360 2,209 199,106 1.1%
Accident and health insurance 298,058 313,036 14,978 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 519,315 337,396 17,187 199,106 8.6%
================= ================= ================ ================ ===============
1994:
Life Insurance in force $35,926,633 7,550,623 829,742 29,205,752 2.8%
================= ================= ================ ================ ===============
Premiums:
Life insurance 198,705 24,912 2,865 176,658 1.6%
Accident and health insurance 303,435 321,696 18,261 - N/A
----------------- ----------------- ---------------- ---------------- ---------------
Total $ 502,140 346,608 21,126 176,658 12.0%
================= ================= ================ ================ ===============
<FN>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on invesment products and universal life insurance
products.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
<TABLE>
<CAPTION>
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Column A Column B Column C Column D Column E
- ------------------------------------------------- ------------ ----------------------------- ------------ -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- ------------------------------------------------- ------------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
1996:
Valuation allowances - mortgage loans on real
estate $49,128 4,497 - 2,587 51,038
Valuation allowances - real estate 25,819 (10,600) - - 15,219
------------ ------------ -------------- ------------ -------------
Total $74,947 (6,103) - 2,587 66,257
============ ============ ============== ============ =============
1995:
Valuation allowances - fixed maturity securities - 8,908 - 8,908 -
Valuation allowances - mortgage loans on real
estate 46,381 7,433 - 4,686 49,128
Valuation allowances - real estate 27,330 (1,511) - - 25,819
------------ ------------ -------------- ------------ -------------
Total $73,711 14,830 - 13,594 74,947
============ ============ ============== ============ =============
1994:
Valuation allowances - fixed maturity securities 4,800 (4,800) - - -
Valuation allowances - mortgage loans on real
estate 42,150 20,445 - 16,214 46,381
Valuation allowances - real estate 31,357 (4,027) - - 27,330
------------ ------------ -------------- ------------ -------------
Total $78,307 11,618 - 16,214 73,711
============ ============ ============== ============ =============
<FN>
- ----------
(1) Amounts represent direct write-downs charged against the valuation allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 38
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial statements and schedule included in Prospectus.
(Part A):
Condensed Financial Information.......................N/A
(2) Financial statements and schedule included
in Part B:
Those financial statements and schedule required by Item
23 to be included in Part B have been incorporated
therein by reference to the Prospectus (Part A)........37
Nationwide Variable Account:
Independent Auditors' Report...........................37
Statement of Assets, Liabilities and Contract Owners'
Equity as of December 31, 1996.........................38
Statement of Operations and Changes in Contract Owners'
Equity for the years ended December 31, 1996, 1995
and 1994...............................................40
Notes to Financial Statements..........................41
Schedules of Changes in Unit Value.....................46
Nationwide Life Insurance Company:
Independent Auditors' Report...........................51
Consolidated Balance Sheets as of December 31, 1996
and 1995...............................................52
Consolidated Statements of Income for the years
ended December 31, 1996, 1995 and 1994.................53
Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1996, 1995 and 1994...........54
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995, and 1994................55
Notes to Consolidated Financial Statements.............56
Schedule I - Consolidated Summary of Investments - Other
Than Investments in Related Parties....................93
Schedule III - Supplementary Insurance Information.....94
Schedule IV - Reinsurance..............................95
Schedule V - Valuation and QualifyingAccounts..........96
74 of 96
<PAGE> 39
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing establishment of the separate account
(Nationwide Variable Account)*
(2) Not Applicable
(3) Underwriting or Distribution Agreement between Depositor
and Principal Underwriter - Filed previously in
conjunction with '33 Act File No. 2-58043 and '40 Act
File No. 811-2716 and is hereby incorporated by reference
(4) Form of Variable Annuity Contract - Filed Previously in
connection with `33 Act File No. 33-60239 and is hereby
incorporated by reference.
(5) Form of Application - Filed Previously in connection with
`33 Act File No. 33-60239 and is hereby incorporated by
reference.
(6) Articles of Incorporation - Filed previously in
conjunction with '33 Act File No. 2-58043 and is hereby
incorporated by reference
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - attached hereto
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Computation of Performance Quotations. Filed previously
in conjunction with `33 Act File No. 33-82190 and is
hereby Incorporated by reference.
75 of 96
<PAGE> 40
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
Keith W. Eckel
1647 Falls Road
Clarks Summit, PA 18411 Director
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the Board
1247 Stafford Road and Director
Darlington, MD 21034
Dimon Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, OH 43025
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
76 of 96
<PAGE> 41
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
77 of 96
<PAGE> 42
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Service
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Applications Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Compliance
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
78 of 96
<PAGE> 43
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
California Cash Management Company California Investment Securities Agent
Colonial County Mutual insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies placed
through Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas, Texas Insurance Broker
Inc.
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
Employers Insurance of Wausau A Wisconsin Insurance Company
Mutual Company
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Insurance Company
</TABLE>
79 of 96
<PAGE> 44
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates, McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and Medicare
Supplement Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
** Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
</TABLE>
80 of 96
<PAGE> 45
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons, associations,
corporations, domestic or foreign and to
form or acquire the control of other
corporations
* Nationwide Development Company Ohio Owns, leases and manages commercial real
estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services, Inc. Delaware Holding Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation Michigan Investment Company
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Develops and operates Managed Care Delivery
System
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments.
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments.
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
</TABLE>
81 of 96
<PAGE> 46
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance organization
Public Employees Benefit Services Delaware Markets and Administrates Deferred
Corporation Compensation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Excess and surplus lines insurance company
Scottsdale Surplus Lines Insurance Arizona Excess and surplus lines insurance company
Company
</TABLE>
82 of 96
<PAGE> 47
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
** West Coast Life Insurance Company California Life Insurance Company
</TABLE>
83 of 96
<PAGE> 48
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Life Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Policies
Account-A Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
84 of 96
<PAGE> 49
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| SAN DIEGO LOTUS | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| CORPORATION | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 748,212 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
|100% $29,000,000| |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $861,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | OF ILLINOIS, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 250 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | | |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | | |WSC-100% $2,500 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | | COMPANIES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | | AGENCY, INC. |
| | | | | | | CORPORATION | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |-------| | |---|Preferred Stock: 11,540 | |------| |
| | | | | |--------------- Shares | | | |
| | | | | | | | | |
| Cost | | Cost | | | Cost | | | Cost |
| ---- | | ---- | | | ---- | | | ---- |
|WSC-100% $1,000 | |WSC-100% $1,000 | | |WSC-33 1/3% $6,215,459| | |WSC-100% $10,000 |
- --------------------------- --------------------------- | ---------------------------- | ---------------------------
| |
| ---------------------------- | ---------------------------
| | PREVEA HEALTH | | | PENSION ASSOCIATES |
| | INSURANCE PLAN, INC. | | | OF WAUSAU, INC. |
| |Common Stock: 3,000 Shares| | |Common Stock: 1,000 |
| |------------ | | |------------ Shares |
----| | -------| |
| | | |
| Cost | |Companies Cost |
| ---- | |Agency, Inc. ---- |
|WSC-33 1/3% $500,000 | |(Wisconsin)-100% $10,000 |
---------------------------- ---------------------------
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 3,136 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-24.5% $88,320 | || | | Cost | | Cost |
|Fire-24.5% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-7.7% $100,000 | || | | | | | |
|Fire-7.7% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate | | |------------ Shares | | |------------ Shares |
|----------- Cost | | | Cost | | | Cost |
| ---- | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | -------------------------------- | --------------------------------
| | |
- -------------------------------- | -------------------------------- | --------------------------------
| F & B, INC. | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | COMPANY OF CALIFORNIA | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | (COLONIAL) | | | |
|------------ | |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | |------------ Shares | | |------------ Shares |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $10 | | |Casualty-100% $11,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | -------------------------------- | --------------------------------
| |
- -------------------------------- | -------------------------------- | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | NECKURA GENERAL |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 1,000,000 | | | | | | |
|------------ Shares | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |------------------|------------ Shares | |--------|------------ Shares |
| ---- | | Cost | | | Cost |
|Casualty-99.9% $26,714,335 | | ---- | | | ---- |
|Other Capital: | |Casualty-100% $150,000,000 | | |Neckura-100% DM 1,656,925 |
|------------- | | | | | |
|Casualty-Ptd. $ 713,567 | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| SCOTTSDALE | | | COLUMBUS INSURANCE |
| SURPLUS LINES | | | BROKERAGE AND SERVICE |
| INSURANCE COMPANY | | | GmbH |
| | | |Common Stock: 1 Share |
| | |--------|------------ |
| "NEWLY FORMED" | | | Cost |
| | | | ---- |
| | | |Neckura-100% DM 51,639 |
| | | | |
| | | | |
-------------------------------- | --------------------------------
| |
-------------------------------- | --------------------------------
| NATIONAL PREMIUM & | | | LEBEN DIREKT |
| BENEFIT ADMINISTRATION | | | INSURANCE COMPANY |
| COMPANY | | | |
|Common Stock: 10,000 | | |Common Stock: 4,000 Shares |
|------------ Shares |------------------|------------ |
| Cost | | Cost |
| ---- | | ---- |
|Scottsdale-100% $10,000 | |Neckura-100% DM 4,000,000 |
| | | |
| | | |
-------------------------------- --------------------------------
-------------------------------- --------------------------------
| SVM SALES | | AUTO DIREKT |
| GmbH | | INSURANCE COMPANY |
| | | |
|Common Stock: 50 Shares | |Common Stock: 1,500 Shares |
|------------ | |------------ |
| Cost | | Cost |
| ---- | | ---- |
|Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | |
| | | |
-------------------------------- --------------------------------
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
|------------ Shares | | | Cost |
| Cost | | | ---- |
| ---- | | |Casualty-90% $9,000 |
|Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
-------------------------------- | --------------------------------
|| |
-------------------------------- | --------------------------------
| COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| INSURANCE COMPANY | | | MANAGEMENT |
| | | | |
|Surplus Debentures | | |Common Stock: 90 Shares |
|------------------ | |----|------------ |
| Cost | | | Cost |
| ---- | | | ---- |
|Colonial $500,000 | | |Casualty-100% $9,000 |
|Lone Star 150,000 | | | |
-------------------------------- | --------------------------------
|
| -------------------------------- --------------------------------
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| |Common Stock: 14,750 | | |
| |------------ Shares | |Common Stock: 750 Shares |
-----| Cost |------------------|------------ |
| ---- | | Cost |
|Casualty-100% $11,510,000 | | ---- |
|Other Capital: | |NW Comm-100% $531,000 |
|------------- | | |
|Casualty-Ptd. 1,000,000 | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
March 6, 1997
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
(Left Side)
NATIONWIDE INSURANCE ENTERPRISE(R)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES | | DISTRIBUTORS AGENCY | || | |
| (NW LIFE) | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 68,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $58,070,003 | | | NW Life--100% $5,996,261 | || | NFIDIA--100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTOR SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ Shares |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life--100% $35,971,375 | | | NW Adv. Serv.--100% $5,000| || | NFIDIA--100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares | ||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life--100% $529,728 | | | COMMON LAW TRUST | || | NFIDIA--100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE LIFE INSURANCE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| COMPANY OF NEW YORK | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Common Stock: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------------ Shares |--| | |==|| | ------------ Shares |__||==| AGENCY OF |
| Cost | | | | || | | | OHIO, INC. |
| ---- | | | | || | Cost | | |
| NW Life--100% | | | | || | ---- | | |
| (Proposed) | | | COMMON LAW TRUST | || | NFIDIA--100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: | | | | ||
| ------ | | | |==||
| | | | | ||
| | | | | ||
| NW Life--90% | | | | ||
| NW Mutual--10% | | | COMMON LAW TRUST | ||
--------------------------- | --------------------------- ||
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE REALTY | | | NATIONWIDE | ||
| INVESTORS, LTD. | | | SEPARATE ACCOUNT | ||
| | | | TRUST | ||
| Units: | | | | ||
| ------ |__| | |__||
| | | |
| | | |
| NW Life--97.6% | | |
| NW Mutual--2.4% | | COMMON LAW TRUST |
--------------------------- ---------------------------
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
(Center)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|
----------------------------------------------------------------------------------------------------------------------
| | | |
--------------------------- -------------------------- ----------------------------- ----------------------------
| NATIONWIDE FINANCIAL | | MRM INVESTMENTS, INC. | | WEST COAST LIFE | | NATIONAL CASUALTY |
| SERVICES, INC. (NFS) | | | | INSURANCE COMPANY | | COMPANY |
| | | | | | | (NC) |
| Common Stock: Control | | Common Stock: 1 | | Common Stock: 1,000,000 | | Common Stock: 100 |
| ------------ ------- | | ------------ Share | | ------------ Shares | | ------------ Shares |
| | | | | | | |
| | | Cost | | Cost | | Cost |
| Class A Public--100% | | ---- | | ---- | | ---- |
| Class B NW Corp--100% | | NW Corp.--100% $1,339,218 | | NW Corp.--100% $152,946,930 | | NW Corp.--100% $73,442,439 |
--------------------------- --------------------------- ----------------------------- ----------------------------
| |
- -------------------------------------------------------------------------------- |
| | |
--------------------------- --------------------------- ----------------------------
| PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | NCC OF AMERICA, INC. |
| SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | (INACTIVE) |
| (PEBSCO) | | (NEA) | | |
| Common Stock: 236,494 |==|| | Common Stock: 500 | | |
| ------------ Shares | || | ------------ Shares | | |
| | || | | | |
| NFS--100% | || | NFS--100% | | NFS--100% |
--------------------------- || ----------------------------- ----------------------------
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ALABAMA | || | INVESTOR SERVICES | ||
| | || | OF ALABAMA, INC. | ||
| Common Stock: 100,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $5,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $500 | || | NEA--100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO--100% $1,000 | || | NEA--100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| MONTANA | || | INVESTOR SERVICES | || | |
| | || | OF NEVADA, INC. | || | NEA VALUEBUILDER |
| Common Stock: 500 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OHIO, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $500 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ---------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | |
| NEW MEXICO | || | INVESTOR SERVICES | || | |
| | || | OF WYOMING, INC. | || | NEA VALUEBUILDER |
| Common Stock: 1,000 | || | Common Stock: 500 | || | INVESTOR SERVICES |
| ------------ Shares |--|| | ------------ Shares | ||==| OF OKLAHOMA, INC. |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO--100% $1,000 | || | NEA--100% $500 | || | |
--------------------------- || --------------------------- || ---------------------------
|| ||
--------------------------- || --------------------------- || ----------------------------
| | || | NEA VALUEBUILDER | || | |
| | || | SERVICES INSURANCE | || | |
| PEBSCO OF | || | AGENCY, INC. | || | NEA VALUEBUILDER |
| TEXAS, INC. | || | Common Stock: 100 | || | INVESTOR SERVICES |
| |==|| | ------------ Shares |__||==| OF TEXAS, INC. |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA--100% $1,000 | | |
--------------------------- --------------------------- ----------------------------
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE HMO, INC. |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | (NW HMO) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP.--100% $25,683,532 | | | NW CORP.--100% $126,509,480 | | | NW CORP.--100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 250,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | NW HMO Cost |
| | ---- | | | ---- | | | ---- |
| | GATES--100% $106,947 | | | NW CORP.--100% $57,413,193 | | | Inc.--100% $25,149 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| ----------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | KEY HEALTH PLAN, INC. | | | NATIONWIDE |
| | OF NEVADA | | | | | | AGENCY, INC. |
| | | | | | | | |
| | Common Stock: 40 | | | Common Stock: 1,000 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NW HMO Cost |
| | ---- | | ---- | | | ---- |
| | Gates--100% $93,750 | | ELIOPW--80% $2,700,000 | | | Inc.--99% $116,077 |
| ----------------------------- ------------------------------ | ------------------------------
|
| -----------------------------
| | GATES, MCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| NW CORP.--100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Partnership Interest -- Dotted Line
March 6, 1997
Page 2
</TABLE>
<PAGE> 55
ITEM 27. NUMBER OF CONTRACT OWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation Law of
the State of Ohio, for indemnification by the Company of any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact
that such person is or was a director, officer or employee of the
Company, against expenses, including attorney fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding, to the
extent and under the circumstances permitted by the General
Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as
principal underwriter and general distributor for the
Nationwide Multi-Flex Variable Account, Nationwide DCVA-II,
Nationwide DC Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VL Separate Account-B,
Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, NACo Variable Account and Nationwide Variable
Account, all of which are separate investment accounts of
the Company or its affiliates.
NAS also acts as principal underwriter for Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, Nationwide Investing
Foundation II and Nationwide Asset Allocation Trust, which
are open-end management investment companies.
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon Richard McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Gordon E. McCutchan
One Nationwide Plaza Executive Vice President-Law and
Columbus, OH 43215 Corporate Services and Director
Robert A. Oakley Executive Vice President - Chief
One Nationwide Plaza Financial Officer and Director
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief
One Nationwide Plaza Investment Officer and Director
Columbus, OH 43215
</TABLE>
87 of 96
<PAGE> 56
<TABLE>
<S> <C>
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
James F. Laird, Jr. Vice President - General
One Nationwide Plaza Manager and Acting Treasurer
Columbus, OH 43215
Edwin P. McCausland Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
William G. Goslee Vice President
One Nationwide Plaza
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Rae M. Pollina 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
Advisory
Services,
Inc.
</TABLE>
88 of 96
<PAGE> 57
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Depositor hereby undertakes to:
(a) Represent that the fees and charges deducted under the
Contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred,
and the risks assumed by the Company.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Code is issued by the Registrant in reliance upon, and in
compliance with, the Securities and Exchange Commission's
no-action letter to the American Council of Life Insurance
(publicly available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with IRC Section
403(b)(11).
89 of 96
<PAGE> 58
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide Variable Account
Individual Deferred Variable Annuity Contract
PROSPECTUS
May 1, 1997
90 of 96
<PAGE> 59
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of the Nationwide Variable Account:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 31, 1997 included the related financial statement
schedules as of December 31, 1996, and for each of the years in the three-year
period ended December 31, 1996, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Services" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 24, 1997
91 of 96
<PAGE> 60
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 24th
day of April, 1997.
NATIONWIDE VARIABLE ACCOUNT
-----------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-----------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH Joseph P. Rath
-----------------------------------------------
Vice President and
Associate General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 1 has been signed below by the following persons in the
capacities indicated on the 24th day of April, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ----------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- ----------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ----------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ----------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ----------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief
- ---------------------------------- Operating Officer and Director
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board
- ---------------------------------- and Director
Henry S. Holloway
DIMON RICHARD McFERSON Chairman and Chief Executive Officer
- ---------------------------------- Nationwide Insurance Enterprise and Director
Dimon Richard McFerson
DAVID O. MILLER Director
- ----------------------------------
David O. Miller
C. RAY NOECKER Director
- ----------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ---------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ---------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
Atorney-in-Fact
ARDEN L. SHISLER Director
- ----------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ----------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ----------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ----------------------------------
Harold W. Weihl
</TABLE>
96 of 96
<PAGE> 61
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide VA
Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C and Nationwide VA Separate Account-Q; and the registration of fixed
interest rate options subject to a market value adjustment offered under some or
all of the aforementioned individual Variable Annuity Contracts in connection
with Nationwide Multiple Maturity Separate Account and Nationwide Multiple
Maturity Separate Account-A, and the registration of Group Flexible Fund
Retirement Contracts in connection with Nationwide DC Variable Account,
Nationwide DCVA-II, and NACo Variable Account; and the registration of Group
Common Stock Variable Annuity Contracts in connection with Separate Account No.
1; and the registration of variable life insurance policies in connection with
Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, Nationwide VL Separate Account-A and Nationwide VL
Separate Account-B, hereby constitutes and appoints Dimon Richard McFerson,
Joseph J. Gasper, W. Sidney Druen, and Joseph P. Rath, and each of them with
power to act without the others, his/her attorney, with full power of
substitution and resubstitution, for and in his/her name, place and stead, in
any and all capacities, to approve, and sign such Registration Statements and
any and all amendments thereto, with power to affix the corporate seal of said
corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument may
be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 2nd day of April, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief
Financial Officer
/s/ Fred C. Finney /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director James F. Patterson, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director
and Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ Dimon Richard McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon Richard McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
</TABLE>
