<PAGE> 1
As filed with the Securities and Exchange Commission.
Securities Act File No. 33-67636
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 5 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
NATIONWIDE VARIABLE ACCOUNT-II
(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
/ / on (date) pursuant to paragraph (b) of Rule 485
/X/ 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on (date) pursuant to paragraph (a) of Rule 485
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a
prior registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable fee
in the amount of $500 has been paid to the Commission. Registrant filed its Rule
24f-2 Notice for the fiscal year ended December 31, 1994 on February 22, 1995.
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NATIONWIDE VARIABLE ACCOUNT-II
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
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page.................................................................... 3
Item 2. Definitions................................................................... 5
Item 3. Synopsis or Highlights........................................................ 13
Item 4. Condensed Financial Information............................................... 14
Item 5. General Description of Registrant, Depositor, and Portfolio Companies......... 18
Item 6. Deductions and Expenses....................................................... 19
Item 7. General Description of Variable Annuity Contracts............................. 21
Item 8. Annuity Period................................................................ 24
Item 9. Death Benefit and Distributions............................................... 26
Item 10. Purchases and Contract Value.................................................. 31
Item 11. Redemptions................................................................... 32
Item 12. Taxes......................................................................... 33
Item 13. Legal Proceedings............................................................. 38
Item 14. Table of Contents of the Statement of Additional Information.................. 38
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page.................................................................... 46
Item 16. Table of Contents............................................................. 46
Item 17. General Information and History............................................... 46
Item 18. Services...................................................................... 46
Item 19. Purchase of Securities Being Offered.......................................... 46
Item 20. Underwriters.................................................................. 47
Item 21. Calculation of Performance Information........................................ 47
Item 22. Annuity Payments.............................................................. 49
Item 23. Financial Statements.......................................................... 50
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits............................................. 88
Item 25. Directors and Officers of the Depositor....................................... 90
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.................................................................... 92
Item 27. Number of Contract Owners..................................................... 103
Item 28. Indemnification............................................................... 103
Item 29. Principal Underwriter......................................................... 103
Item 30. Location of Accounts and Records.............................................. 106
Item 31. Management Services........................................................... 106
Item 32. Undertakings.................................................................. 106
</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-II
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"). Reference throughout
the prospectus to Individual Deferred Variable Annuity Contracts shall also mean
certificates issued under Group Modified Single Premium Retirement Contracts.
For such Group Contracts, references to "Owner" shall mean the "Participant"
unless the Plan otherwise permits or requires the Owner to exercise such rights
under the authority of the Plan terms. The Contracts are sold either as
Non-Qualified Contracts; as Individual Retirement Annuities with contributions
rolled-over from certain tax-qualified plans such as Tax Sheltered Annuity
plans, Qualified Plans or IRAs; or as Tax Sheltered Annuities with contributions
rolled over or transferred from other Tax Sheltered Annuity Plans. Annuity
payments under the Contracts are deferred until a selected later date.
Purchase Payments are allocated to the Nationwide Variable Account-II
("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:
AMERICAN CAPITAL LIFE INVESTMENT TRUST
American Capital Real Estate Securities Portfolio
DREYFUS
Dreyfus Stock Index Fund The Dreyfus Socially Responsible Growth Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
<TABLE>
<S> <C> <C> <C>
Equity-Income Portfolio Growth Portfolio High Income Portfolio* Overseas Portfolio
</TABLE>
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund Government Bond Fund Money Market Fund
Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST (FORMERLY "ADVISERS MANAGEMENT
TRUST")
Growth Portfolio Limited Maturity Bond Portfolio Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Multiple Strategies Fund
STRONG VARIABLE INSURANCE PRODUCTS FUND
Strong Discovery Fund II, Inc. Strong Special Fund II, Inc.
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST)
<TABLE>
<S> <C>
Worldwide Bond Fund (Formerly Global Bond Fund) Gold and Natural Resources Fund
</TABLE>
WARBURG PINCUS TRUST
International Equity Portfolio Small Company Growth Portfolio
*The High Income Portfolio may invest in lower quality debt securities commonly
referred to as junk bonds.
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-II before investing. You should read
it and keep it for future reference. A Statement of Additional Information dated
May 1, 1995 containing further information about the Contracts and the
Nationwide Variable Account-II 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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1995, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 36 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1995.
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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 during
Annuitization and upon whose life any annuity payments 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. The Annuitant may be changed prior to the Annuitization Date with
the consent of the Company.
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments are scheduled to begin.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the 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 ANNUITANT- The Contingent Annuitant is the person designated to be
the Annuitant if the Annuitant is not living at the Annuitization Date. If a
Contingent Annuitant is named, all provisions of the Contract which are based on
the death of the Annuitant prior to the Annuitization Date will be based on the
death of the last survivor of the Annuitant and the Contingent Annuitant.
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.
CONTINGENT OWNER- A Contingent Owner, if named, may succeed to the rights of
Contract Owner upon the Contract Owner's death before Annuitization. For
Contracts issued in the State of New York, references throughout this prospectus
to "Contingent Owner" shall mean "Owner's Beneficiary."
CONTRACT- 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 is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, the Contingent Owner, the Annuitant, the Contingent
Annuitant, the Beneficiary, the Contingent Beneficiary, the Annuity Payment
Option, or the Annuitization 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 commencing with the Date of Issue, and each Contract
Anniversary thereafter shall be a Contract Year.
DATE OF ISSUE- The Date of Issue is the date the first Purchase Payment is
applied to the Contract.
DEATH BENEFIT- The benefit payable upon the death of the Annuitant prior to the
Annuitization Date. This benefit does not apply upon the death of the Contract
Owner when the Owner and Annuitant are not the same person. If the Annuitant
dies after the Annuitization Date, any benefit that may be payable shall be as
specified in the Annuity Payment Option elected.
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 any segregated asset account.
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FIXED ANNUITY- An annuity providing for a series of payments which are
guaranteed by the Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY- An annuity which qualifies for treatment under
Section 408(b) of the Internal Revenue Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time in which an interest rate credited to the Fixed Account under
the Contract is guaranteed to remain the same. For Purchase Payments into the
Fixed Account or transfers from the Variable Account, this period begins upon
the date of deposit or transfer and ends at the end of the calendar quarter at
least one year from deposit or transfer. At the end of an Interest Rate
Guarantee Period, a new interest rate is declared with an Interest Rate
Guarantee Period starting at the end of the prior period and ending at the end
of the calendar quarter one year later.
IRA- Refers generally to both an Individual Retirement Account and an Individual
Retirement Annuity as defined in Sections 408(a) and (b), respectively, of the
Code.
JOINT OWNER- The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Owner. IF A JOINT OWNER IS NAMED,
REFERENCES TO "CONTRACT OWNER" OR "OWNER" IN THIS PROSPECTUS WILL APPLY TO BOTH
THE OWNER AND JOINT OWNER. JOINT OWNERS MUST BE SPOUSES AT THE TIME JOINT
OWNERSHIP IS REQUESTED.
MUTUAL FUNDS (FUNDS)- The registered management investment companies in which
the assets of the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACTS- A Contract which does not qualify for favorable tax
treatment under the provisions of Section 401 (Qualified Plans), 408 (IRAs) or
403(b) (Tax-Sheltered Annuities) of the Code.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and Fixed
Account, or among the Sub-Accounts.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 and 403(a) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific Mutual Fund shares are allocated and for which Accumulation Units and
Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for 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 Variable Account-II, 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 the shares of a separate Mutual Fund.
VARIABLE ANNUITY- An annuity providing for payments which are not predetermined
or guaranteed as to dollar amount and which vary in amount with the investment
experience of the Variable Account.
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<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.......................................................................... 3
SUMMARY OF CONTRACT EXPENSES....................................................................... 7
SYNOPSIS........................................................................................... 11
CONDENSED FINANCIAL INFORMATION.................................................................... 12
NATIONWIDE LIFE INSURANCE COMPANY.................................................................. 16
THE VARIABLE ACCOUNT............................................................................... 16
Underlying Mutual Fund Options............................................................ 16
Voting Rights............................................................................. 16
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS.................................. 17
Mortality Risk Charge..................................................................... 17
Expense Risk Charge....................................................................... 17
Contingent Deferred Sales Charge.......................................................... 17
Elimination of Contingent Deferred Sales Charge........................................... 18
Administration Charge..................................................................... 19
Premium Taxes............................................................................. 19
Expenses of Variable Account.............................................................. 19
Investments of the Variable Account....................................................... 19
Right to Revoke........................................................................... 19
Transfers................................................................................. 19
Assignment................................................................................ 20
Loan Privilege............................................................................ 20
Contingent Owner and Beneficiary Provisions............................................... 21
Ownership Provisions...................................................................... 22
Substitution of Securities................................................................ 22
Contract Owner Inquiries.................................................................. 22
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT............................................................ 22
Value of an Annuity Unit.................................................................. 23
Assumed Investment Rate................................................................... 23
Frequency and Amount of Annuity Payments.................................................. 23
Annuitization Date........................................................................ 23
Change in Annuitization Date.............................................................. 23
Change in Form of Annuity................................................................. 23
Annuity Payment Options................................................................... 23
Death of Contract Owner................................................................... 24
Death of Annuitant Prior to the Annuitization Date........................................ 24
Death of Annuitant After the Annuitization Date........................................... 25
Required Distribution for Tax Sheltered Annuities......................................... 25
Required Distributions for Individual Retirement Annuities................................ 26
Generation-Skipping Transfers............................................................. 27
GENERAL INFORMATION................................................................................ 27
Contract Owner Services................................................................... 27
Statements and Reports.................................................................... 28
Allocation of Purchase Payments and Contract Value........................................ 29
Value of a Variable Account Accumulation Unit............................................. 29
Net Investment Factor..................................................................... 29
Valuation of Assets....................................................................... 30
Determining the Contract Value............................................................ 30
Surrender (Redemption).................................................................... 30
Surrenders Under a Tax Sheltered Annuity Contract......................................... 30
Taxes..................................................................................... 31
Non-Qualified Contracts................................................................... 31
Individual Retirement Annuities........................................................... 32
Diversification........................................................................... 33
Charge for Tax Provisions................................................................. 33
Individual Retirement Annuities, Individual Retirement Accounts and Tax Sheltered
Annuities................................................................................. 33
</TABLE>
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<TABLE>
<S> <C>
Advertising............................................................................... 34
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY......................................................... 35
LEGAL PROCEEDINGS.................................................................................. 36
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION........................................... 36
APPENDIX A......................................................................................... 37
APPENDIX B......................................................................................... 39
</TABLE>
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SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION 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
Mortality and Expense Risk Charges.............................. 1.25%
Administration Charge........................................... 0.15%
Total Variable Account Annual Expenses........................ 1.40%
(1) Each Contract Year, the Contract Owner 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, less any
Purchase Payments previously withdrawn that were subject to a CDSC or for
distributions required for the Contract to meet minimum distribution rules
for IRA Rollover Contracts. 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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UNDERLYING MUTUAL FUND ANNUAL EXPENSES(2) (AS A PERCENTAGE OF UNDERLYING MUTUAL
FUND NET ASSETS)
<TABLE>
<CAPTION>
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Management Total Mutual
Fees Other Expenses Fund Expenses
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Capital Real Estate Securities 1.00% 0.00% 1.00%
Portfolio
-----------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.14% 0.26% 0.40%
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The Dreyfus Socially Responsible Growth Fund, Inc. 0.00% 0.25% 0.25%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP-Equity-Income Portfolio 0.52% 0.06% 0.58%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP-Growth Portfolio 0.62% 0.07% 0.69%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP-High Income Portfolio 0.61% 0.10% 0.71%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP-Overseas Portfolio 0.77% 0.15% 0.92%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP II-Asset Manager Portfolio 0.72% 0.07% 0.79%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP II-Contrafund Portfolio 0.62% 0.27% 0.89%
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NSAT-Capital Appreciation Fund 0.50% 0.06% 0.56%
-----------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
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NSAT-Money Market Fund 0.50% 0.04% 0.54%
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NSAT-Total Return Fund 0.50% 0.02% 0.52%
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Neuberger & Berman Advisers 0.79% 0.12% 0.91%
Management Trust-Growth Portfolio
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Neuberger & Berman Advisers 0.60% 0.13% 0.73%
Management Trust-Limited Maturity Bond Portfolio
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Neuberger & Berman Advisers 0.80% 0.50% 1.30%
Management Trust-Partners Portfolio
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Oppenheimer-Bond Fund 0.75% 0.06% 0.81%
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Oppenheimer-Global Securities Fund 0.75% 0.20% 0.95%
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Oppenheimer-Multiple Strategies Fund 0.74% 0.05% 0.79%
-----------------------------------------------------------------------------------------------------------------
Strong Discovery Fund II, Inc. 1.00% 0.21% 1.21%
-----------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.10% 1.10%
-----------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI Balanced 1.00% 0.00% 1.00%
-----------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI Growth 1.00% 0.00% 1.00%
-----------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI International 1.50% 0.00% 1.50%
-----------------------------------------------------------------------------------------------------------------
Van Eck-Worldwide Bond Fund 0.75% 0.18% 0.93%
-----------------------------------------------------------------------------------------------------------------
Van Eck-Gold and Natural Resources Fund 0.75% 0.21% 0.96%
-----------------------------------------------------------------------------------------------------------------
Warburg Pincus-International Equity Portfolio 1.00% 0.44% 1.44%
-----------------------------------------------------------------------------------------------------------------
Warburg Pincus-Small Company Growth Portfolio 0.90% 0.35% 1.25%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(2) The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against separate account assets or
reductions from Contract Values. These underlying Mutual Fund expenses are
taken into consideration in computing each underlying Mutual Fund's net
asset value, which is the share price used to calculate the unit values of
the Variable Account.
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<PAGE> 11
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 Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period 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 Capital Real 88 122 159 282 25 77 132 282 * 77 132 282
Estate Securities
Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 82 103 128 218 19 58 101 218 * 58 101 218
Fund
------------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 80 99 119 201 17 54 92 201 * 54 92 201
Responsible Growth Fund,
Inc.
------------------------------------------------------------------------------------------------------------------------------------
Fidelity 84 109 137 237 21 64 110 237 * 64 110 237
VIP-Equity-Income
Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-Growth 85 113 143 249 22 68 116 249 * 68 116 249
Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Fidelity-VIP-Overseas 87 120 155 274 24 75 128 274 * 75 128 274
Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP-High Income 85 113 144 251 22 68 117 251 * 68 117 251
Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II-Asset 86 116 148 260 23 71 121 260 * 71 121 260
Manager
------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP 87 119 154 271 24 74 127 271 * 74 127 271
II-Contrafund Portfolio
------------------------------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation 84 109 136 235 21 64 109 235 * 64 109 235
Fund
------------------------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 83 107 133 230 20 62 106 230 * 62 106 230
------------------------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 83 108 135 233 20 63 108 233 * 63 108 233
------------------------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 83 107 134 231 20 62 107 231 * 62 107 231
------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 87 120 155 273 24 75 128 273 * 75 128 273
Advisers Management
Trust-Growth Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 85 114 145 254 22 69 118 254 * 69 118 254
Advisers Management
Trust-Limited Maturity
Bond Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 91 132 175 313 28 87 148 313 * 87 148 313
Advisers Management
Trust-Partners Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Bond Fund 86 116 149 262 23 71 122 262 * 71 122 262
------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global 88 121 157 277 25 76 130 277 * 76 130 277
Securities Fund
------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer-Multiple 86 116 148 260 23 71 121 260 * 71 121 260
Strategies Fund
------------------------------------------------------------------------------------------------------------------------------------
Strong Discovery Fund II 90 129 170 304 27 84 143 304 * 84 143 304
------------------------------------------------------------------------------------------------------------------------------------
Strong Special Fund II 89 126 169 292 26 81 138 292 * 81 138 292
------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI 88 122 159 282 25 77 132 282 * 77 132 282
------------------------------------------------------------------------------------------------------------------------------------
Balanced
TCI Portfolios-TCI Growth 88 122 159 282 25 77 132 282 * 77 132 282
------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios-TCI 93 138 185 333 30 93 158 333 * 93 158 333
International
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period 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>
Van Eck-Worldwide Bond 87 120 156 275 24 75 129 275 * 75 129 275
Fund
------------------------------------------------------------------------------------------------------------------------------------
Van Eck-Gold and Natural 88 121 157 278 25 76 130 278 * 76 130 278
Resources Fund
------------------------------------------------------------------------------------------------------------------------------------
Warburg 93 136 182 327 30 91 155 327 * 91 155 327
Pincus-International
Equity Portfolio
------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus-Small 91 130 172 308 28 85 145 308 * 85 145 308
Company Growth Portfolio
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The Contracts sold under this prospectus do not permit annuitizations during
the first two Contract years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that a Contract
Owner will bear directly or indirectly when investing in the Contract. The
expenses of the Variable Account as well as those of the underlying Mutual Funds
are reflected in the Example. For more and complete descriptions of the expenses
of the Variable Account, see "Variable Account Charges, Purchase Payments, and
Other Deductions." For more and complete information regarding expenses paid out
of the assets of the underlying Mutual Funds, see the underlying Mutual Funds'
prospectuses. Deduction for premium taxes may also apply but are not reflected
in the Example shown above (see "Premium Taxes").
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<PAGE> 13
SYNOPSIS
There are three types of Contracts. A Non-Qualified Contract may be
purchased; an Individual Retirement Annuity may also be purchased with
contributions rolled-over from Qualified Plans, Tax-Sheltered Annuities or IRAs;
and, a Tax Sheltered Annuity may be purchased with contributions rolled over
from or transferred from another Tax Sheltered Annuity Plan.
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts. However, if any part of the Contract Value of such
Contracts is surrendered, the Company will, with certain exceptions, deduct from
the Contract Owner's Contract Value a Contingent Deferred Sales Charge 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 by 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 a Contract may
not exceed $1,000,000 without the prior consent of the Company (see "Allocation
of Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $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 (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 at
the time purchase payments are made, the premium tax deduction will be made from
the Contract prior to allocation to any underlying Mutual Fund option.
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the day the Contract
is received, it may be returned to the Home Office of the Company, at the
address shown on page 1 of this Prospectus. When the Contract is received by the
Company, the Company will void the Contract and refund the Contract Value in
full unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be return of purchase payments (see "Right to
Revoke").
11
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<PAGE> 14
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF UNITS
FUND BEGINNING UNIT ENDING UNIT PERCENT CHANGE AT THE END OF
VALUE VALUE IN UNIT VALUE THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
========================================================================================================
Dreyfus Stock Index 10.099271 10.046079 -0.53% 142,221 1994
Fund-Q ---------------------------------------------------------------------------------
10.000000 10.099271 0.99% 0 1993
========================================================================================================
Dreyfus Stock Index 10.099271 10.046079 -0.53% 276,005 1994
Fund-NQ ---------------------------------------------------------------------------------
10.000000 10.099271 0.99% 0 1993
========================================================================================================
The Dreyfus Socially 10.138790 10.146464 0.08% 56,245 1994
Responsible Growth ---------------------------------------------------------------------------------
Fund, Inc.-Q 10.000000 10.138790 1.39% 0 1993
========================================================================================================
The Dreyfus Socially 10.138790 10.146464 0.08% 106,285 1994
Responsible Growth ---------------------------------------------------------------------------------
Fund, Inc.-NQ 10.000000 10.138790 1.39% 0 1993
========================================================================================================
Fidelity VIP-Overseas 10.504149 10.536141 0.30% 1,746,850 1994
Portfolio-Q ---------------------------------------------------------------------------------
10.000000 10.504149 5.04% 0 1993
========================================================================================================
Fidelity VIP-Overseas 10.504149 10.536141 0.30% 2,782,899 1994
Portfolio-NQ ---------------------------------------------------------------------------------
10.000000 10.504149 5.04% 0 1993
========================================================================================================
Fidelity VIP-High 10.140663 9.844496 -2.92% 1,188,719 1994
Income Portfolio-Q ---------------------------------------------------------------------------------
10.000000 10.140663 1.41% 0 1993
========================================================================================================
Fidelity VIP-High 10.140663 9.844496 -2.92% 1,667,761 1994
Income Portfolio-NQ ---------------------------------------------------------------------------------
10.000000 10.140663 1.41% 0 1993
========================================================================================================
Fidelity VIP-Equity- 10.192462 10.760332 5.57% 2,320,419 1994
Income Portfolio-Q ---------------------------------------------------------------------------------
10.000000 10.192462 1.92% 0 1993
========================================================================================================
Fidelity VIP-Equity- 10.192462 10.760332 5.57% 3,315,450 1994
Income Portfolio-NQ ---------------------------------------------------------------------------------
10.000000 10.192462 1.92% 0 1993
========================================================================================================
Fidelity VIP-Growth 10.227729 10.082986 -1.42% 2,012,595 1994
Portfolio-Q ---------------------------------------------------------------------------------
10.000000 10.227729 2.28% 0 1993
========================================================================================================
Fidelity VIP-Growth 10.227729 10.082986 -1.42% 3,322,957 1994
Portfolio-NQ ---------------------------------------------------------------------------------
10.000000 10.227729 2.28% 0 1993
========================================================================================================
Fidelity VIP II-Asset 10.337032 9.571852 -7.40% 3,610,795 1994
Manager Portfolio-Q ---------------------------------------------------------------------------------
10.000000 10.337032 3.37% 0 1993
========================================================================================================
Fidelity VIP II-Asset 10.337032 9.571852 -7.40% 5,121,023 1994
Manager Portfolio-NQ ---------------------------------------------------------------------------------
10.000000 10.337032 3.37% 0 1993
========================================================================================================
</TABLE>
12
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<PAGE> 15
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Value for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF UNITS
FUND BEGINNING UNIT ENDING UNIT PERCENT CHANGE AT THE END OF
VALUE VALUE IN UNIT VALUE THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
=========================================================================================================
Nationwide SAT 10.278752 10.044095 -2.28% 147,498 1994
Capital Appreciation ----------------------------------------------------------------------------------
Fund-Q 10.000000 10.278752 2.79% 0 1993
=========================================================================================================
Nationwide SAT 10.278752 10.044095 -2.28% 182,857 1994
Capital Appreciation ----------------------------------------------------------------------------------
Fund-NQ 10.000000 10.278752 2.79% 0 1993
=========================================================================================================
Nationwide SAT Gov't 10.021251 9.562079 -4.58% 592,092 1994
Bond Fund-Q ----------------------------------------------------------------------------------
10.000000 10.021251 0.21% 0 1993
=========================================================================================================
Nationwide SAT Gov't 10.021251 9.562079 -4.58% 794,271 1994
Bond Fund-NQ ----------------------------------------------------------------------------------
10.000000 10.021251 0.21% 0 1993
=========================================================================================================
Nationwide SAT 10.011385 10.254838 2.43% 3,886,019 1994
Money Market Fund- ----------------------------------------------------------------------------------
Q* 10.000000 10.011385 0.11% 0 1993
=========================================================================================================
Nationwide SAT 10.011385 10.254838 2.43% 7,565,949 1994
Money Market Fund- ----------------------------------------------------------------------------------
NQ* 10.000000 10.011385 0.11% 0 1993
=========================================================================================================
Nationwide SAT Total 10.091256 10.057257 -0.34% 441,098 1994
Return Fund-Q ----------------------------------------------------------------------------------
10.000000 10.091256 0.91% 0 1993
=========================================================================================================
Nationwide SAT Total 10.091256 10.057257 -0.34% 657,733 1994
Return Fund-NQ ----------------------------------------------------------------------------------
10.000000 10.091256 0.91% 0 1993
=========================================================================================================
Neuberger & Berman 10.096549 9.458916 -6.32% 264,982 1994
Advisers Management- ----------------------------------------------------------------------------------
Growth Portfolio-Q 10.000000 10.096549 0.97% 0 1993
=========================================================================================================
Neuberger & Berman 10.096549 9.458916 -6.32% 616,908 1994
Advisers Management- ----------------------------------------------------------------------------------
Growth Portfolio-NQ 10.000000 10.096549 0.97% 0 1993
=========================================================================================================
Neuberger & Berman 10.015749 9.860649 -1.55% 1,228,030 1994
Advisers Management- ----------------------------------------------------------------------------------
Limited Maturity Bond 10.000000 10.015749 0.16% 0 1993
Portfolio-Q
=========================================================================================================
Neuberger & Berman 10.015749 9.860649 -1.55% 1,355,362 1994
Advisers Management- ----------------------------------------------------------------------------------
Limited Maturity Bond 10.000000 10.015749 0.16% 0 1993
Portfolio-NQ
=========================================================================================================
Neuberger & Berman 10.000000 10.013591 0.14% 33,992 1994
Advisers Management ----------------------------------------------------------------------------------
Trust-Partners
Portfolio-Q
=========================================================================================================
Neuberger & Berman 10.000000 10.013591 0.14% 89,689 1994
Advisers Management ----------------------------------------------------------------------------------
Trust-Partners
Portfolio-NQ
=========================================================================================================
</TABLE>
*The 7-day yield on the Money Market Fund as of December 30, 1994 was 5.65%.
13
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<PAGE> 16
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF UNITS
FUND BEGINNING UNIT ENDING UNIT PERCENT CHANGE AT THE END OF
VALUE VALUE IN UNIT VALUE THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
=============================================================================================================
Oppenheimer-Global 11.182167 10.394970 -7.04% 1,500,105 1994
Securities Fund-Q ----------------------------------------------------------------------------------
10.000000 11.182167 11.82% 0 1993
=============================================================================================================
Oppenheimer-Global 11.182167 10.394970 -7.04% 2,319,507 1994
Securities Fund-NQ ----------------------------------------------------------------------------------
10.000000 11.182167 11.82% 0 1993
=============================================================================================================
Oppenheimer-Multiple 10.167774 9.830640 -3.32% 567,718 1994
Strategies Fund-Q ----------------------------------------------------------------------------------
10.000000 10.167774 1.68% 0 1993
=============================================================================================================
Oppenheimer-Multiple 10.167774 9.830640 -3.32% 737,041 1994
Strategies Fund-NQ ----------------------------------------------------------------------------------
10.000000 10.167774 1.68% 0 1993
=============================================================================================================
Oppenheimer Bond 10.066342 9.733460 -3.31% 438,846 1994
Fund-Q ----------------------------------------------------------------------------------
10.000000 10.066342 0.66% 0 1993
=============================================================================================================
Oppenheimer Bond 10.066342 9.733460 -3.31% 538,413 1994
Fund-NQ ----------------------------------------------------------------------------------
10.000000 10.066342 0.66% 0 1993
=============================================================================================================
Strong Discovery Fund 10.796000 10.071698 -6.71% 521,530 1994
II-Q ----------------------------------------------------------------------------------
10.000000 10.796000 7.96% 0 1993
=============================================================================================================
Strong Discovery Fund 10.796000 10.071698 -6.71% 904,088 1994
II-NQ ----------------------------------------------------------------------------------
10.000000 10.796000 7.96% 0 1993
=============================================================================================================
Strong Special Fund II- 10.484543 10.710138 2.15% 1,448,992 1994
Q ----------------------------------------------------------------------------------
10.000000 10.484543 4.85% 0 1993
=============================================================================================================
Strong Special Fund II- 10.484543 10.710138 2.15% 2,121,641 1994
NQ ----------------------------------------------------------------------------------
10.000000 10.484543 4.85% 0 1993
=============================================================================================================
</TABLE>
14
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<PAGE> 17
CONDENSED FINANCIAL INFORMATION, CONTINUED
Accumulation Unit Values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
NUMBER OF UNITS
FUND BEGINNING UNIT ENDING UNIT PERCENT CHANGE AT THE END OF
VALUE VALUE IN UNIT VALUE THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
========================================================================================================
TCI Portfolios, Inc. 10.055760 9.975959 -0.79% 190,646 1994
TCI Balanced-Q ---------------------------------------------------------------------------------
10.000000 10.055760 0.56% 0 1993
========================================================================================================
TCI Portfolios, Inc. 10.055760 9.975959 -0.79% 353,974 1994
TCI Balanced-NQ ---------------------------------------------------------------------------------
10.000000 10.055760 0.56% 0 1993
========================================================================================================
TCI Portfolios, Inc. 10.155359 9.896469 -2.55% 581,271 1994
TCI Growth-Q ---------------------------------------------------------------------------------
10.000000 10.155359 1.55% 0 1993
========================================================================================================
TCI Portfolios, Inc. 10.155359 9.896469 -2.55% 984,162 1994
TCI Growth-NQ ---------------------------------------------------------------------------------
10.000000 10.155359 1.55% 0 1993
========================================================================================================
TCI Portfolios, Inc. 10.000000 9.388381 -6.12% 93,487 1994
TCI International-Q
========================================================================================================
TCI Portfolios, Inc. 10.000000 9.388381 -6.12% 227,593 1994
TCI International-NQ
========================================================================================================
Van Eck Worldwide 10.194477 9.919400 -2.70% 237,637 1994
Insurance Trust -
Worldwide Bond ---------------------------------------------------------------------------------
Fund-Q 10.000000 10.194477 1.94% 0 1993
========================================================================================================
Van Eck Worldwide 10.194477 9.919400 -2.70% 473,752 1994
Insurance Trust-
Worldwide Bond ---------------------------------------------------------------------------------
Fund-NQ 10.000000 10.194477 1.94% 0 1993
========================================================================================================
Van Eck Worldwide 11.147499 10.464922 -6.12% 416,949 1994
Insurance Trust-
Gold and Natural ---------------------------------------------------------------------------------
Resources Fund-Q 10.000000 11.147499 11.47% 0 1993
========================================================================================================
Van Eck Worldwide 11.147499 10.464922 -6.12% 771,280 1994
Insurance Trust-
Gold and Natural ---------------------------------------------------------------------------------
Resources Fund-NQ 10.000000 11.147499 11.47% 0 1993
========================================================================================================
</TABLE>
15
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<PAGE> 18
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 Offices 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 October 7, 1981,
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
designated by the Contract Owner. A separate Sub-Account is established within
the Variable Account for each of the underlying Mutual Fund options that may be
designated by the Contract Owner.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different Sub-Account
options. (See Appendix B Participating Funds 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 may also be available to registered
separate accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect Contract
Owners and variable annuity payees, including withdrawal of the Variable Account
from participation in the underlying Mutual Fund of Mutual Funds which are
involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to Purchase
Payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds
in accordance with instructions received from persons whose Contract Value is
measured by units in the Variable Account. However, if the Investment Company
Act of 1940 or any Regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote the shares of the underlying Mutual Funds in its
own right, it may elect to do so.
16
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<PAGE> 19
The person having the voting interest under a Contract shall be the
Contract Owner. The number of shares held in the Variable Account which is
attributable to each Contract Owner is determined by dividing the Contract
Owner's interest in the Variable Account by the net asset value of the
applicable share of the underlying Mutual Funds.
The number of shares held in the Variable Account which is attributable
to each Contract is determined by dividing the reserve for such Contract by the
net asset value of one share.
The number of shares which a person has the right to vote will be
determined as of the date to be chosen by the Company not more than 90 days
prior to the meeting of the underlying Mutual Fund and voting instructions will
be solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having the voting interest in the Variable Account will
receive periodic reports relating to the underlying Mutual Fund, proxy material
and a form with which to give such voting instructions with respect to the
proportion of the underlying Mutual Fund shares held in the Variable Account
corresponding to his or her interest in the Variable Account.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" that variable annuity payments
will not be affected by the death rates of persons receiving such payments or of
the general population by virtue of annuity rates incorporated in the Contract
which cannot be changed.
For assuming this mortality risk, the Company 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, the Contingent Deferred Sales Charge, referred to
below, when it is applicable, will be used to cover expenses relating to the
sale of the Contracts, including commissions paid to sales personnel, the costs
of preparation of sales literature and other promotional activity. The Company
attempts to recover its distribution costs relating to the sale of the Contracts
from the Contingent Deferred Sales Charge. Any shortfall will be made up from
the general account of the Company, which may indirectly include portions of the
Mortality and Expense Risk Charges, since the Company expects to generate a
profit 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 made 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 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.
The Contingent Deferred Sales Charge applies to Purchase Payments as
follows:
17
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<PAGE> 20
<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 Contract Owner 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, less any
Purchase Payments previously withdrawn that were subject to a CDSC or for
distributions required for the Contract to meet minimum distribution rules. 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.
A CDSC will not be assessed against the withdrawal of any: (1) Purchase
Payments which have been held under the Contract for at least 7 years; (2)
earnings attributable to Purchase Payments made to the Contract; (3) Death
Benefit payments made upon the death of the Annuitant prior to the Annuitization
Date; (4) amounts applied to an Annuity Payment Option after two years from the
Date of Issue; or (5) amounts transferred among the Sub-Accounts or from the
Fixed Account to the Variable Account or vice versa.
For a discussion of the withdrawals that are subject to a CDSC, see the
"Contingent Deferred Sales Charge" section above.
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The waiver of Contingent Deferred Sales Charge set forth in A through E
below shall NOT be available for 403(b) Tax Sheltered Annuity Contracts issued
on or after November 1, 1995, except in those state jurisdictions in which the
insurance regulatory authorities have not approved amendatory Contract language
making this change.
For 403(b) Tax Sheltered Annuity Contracts, the Company will waive the
Contingent Deferred Sales Charge when:
A. the Contract Owner experiences a case of hardship (as provided in
Code Section 403(b) and as defined for purposes of Code Section
401(k));
B. the Contract Owner becomes disabled (within the meaning of Code
Section 72(m)(7));
C. the Contract Owner attains age 59-1/2 and has participated in the
Contract for at least 5 years, as determined from the Contract
Anniversary date;
D. the Contract Owner has participated in the Contract for at least 15
years as determined from the Contract Anniversary date;
E. the Contract Owner dies; or
F. the Contract Owner annuitizes after 2 years in the Contract.
For Non-Qualified Contracts the Company will waive the Contingent
Deferred Sales Charge when:
A. the Designated Annuitant dies; or
B. the Contract Owner annuitizes after 2 years in the Contract.
When a Contract described in this Prospectus is exchanged for another
Contract issued by the Company, of the type and class which the Company
determined is eligible for such exchange, the Company will waive the Contingent
Deferred Sales Charge on the first Contract.
18
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<PAGE> 21
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, and 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. To the best of the Company's present
knowledge, premium taxes currently imposed by certain jurisdictions range from
0% to 3.5%. This range is subject to change. The method used to recoup premium
tax expense will be determined by the Company at its sole discretion and in
compliance with applicable state law. The Company currently deducts such charges
from a Contract Owner's Contract Value either: (1) at the time the Contract is
surrendered, (2) at Annuitization, or (3) at such earlier date as the Company
may be subject to such taxes.
EXPENSES OF VARIABLE ACCOUNT
For 1994, the Variable Account incurred total expenses equal to 1.49% of
its average net assets, relating to the administrative, sales, mortality and
expense risk charges described above for all Contracts outstanding during that
year. Deductions from and expenses paid out of the assets of the underlying
Mutual Funds are described in each underlying Mutual Fund's prospectus.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of purchase each Contract Owner elects to have purchase
payments attributable to his participation in the Variable Account allocated
among one or more of the Sub-Accounts which consist of shares in the underlying
Mutual Funds. Shares of the respective underlying Mutual Funds specified by the
Contract Owner are purchased at net asset value for the respective
Sub-Account(s) and converted into Accumulation Units. At the time of purchase,
the Contract Owner designates the underlying Mutual Funds to which he desires to
have purchase payments allocated. Such election is subject to any minimum
purchase payment limitations which may be imposed by the underlying Mutual Funds
designated. The Contract Owner may change the election as to allocation of
purchase payments or may elect to exchange amounts among the Sub-Account options
pursuant to such terms and conditions applicable to such transactions as may be
imposed by each of the underlying Mutual Funds, in addition to those set forth
in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the 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. All
Individual Retirement Annuity refunds will be a return of purchase payments. In
order to revoke the Contract, it must be mailed or delivered to the Home Office
of the Company at the mailing address shown on page 1 of this Prospectus.
Mailing or delivery must occur on or before 10 days after receipt of the
Contract for revocation to be effective. In order to revoke the Contract, if it
has not been received, written notice must be mailed or delivered to the Home
Office of the Company at the mailing address shown on page 1 of this Prospectus.
The liability of the Variable Account under this provision is limited to
the Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Company currently allows transfers up to 100% of the Variable Account
Contract Value from the Variable Account to the Fixed Account. However, the
Company reserves the right to restrict transfers from the Variable Account to
the Fixed Account to 25% of 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. The Interest Rate
Guarantee Period expires on the final day of a calendar quarter during which the
one year anniversary of the allocation of the Fixed Account occurs. The Contract
Owner's value in each sub-account will be determined as of the date the transfer
request is received in the Home Office in good order. The Company reserves the
right to refuse transfers or Purchase Payments into the Fixed Account if the
Fixed Account is greater than or equal to 30% of the Contract Value.
19
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<PAGE> 22
The Contract Owner 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 from the Fixed Account
to the Variable Account will be determined by the Company, at its sole
discretion, but will not be less than 10% of the total value of the portion of
the Fixed Account that is maturing and will be declared upon the expiration date
of the then current Interest Rate Guarantee Period. The specific percentage will
be declared upon the expiration date of the guaranteed period. Transfers from
the Fixed Account must be made within 45 days after the expiration date of the
guarantee period. Contract Owners who have entered into a Dollar Cost Averaging
agreement with the Company (see "Dollar Cost Averaging") may transfer from the
Fixed Account to the Variable Account under the terms of that agreement.
Transfers from the Fixed Account may not be made prior to the first
Contract Anniversary. Transfers must also be made prior to the Annuitization
Date.
Transfers among the sub-accounts may be made either in writing or, in
states allowing such transfers, by telephone. This telephone exchange privilege
is made available to Contract Owners automatically without their having to elect
the privilege. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include
any or all of the following, or such other procedures as the Company may, from
time to time, deem reasonable: requesting identifying information, such as name,
contract number, Social Security number, and/or personal identification number;
tape recording all telephone transactions; and providing written confirmation
thereof to both the Contract Owner and any agent of record, at the last address
of record. The Company will not be liable for following instructions
communicated by telephone which it reasonably believes to be genuine. Any losses
incurred pursuant to actions taken by the Company in reliance on telephone
instructions reasonably believed to be genuine shall be borne by the Contract
Owner. The Company may withdraw the telephone exchange privilege upon 30 days'
written notice to Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign the Contract at any time
during the lifetime of the Annuitant prior to the Annuitization Date. Such
assignment will take effect upon receipt and recording by the Company at its
Home Office of a written notice thereof executed by the Contract Owner. The
Company assumes no responsibility for the validity or tax consequences of any
assignment. The Company shall not be liable as to any payment or other
settlement made by the Company before recording of the assignment.
Any portion of Contract Value which is pledged or assigned shall be
treated as a distribution and shall be included in gross income to the extent
that the cash value exceeds the investment in the Contract for the taxable year
in which assigned or pledged. In addition, any Contract Values assigned may,
under certain conditions, be subject to a tax penalty equal to 10% of the amount
which is included in gross income. All rights in this Contract are personal to
the Contract Owner and may not be assigned without written consent of the
Company. Individual Retirement Annuities, Individual Retirement Accounts and Tax
Sheltered Annuities are not eligible for assignment.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Tax Sheltered Annuity
Contract may receive a loan from the Contract Value subject to the terms of the
Contract, the Plan, and the Internal Revenue Code ("Code"), which impose
restrictions on loans.
Loans from Tax Sheltered Annuities are available beginning 30 days after
the Date of Issue. The Contract Owner may borrow a minimum of $1,000. In
non-ERISA plans, for Contract Values up to $20,000, the maximum loan balance
which may be outstanding at any time is 80% of the Contract Value, but not more
than $10,000. If the Contract Value is $20,000 or more, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. For ERISA plans, the maximum loan balance which may be outstanding
at any time is 50% of the Contract Value, but not more than $50,000. The $50,000
limit will be reduced by the highest loan balances owed during the prior
one-year period. Additional loans are subject to the contract minimum amount.
The aggregate of all loans may not exceed the Contract Value limitations stated
above.
For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value. For loans from Qualified Contracts and other Tax
Sheltered Annuities, the Company reserves the right to limit a loan to 50% of
the Contract Value subject to the acceptance by the Contract Owner of the
Company's loan
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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 Internal Revenue Code.
If a loan payment is not made when due, interest will continue to accrue.
The defaulted payment plus accrued interest will be deducted from any future
distribution under the Contract and paid to the Company. Any loan payment which
is not made when due, plus interest will be treated as a distribution, as
permitted by law, may be taxable to the borrower, and may be subject to the
early withdrawal tax penalty.
Loans may also be limited or controlled by the provisions of the
employer's plan.
Loan repayments must be identified as such or else they will be treated
as purchase payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures of the loan in the event of a change in the laws or regulations
relating to the treatment of loans. The Company also reserves the right to
assess a loan processing fee. Individual Retirement Annuities and Non-Qualified
Contracts are not eligible for loans.
CONTINGENT OWNER AND BENEFICIARY PROVISIONS
The Contingent Owner is the person or persons who may receive certain
benefits under the Contract in the event the Contract Owner dies before the
Annuitization Date. If more than one Contingent Owner survives the Contract
Owner, each will share equally unless otherwise specified in the Contingent
Owner designation. If a Contingent Owner is not named or predeceases the
Contract Owner, all rights and interest of the Contingent Owner will vest in the
Contract Owner's estate. Subject to the terms of any existing assignment, the
Contract Owner may change the Contingent Owner from time to time prior to the
Annuitization Date, by written notice to the Company. The change, upon receipt
and recording by the Company at its Home Office, will take effect as of the time
the written notice was signed, whether or not the Contract Owner 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.
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
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interest of the Contingent Beneficiary will vest with the Contract Owner or the
Contract Owner's estate. Subject to the terms of any existing assignment, the
Contract Owner may change the Beneficiary or Contingent Beneficiary from time to
time during the lifetime of the Annuitant, 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 Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF OR HERSELF AS OWNER,
THE PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT. If a Joint Owner is named,
the Joint Owner will possess an undivided interest in the Contract. Prior to the
Annuitization Date, a surviving Joint Owner shall retain sole rights in the
Contract upon the other Joint Owner's death. Unless otherwise provided, when
Joint Owner(s) are named, the exercise of any ownership right in the Contract
(including the right to surrender or partially surrender the Contract, to change
the Contract Owner, the Contingent Owner, the Annuitant, the Contingent
Annuitant, 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 both Contract Owners.
Joint Owners must be spouses at the time joint ownership is requested.
If a Contract Owner dies prior to the Annuitization Date and the Contract
Owner and the Annuitant are not the same person, Contract ownership will be
determined in accordance with the "Death of Contract Owner" provision. If the
Annuitant (regardless of whether the Annuitant is also the Contract Owner) dies
prior to the Annuitization Date, ownership will be determined in accordance with
the "Death of Annuitant Prior to the Annuitization Date" provision. On and after
the Annuitization Date, the Contract Owner is the Annuitant.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner. Such change may be subject to state and federal gift taxes, and
may also result in current federal income taxation (See "Taxes"). Any change of
Contract Owner will automatically revoke any prior Contract Owner designation.
Any request for change of Contract Owner must be (1) made by proper written
application, (2) received and recorded by the Company at its Home Office, and
(3) may include a signature guarantee as specified in the "Surrender" provision.
The change will become effective as of the date the written request is signed. A
new choice of Contract Owner will not apply to any payment made or action taken
by the Company prior to the time it was received and recorded.
The Contract Owner may request a change in the Annuitant or Contingent
Annuitant before the Annuitization Date. Such a request must be made in writing
on a form acceptable to the Company and must be signed by the Contract Owner and
the person to be named as Annuitant or Contingent Annuitant. Any such change is
subject to underwriting and approval by the Company.
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 in view of the purposes of the
Contract, the Company may substitute shares of another underlying Mutual Fund
for underlying Mutual Fund shares already purchased or to be purchased in the
future by Purchase Payments under the Contract. No substitution of securities in
the Variable Account may take place without prior approval of the Securities and
Exchange Commission, and under such requirements as it may impose.
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to Nationwide Life Insurance
Company by writing P.O. Box 16609, Columbus, Ohio 43216-6609, or calling
1-800-848-6331, TDD 1-800-238-3035.
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT
At the Annuitization Date the Variable Account Contract Value is applied
to the Annuity Payment Option elected in accordance with the Annuity Table in
the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the
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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").
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.
ANNUITIZATION DATE
The Contract Owner selects an Annuitization Date 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. In the
event the Contract is issued subject to the terms of a Tax Sheltered Annuity
Plan, Annuitization may occur during the first two years subject to approval by
the Company.
CHANGE IN ANNUITIZATION DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuitization Date. The date to which such a change may be made shall be the
first day of a calendar month.
If the Contract Owner requests in writing (see "Ownership Provisions"),
and the Company approves the request, the 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
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment Options.
ANNUITY PAYMENT 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.
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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 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 Contract Owner may request an alternative non-guaranteed option by giving
notice in writing prior to annuitization. If such a request is approved by the
Company, it will be permitted under the Contract.
If the Owner fails to elect an Annuity Payment Option, the Contract Value
will continue to accumulate. Individual Retirement Annuities are subject to the
minimum distribution requirements set forth in the Internal Revenue Code.
DEATH OF CONTRACT OWNER
If the Contract Owner and the Annuitant are not the same person and the
Contract Owner dies prior to the Annuitization Date, then the Joint Owner, if
any, becomes the new Contract Owner. If no Joint Owner is named (or if the Joint
Owner predeceases the Contract Owner), then the Contingent Owner becomes the new
Contract Owner. If no Contingent Owner is named (or if the Contingent Owner
predeceases the Contract Owner), then the Contract Owner's estate becomes the
Contract Owner. Unless the new Contract Owner is the prior Contract Owner's
spouse, the entire interest in the Contract, less applicable deductions (which
may include a Contingent Deferred Sales Charge), must be distributed within five
years of the prior Contract Owner's death. The new Contract Owner may elect to
receive distribution in the form of a life annuity or an annuity for a period
not exceeding his or her life expectancy. Such annuity must begin within one
year following the date of the prior Contract Owner's death. If the new Contract
Owner is the spouse of the prior Contract Owner, then the Contract may be
continued without any required Distribution.
If the Annuitant (regardless of whether the Annuitant is also the
Contract Owner) dies prior to the Annuitization Date, a Death Benefit will be
payable in accordance with the "Death of Annuitant Prior to the Annuitization
Date" provision below, provided however, that all distributions made as a result
of the death of the Contract Owner shall be made within the time limits set
forth above.
Individual Retirement Annuities or Tax Sheltered Annuities will be
subject to specific rules set forth in the Plan, Contract, or Internal Revenue
Code concerning distributions upon the death of the Contract Owner.
DEATH OF ANNUITANT PRIOR TO THE ANNUITIZATION DATE
If the Annuitant dies prior to the Annuitization Date, a Death Benefit is
payable unless the Contract Owner has also named a Contingent Annuitant, in
which case the Death Benefit is payable upon the death of the last survivor of
the Annuitant and Contingent Annuitant. The 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 Contract Owner or the
Contract Owner's estate.
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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
both (1) due proof of the Annuitant's death and (2) an election for either (a) a
single sum payment or (b) an Annuity Payment Option (3) and 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.
If the Contract Owner is not a natural person, the death of the Annuitant
(or a change of the Annuitant) will be treated like a death of the Contract
Owner and will result in a distribution pursuant to the first paragraph in the
"Death of Contract Owner" provision, regardless of whether a Contingent
Annuitant has also been named. If the Contract Owner is not an individual, the
death of the Annuitant (or change in the Annuitant); regardless of whether a
Contingent Annuitant has been named, will be treated like a death of the
Contract Owner for purposes of the "Death of Contract Owner" provision, and will
result in a distribution of either:
(a) the Death Benefit described above (if there is no Contingent
Annuitant and Annuitant has died), or in all other cases
(b) a distribution to the Contract Owner if the Annuitant has been
changed, provided that any such distribution must be made within the
time period specified in the "Death of Contract Owner" provision.
If a Contract Owner/Annuitant has died prior to the first day of the
calendar month following his or her 86th birthday, and
1. the Contract Value is less than the Death Benefit as defined above,
and
2. the Beneficiary is entitled to continue the Contract indefinitely (in
the case of a beneficiary-spouse) or for any period of time
consistent with Section 72 of the Internal Revenue Code (in the case
of non-spousal beneficiaries), then the following option will be
provided:
At the direction of the Beneficiary, and in lieu of distribution of
the Death Benefit, the Company will credit the Contract with the
difference between the Contract Value and the Death Benefit. Any such
credit shall be made among the various sub-accounts and the Fixed
Account in the same proportional allocation existing at the time of
the Contract Owner/Annuitant's death.
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.
REQUIRED DISTRIBUTION FOR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Tax Sheltered Annuity
Contract will be distributed in a manner consistent with the Minimum
Distribution and Incidental Benefit (MDIB) provisions of Section 401(a)(9) of
the Internal Revenue Code and regulations thereunder, as applicable, and will be
paid, notwithstanding anything else contained herein, to the Contract
Owner/Annuitant under the Annuity Payments Option selected, over a period not
exceeding:
A. the life of the Contract Owner/Annuitant or the lives of the Contract
Owner/Annuitant and the Contract Owner/Annuitant's designated
Beneficiary; or
B. a period not extending beyond the life expectancy of the Contract
Owner/Annuitant or the life expectancy of the Contract
Owner/Annuitant and the Contract Owner/Annuitant's designated
Beneficiary.
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If the Contract 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 Contract Owner/Annuitant attains age 70-1/2 (the
required beginning date). In the case of a governmental plan or church plan (as
defined in Code Section 89(I)(4)), 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 Contract Owner dies prior to the commencement of his or her
distribution, the interest in the Tax Sheltered Annuity must be distributed by
December 31 of the calendar year in which the fifth anniversary of his or her
death occurs unless:
(a) In the case of a Tax Sheltered Annuity, the Contract Owner names his or her
surviving spouse as the Beneficiary and such spouse elects to:
(i) treat the annuity as a Tax Sheltered Annuity established for his or
her benefit; or
(ii) receive distribution of the account in nearly equal payments over his
or her life (or a period not exceeding his or her life expectancy)
and commencing not later than December 31 of the year in which the
Contract Owner would have attained age 70-1/2; or
(b) In the case of a Tax Sheltered Annuity, the Contract 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 Contract
Owner dies.
If the Contract Owner dies after distribution has commenced, distribution
must continue at least as rapidly as under the schedule being used prior to his
or her death.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Contract Owner/Annuitant by the life expectancy of the Contract Owner/Annuitant,
or the joint and last survivor expectancy of the Contract Owner/Annuitant and
the Contract Owner/Annuitant's Designated Beneficiary (whichever is applicable
under the applicable Minimum Distribution or MDIB provisions). Life expectancy
and joint and last survivor expectancy are computed by the use of return
multiples contained in Section 1.72-9 of the Treasury Regulations.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the
Contract Owner attains age 70-1/2. Distribution may be accepted in a lump sum or
in nearly equal payments over: (a) the Contract Owner's life or the lives of the
Contract Owner and the Contract Owner's spouse or designated beneficiary, or (b)
a period not extending beyond the Contract Owner and the Contract Owner's spouse
or designated beneficiary.
If the Contract Owner dies prior to the commencement of the distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the calendar year in which the fifth anniversary of the Contract
Owner's death occurs unless:
(a) The Contract Owner has named his or her surviving spouse as the
designated beneficiary and such spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity established
for his or her benefit; or
(ii) receive distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Contract Owner would have attained age 70-1/2; or
(b) The Contract Owner has named a beneficiary other than his or her
surviving spouse and such beneficiary elects to receive a distribution of
the account in nearly equal payments over his or her life (or a period
not exceeding his or her life expectancy) commencing not later than
December 31 of the year following the year in which the Contract Owner
dies.
If the Contract Owner dies after distribution has commenced, the
distribution must continue at least as rapidly as under the schedule being used
prior to the Contract Owner's death, except to the extent that a
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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 Contract Owner are less than those
mentioned above, penalty tax of 50% is levied on the amount that should have
been distributed for that year.
A pro-rata portion of all distributions will be included in the gross
income of the person receiving the distribution and taxed at ordinary income tax
rates. The portion of the distribution which is taxable is based on the ratio
between the amount by which non-deductible purchase payments exceed prior
non-taxable distributions and total account balances at the time of the
distribution. The Contract Owner must annually report the amount of
non-deductible purchase payments, the amount of any distribution, the amount by
which non-deductible purchase payments for all years exceed non-taxable
distributions for all years, and the total balance of all Individual Retirement
Annuities.
Individual Retirement Annuity distributions will not receive the benefit
of the tax treatment of a lump sum distribution from a Qualified Plan. If the
Contract Owner dies prior to the time distribution of the Contract Owner's
interest in the annuity is completed, the balance will also be included in the
Contract Owner's gross estate.
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 Internal Revenue
Code, and the amount of the tax on the generation-skipping transfer resulting
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 Internal Revenue Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING - The Contract Owner may direct the automatic
reallocation of contract values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the three
month period falls on a Saturday, Sunday, recognized holiday or any other day
when the New York Stock Exchange is closed, the Asset Rebalancing exchange will
occur on the last business day before that day. Asset Rebalancing will not
affect future allocations of purchase payments. An Asset Rebalancing request
must be in writing on a form provided by the Company. The Contract Owner may
want to contact a financial adviser in order to discuss a specific contract.
Contracts issued to a Tax Sheltered Annuity Plan as defined by the
Internal Revenue Code may have superseding plan restrictions with regard to
frequency of fund exchanges and underlying Mutual Fund options. The Contract
Owner may want to contact a financial adviser in order to discuss a specific
contract.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days' written notice to the Contract Owners, however, any such
discontinuation would not affect Asset Rebalancing programs which have already
commenced. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer 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 the Contract Owner to utilize Dollar Cost
Averaging, a long-term investment program which provides for regular, level
investments over time. The Company makes no guarantees that Dollar Cost
Averaging will result in a profit or protect against loss 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 completed by the Contract Owner in order to begin transfers.
Once elected, transfers from the Money Market Fund Sub-Account,
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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 Contract Owner instructs the Company in writing to
cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice to Contract Owners however, any such
discontinuation would not affect Dollar Cost Averaging programs already
commenced. The Company also reserves the right to assess a processing fee for
this service.
SYSTEMATIC WITHDRAWALS- The Contract Owner 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 the
Contract Owner has an interest, and the Fixed Account. A Contingent Deferred
Sales Charge may apply to Systematic Withdrawals in accordance with the
considerations set forth in the "Contingent Deferred Sales Charge" and
"Withdrawals Without Charge" sections. Each Systematic Withdrawal is subject to
federal income taxes on the taxable portion. In addition, a 10% federal penalty
tax may be assessed on Systematic Withdrawals if the Contract Owner is under age
59-1/2. If directed by the Contract Owner, the Company will withhold federal
income taxes from each Systematic Withdrawal. A Systematic Withdrawal program
will terminate automatically at the end of each Contract Year and may be
reinstated only pursuant to a new request. The Contract Owner may discontinue
Systematic Withdrawals at any time by notifying the Company in writing.
If the Contract Owner withdraws amounts pursuant to a Systematic
Withdrawal program, then the Contract Owner may withdraw each Contract Year
without a CDSC an amount up to the greater of (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 Contract Owner's age, as
shown in the following table:
Contract Owner's Percentage of
Age Contract Value
Under 59-1/2 5%
59-1/2 to 70-1/2 7%
70-1/2 to 75 9%
75 and Over 13%
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 "Withdrawals Without
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 Contract Owner'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. (In the case of Joint Owners, the older Owner's
age will be used.) The Contract Owner may elect to take such CDSC-free amounts
only once each Contract Year. Furthermore, 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 Contract Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give Nationwide prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional purchase payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a dollar cost averaging program) or salary
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reduction arrangement, the Contract Owner may receive confirmation of such
transactions in their quarterly statements. The Contract Owner should review the
information in these statements carefully. All errors or corrections must be
reported to the Company immediately to assure proper crediting to the Owner's
Contract. The Company will assume all transactions are accurate unless the
Contract Owner notifies the Company otherwise within 30 days after receipt of
the statement. The Company will also send to Contract Owners each year an annual
report and a semi-annual report containing financial statements for the Variable
Account, as of December 31 and June 30, respectively.
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 Contract Owner, 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 a Contract 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, and the
Company may retain the purchase payment for up to 5 business days while
attempting to complete an incomplete Application. If the Application cannot be
made complete within 5 days, the prospective purchaser will be informed of the
reasons for the delay and the purchase payment will be returned immediately
unless the prospective purchaser specifically consents to the Company retaining
the purchase payment until the Application is made complete. Thereafter, the
purchase payment will be priced within 2 business days.
Purchase Payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each Sub-Account
was arbitrarily set initially at $10 when the underlying Mutual Fund shares in
that Sub-Account were available for purchase. The value for any subsequent
Valuation Period is determined by multiplying the Accumulation Unit value for
each Sub-Account for the immediately preceding Valuation Period by the Net
Investment Factor for the Sub-Account during the subsequent Valuation Period.
The value of an Accumulation Unit may increase or decrease from Valuation Period
to Valuation Period. The number of Accumulation Units will not change as a
result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain distributions
made by the underlying Mutual Fund held in the Sub-Account if the
"ex-dividend" date occurs during the current Valuation Period.
(b) is the net asset value per share of the underlying Mutual Fund held in
the Sub-Account determined at the end of the immediately preceding
Valuation Period.
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge deducted from the Variable Account. Such
factor is equal to an annual rate of 1.40% 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 Separate Account Trust - Money
Market Fund), the Net Investment Factor allows for the monthly reinvestment of
these daily dividends.
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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. In the event part or all
of the Contract Value is surrendered or charges or deductions are made against
the Contract Value, an appropriate number of Accumulation Units from the
Variable Account and an appropriate amount from the Fixed Account will be
deducted in the same proportion that the Contract Owner's interest in the
Variable Account and the Fixed Account bears to the total Contract Value.
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 by the Contract Owner deemed by the Company to be in good
order, allow the Contract Owner to surrender a portion or all of the Contract
Value. "Proper Written Application" means that the Contract Owner must request
the surrender in writing and include the Contract. The Company may require that
the 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 Contract Owner has an interest, and the Fixed Account. The number
of Accumulation Units surrendered from each Sub-Account and the amount
surrendered from the Fixed Account will be in the same proportion that the
Contract Owner's interest in the Sub-Accounts and Fixed Account bears to the
total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's Home Office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be more or less than the total of
Purchase Payments made by a Contract Owner, depending on the market value of the
underlying Mutual Fund shares.
SURRENDERS UNDER A TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Internal Revenue Code, may be
executed only -
1. when the Contract Owner attains age 59-1/2, separates from service,
dies, or becomes disabled (within the meaning of Code Section
72(m)(7)); or
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2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case of
hardship may not include any income attributable to salary reduction
contributions.
B. The surrender limitations described in A. above for Tax Sheltered
Annuities apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to salary
reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988 in
such Custodial Accounts may be withdrawn in the case of hardship).
C. Any distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties and/or retroactive
disqualification of a Qualified Contract or Tax Sheltered Annuity.
A premature distribution may not be eligible for rollover treatment. To
assist in preventing disqualification in the event of a ten-day free look, the
Company will agree to transfer the proceeds to another contract which meets the
requirements of Section 403(b) of the Internal Revenue Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Section
403(b)(11) and Revenue Ruling 90-24. Such restrictions are subject to
legislative change and/or reinterpretation from time to time.
The contract surrender provisions may also be modified pursuant to the
plan terms and Internal Revenue Code tax provisions when the contract is issued
to fund a Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF
A PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts. Contract Owners should
consult their financial or tax consultants to discuss in detail their particular
tax situation and the use of the Contracts.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth different rules for annuities purchased as Non-Qualified
Contracts and annuities which are purchased as Individual Retirement Annuities.
Non-Qualified Contracts and Individual Retirement Annuities are discussed
separately below.
The Tax Reform Act of 1986 and subsequent legislation changed some of the
rules regarding the tax treatment of distributions from Tax Sheltered Annuity
Plans and annuities purchased by Tax Sheltered Annuity Plans. You should consult
your financial consultant or legal or tax advisor to discuss in detail your
particular tax situation and the use of the Contracts.
Generally, the amount of any payment of items of interest to a
nonresident alien of the United 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.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are
taxable to the Contract Owner to the extent that the cash value of the Contract
exceeds the Contract Owner's investment at the time of the Distribution.
Distributions, for this purpose, include partial surrenders, dividends, loans,
or any portion of the
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Contract which is assigned or pledged; or for Contracts issued after April 22,
1987, any portion of the Contract transferred by gift. For these purposes, a
transfer by gift may occur upon Annuitization if the Contract Owner and the
Annuitant are not the same individual. In determining the taxable amount of a
Distribution, all annuity contracts issued after October 21, 1988, by the same
company to the same contract owner during any 12 month period, will be treated
as one annuity contract. (Additional limitations on the use of multiple
contracts may be imposed by Treasury regulations). Distributions prior to the
Annuitization Date with respect to that portion of the Contract invested prior
to August 14, 1982, are treated first as a recovery of the investment in the
Contract as of that date. A Distribution in excess of the amount of the
investment in the Contract as of August 14, 1982, will be treated as taxable
income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for immediate annuities and certain Contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium Contract on which payments begin within one year of purchase.
Code Section 72 also provides for a penalty, equal to 10% of any
Distribution which is includable in gross income, if such Distribution is made
prior to attaining age 59-1/2 or disability of the Contract Owner. The penalty
does not apply if the Distribution is one of a series of substantially equal
periodic payments made over the life or life expectancy (or joint lives or life
expectancies) of the Annuitant (and the Annuitant's Beneficiary), or for the
purchase of an immediate annuity, or is allocable to an investment in the
Contract before August 14, 1982. A Contract Owner wishing to begin taking
Distributions to which the 10% tax penalty does not apply should forward a
written request to the Company. Upon receipt of a written request from the
Contract Owner, the Company will inform the Contract Owner of the procedures
pursuant to Company policy and subject to limitations of the Contract including
but not limited to first year withdrawals. If the Annuitant selects an annuity
for life or life expectancy and changes the method of payment before the
expiration of 5 years and the attainment of age 59-1/2, the early withdrawal
penalty will apply. The penalty will be equal to that which would have been
imposed had no exception applied from the outset, and the Annuitant will also
pay interest on the amount of the penalty from the date it would have originally
applied until it is actually paid.
In order to qualify as an annuity Contract under Section 72 of the Code,
the Contract must provide for Distribution to be made upon the death of the
Contract Owner. In such case, the Contingent Owner or other named recipient must
receive the Distribution within 5 years of the Owner's death. However, the
recipient may elect for payments to be made over their life or life expectancy
if such payments begin within one year from the death of the Contract Owner. If
the Contingent Owner or other named recipient is the surviving spouse, such
spouse may be treated as the Contract Owner and the Contract may be continued
throughout the life of the surviving spouse. In the event the Contract Owner
dies on or after the Annuitization Date and before the entire interest has been
distributed, the remaining portion must be distributed at least as rapidly as
under the method of Distribution being used as of the date of the Contract
Owner's death (see "Required Distribution For Tax Sheltered Annuities"). If the
Contract Owner is not an individual, the death of the Annuitant (or a change in
the Annuitant) will result in a distribution pursuant to these rules, regardless
of whether a Contingent Annuitant has been named.
The Company is required to withhold tax from certain Distributions to the
extent that such Distribution would constitute income to the Contract Owner. The
Contract Owner is entitled to elect not to have federal income tax withheld from
any such Distribution, but may be subject to penalties in the event insufficient
federal income tax is withheld during a calendar year.
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the
Internal Revenue Code, and the amount of the tax on the generation-skipping
transfer resulting from such direct skip. If applicable, such payment will be
reduced by any tax the Company is required to pay by Section 2603 of the
Internal Revenue Code. A direct skip may occur when property is transferred to
or a Death Benefit is paid to an individual two or more generations younger than
the Contract Owner.
INDIVIDUAL RETIREMENT ANNUITIES
The Contract may be purchased as an Individual Retirement Annuity under
Section 408(b) of the Code. Because the Contract's initial and subsequent
Purchase Payments are greater than the maximum contribution permitted an
Individual Retirement Annuity, or an Individual Retirement Annuity Contract may
be purchased
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only in connection with a "rollover" (including a direct trustee-to-trustee
transfer, where permitted). Specifically, an Individual Retirement Annuity
Contract may be purchased only in connection with a rollover of amounts from a
Qualified Plan, Tax-Sheltered Annuity or Individual Retirement Annuity. The
Contract Owner should seek competent advice as to the tax consequences
associated with the use of a Contract as an Individual Retirement Annuity.
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 Individual Retirement Account. Distributions which may
not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent) payments
made: a) over the life (or life expectancy) of the employee, b) the joint
lives (or joint life expectancies) of the employee and the employee's
designated beneficiary, or c) for a specified period of ten years or
more, or
2. a required minimum distribution.
Any distribution eligible for rollover will be subject to federal tax
withholding at a rate of twenty percent (20%) unless the distribution is
transferred directly to an appropriate plan as described above.
Individual Retirement Accounts and Individual Retirement Annuities may
not provide life insurance benefits. If the Death Benefit exceeds the greater of
the cash value of the Contract or the sum of all purchase payments (less any
surrenders), it is possible the Internal Revenue Service could determine that
the Individual Retirement Account or Individual Retirement Annuity did not
qualify for the desired tax treatment.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Internal Revenue Code ("Code") relating to diversification
standards for the investments underlying a variable annuity contract. The
regulations provide that a variable annuity contract which does not satisfy the
diversification standards will not be treated as an annuity contract, unless the
failure to satisfy the regulations was inadvertent, the failure is corrected,
and the Owner or the Company pays an amount to the Internal Revenue Service. The
amount will be based on the tax that would have been paid by the Owner if the
income, for the period the contract was not diversified, had been received by
the Owner. If the failure to diversify is not corrected in this manner, the
Owner of an annuity Contract will be deemed the owner of the underlying
securities and will be taxed on the earnings of his account. The Company
believes, under its interpretation of the Code and regulations thereunder, that
the investments underlying this Contract meet these diversification standards.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS AND TAX
SHELTERED ANNUITIES
The Contracts may be used with Individual Retirement Annuities,
Individual Retirement Accounts, Tax Sheltered Annuities and other plans
receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of purchase payments, and tax consequences on
distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
Recent changes to the Internal Revenue Code of 1986, as amended, permit
the rollover of most distributions from Qualified Plans to other Qualified
Plans, Individual Retirement Accounts, or Individual Retirement Annuities. Most
distributions from Tax Sheltered Annuities may be rolled into another Tax
Sheltered Annuity, an Individual Retirement Account, or an Individual Retirement
Annuity. Distributions which may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the
employee, b) the joint lives (or joint life expectancies) of the
employee and the employee's designated beneficiary, or c) for a
specified period of ten years or more, or
2. a required minimum distribution.
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Any distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the distribution is transferred directly
to an appropriate plan as described above. You should consult your financial
consultant to discuss in detail your particular tax situation and the use of the
Contracts.
ADVERTISING
A "yield" and "effective yield" may be advertised for the Nationwide
Separate Account Trust Money Market Fund sub-account. "Yield" is a measure of
the net dividend and interest income earned over a specific seven-day period
(which period will be stated in the advertisement) expressed as a percentage of
the offering price of the sub-account'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: 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 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
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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. The amount of the hypothetical initial investment
assumed affects performance because the Contract Maintenance Charge is a fixed
per Contract charge.
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. A CONTRACT OWNER'S CONTRACT VALUE AT REDEMPTION MAY BE MORE OR LESS
THAN ORIGINAL COST.
Below are quotations of standardized average annual total return and
non-standardized total return calculated as described above, for each of the
sub-accounts available within the Variable Account for which there is
significant investment history. These figures are based upon historical earnings
and are not necessarily representative of future results.
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
NON-STANDARDIZED TOTAL RETURN
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/94 12/31/94 To 12/31/94 Effective
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund -0.53% 6.65% 6.68% 09-29-89
---------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible 0.08% N/A 5.69% 10-06-93
Growth Fund
---------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Port. 5.57% 8.97% 9.40% 10-09-86
---------------------------------------------------------------------------------------------------
Fidelity VIP Growth Port. -1.42% 9.32% 10.99% 10-09-86
---------------------------------------------------------------------------------------------------
Fidelity VIP High Income Port. -2.92% 12.43% 9.33% 09-19-85
---------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Port. 0.30% 4.30% 5.52% 01-28-87
---------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Mgr. -7.40% 9.18% 8.66% 09-06-89
---------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund -2.28% N/A 3.79% 04-15-92
---------------------------------------------------------------------------------------------------
NSAT Govt. Bond Fund -4.58% 6.36% 7.83%* 11-08-82
---------------------------------------------------------------------------------------------------
NSAT Money Market Fund 2.43% 3.30% 4.64%* 11-10-81
---------------------------------------------------------------------------------------------------
NSAT Total Return Fund -0.34% 7.56% 11.30%* 11-08-82
---------------------------------------------------------------------------------------------------
NB Growth Portfolio -6.32% 4.29% 10.32%* 09-10-84
---------------------------------------------------------------------------------------------------
NB Limited Mat. Bond Port. -1.55% 4.71% 6.44%* 09-10-84
---------------------------------------------------------------------------------------------------
NB Partners Portfolio N/A N/A -4.30% 03-22-94
---------------------------------------------------------------------------------------------------
Oppenheimer Bond Fund -3.31% 6.91% 8.08% 04-30-85
---------------------------------------------------------------------------------------------------
Oppenheimer Global Securities -7.04% N/A 9.60% 11-12-90
Fund
---------------------------------------------------------------------------------------------------
Oppenheimer Mult. Strat. Fund -3.32% 5.88% 8.32% 02-09-87
---------------------------------------------------------------------------------------------------
Strong Discovery Fund II -6.71% N/A 7.50% 05-08-92
---------------------------------------------------------------------------------------------------
Strong Special Fund II 2.15% N/A 15.10% 05-08-92
---------------------------------------------------------------------------------------------------
TCI Balanced -0.79% N/A 5.42% 05-01-91
---------------------------------------------------------------------------------------------------
TCI Growth -2.55% 7.02% 8.94% 11-20-87
---------------------------------------------------------------------------------------------------
TCI International N/A N/A -8.68% 05-01-94
---------------------------------------------------------------------------------------------------
Van Eck Worldwide Bond -2.70% 4.34% 4.11% 09-01-89
---------------------------------------------------------------------------------------------------
Van Eck Gold & Nat. Res. -6.12% 3.19% 4.52% 09-01-89
---------------------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/94
35
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<PAGE> 38
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/94 12/31/94 To 12/31/94 Effective
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund -5.90% 6.37% 6.42% 09-29-89
--------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible -5.32% N/A 1.36% 10-06-93
Growth Fund
--------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 0.17% 8.71% 9.40% 10-09-86
Port.
--------------------------------------------------------------------------------------------------
Fidelity VIP Growth Port. -6.73% 9.07% 10.99% 10-09-86
--------------------------------------------------------------------------------------------------
Fidelity VIP High Income Port. -8.15% 12.21% 9.33% 9-19-85
--------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Port. -5.10% 4.00% 5.52% 1-28-87
--------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Mgr. -12.36% 8.93% 8.43% 9-06-89
--------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund -7.55% N/A 2.21% 4-15-92
--------------------------------------------------------------------------------------------------
NSAT Govt. Bond Fund -9.71% 6.08% 7.83%* 11-08-82
--------------------------------------------------------------------------------------------------
NSAT Money Market Fund -2.97% 2.99% 4.64%* 11-10-81
--------------------------------------------------------------------------------------------------
NSAT Total Return Fund -5.72% 7.29% 11.30%* 11-08-82
--------------------------------------------------------------------------------------------------
NB Growth Portfolio -11.34% 3.98% 10.32%* 9-10-84
--------------------------------------------------------------------------------------------------
NB Limited Mat. Bond Port. -6.86% 4.40% 6.44%* 9-10-84
--------------------------------------------------------------------------------------------------
NB Partners Portfolio N/A N/A -11.00% 03-22-94
--------------------------------------------------------------------------------------------------
Oppenheimer Bond Fund -8.51% 6.63% 8.08% 4-30-85
--------------------------------------------------------------------------------------------------
Oppenheimer Global Securities -12.02% N/A 9.10% 11-12-90
Fund
--------------------------------------------------------------------------------------------------
Oppenheimer Mult. Strat. Fund -8.52% 5.59% 8.32% 2-09-87
--------------------------------------------------------------------------------------------------
Strong Discovery Fund II -11.71% N/A 5.98% 5-08-92
--------------------------------------------------------------------------------------------------
Strong Special Fund II -3.25% N/A 13.74% 5-08-92
--------------------------------------------------------------------------------------------------
TCI Balanced -6.15% N/A 4.56% 5-01-91
--------------------------------------------------------------------------------------------------
TCI Growth -7.80% 6.74% 8.94% 11-20-87
--------------------------------------------------------------------------------------------------
TCI International N/A N/A -15.08% 05-01-94
--------------------------------------------------------------------------------------------------
Van Eck Worldwide Bond -7.94% 4.04% 3.83% 9-01-89
--------------------------------------------------------------------------------------------------
Van Eck Gold & Nat. Res. -11.16% 2.87% 4.24% 9-01-89
--------------------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/94.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company and the Variable
Account are parties or to which any of their property is the subject.
The General Distributor, Nationwide Financial Services, Inc., is not
engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History......................................... 1
Services................................................................ 1
Purchase of Securities Being Offered.................................... 1
Underwriters............................................................ 2
Calculations of Performance............................................. 2
Fund Performance Summary................................................ 3
Annuity Payments........................................................ 4
Financial Statements.................................................... 5
36
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<PAGE> 39
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 Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those assets
chosen by the Company and allowed by applicable law. Investment income from such
Fixed Account assets will be allocated by the Company between itself and the
Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts will
not be affected by the mortality experience (death rate) of persons receiving
such payments or of the general population. The Company assumes this "mortality
risk" by virtue of annuity rates incorporated in the Contract which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion of
the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year (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 CONTRACT OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF
3.0% FOR ANY GIVEN YEAR. New purchase payments deposited to the Contract which
are allocated to the Fixed Account may receive a different rate of interest than
money 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 Contract Owner effects a surrender, the amount available
from the Fixed Account will be reduced by any applicable Contingent Deferred
Sales Charge (see "Contingent Deferred Sales Charge").
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The maximum percentage that may be transferred will be determined by the Company
at its sole discretion, but will not be less than 10% of the total value of the
portion of the Fixed Account that is maturing and will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. The Interest
Rate Guarantee Period expires on the final day of a calendar quarter. Transfer
under this provision must be made within 45 days after the expiration date of
the guarantee period.
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<PAGE> 40
Owners who have entered into a Dollar Cost Averaging Agreement with the Company
(see "Dollar Cost Averaging") may transfer from the Fixed Account to the
Variable Account under the terms of that agreement.
Transfers among the sub-accounts may be made either in writing or, in
states allowing such transfers, by telephone. This telephone exchange privilege
is made available to Contract Owners automatically without their having to elect
the privilege. The Company will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may include
any or all of the following, or such other procedures as the Company may, from
time to time, deem reasonable: requesting identifying information, such as name,
contract number, Social Security number, and/or personal identification number;
tape recording all telephone transactions; and providing written confirmation
thereof to both the Contract Owner and any agent of record, at the last address
of record. Although failure to follow reasonable procedures may result in the
Company's liability for any losses due to unauthorized or fraudulent telephone
transfers, the Company will not be liable for following instructions
communicated by telephone which it reasonably believes to be genuine. The
Company may withdraw the telephone exchange privilege upon 30 days' written
notice to Contract Owners.
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.
38
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<PAGE> 41
APPENDIX B
PARTICIPATING FUNDS
Below are the investment objectives of each Mutual Fund available through the
Variable Account. THERE CAN BE NO ASSURANCE THAT THE FUNDS' INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
AMERICAN CAPITAL LIFE INVESTMENT TRUST
The American Capital Life Investment Trust is an open-end diversified
management investment company organized as a Massachusetts business trust on
June 3, 1985. The Trust offers shares in separate portfolios which are sold only
to insurance companies to provide funding for variable life insurance policies
and variable annuity contracts. Van Kampen American Capital Asset Management,
Inc. serves as the Portfolio's investment adviser.
-AMERICAN CAPITAL REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: To seek long-term capital growth by investing in a
portfolio of securities of companies operating in the real estate
industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities,
including common stocks and convertible securities, as well as
non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate
investment trusts. The Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of which may also be
Real Estate Securities. There can be no assurance that the Fund will
achieve its investment objective.
DREYFUS
-DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified,
management investment company. It was incorporated under Maryland law on
January 24, 1989, and commenced operations on September 29, 1989. Wells
Fargo Nikko Investment Advisors serves as the Fund's index fund manager.
Investment Objective: 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 is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
-THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company. It was incorporated under
Maryland law on July 20, 1992, and commenced operations on October 7,
1993. The Dreyfus Corporations serves as the Fund's investment advisor.
Tiffany Capital Advisors, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital
growth through equity investment in companies that, in the opinion of the
Fund's management, not only meet traditional investment standards but
which also show evidence that they conduct their business in a manner
that contributes to the enhancement of the quality of life in America.
Current income is secondary to the primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The fund is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 13, 1981. The funds
shares are purchased by insurance companies to fund benefits under variable
insurance and annuity policies. Fidelity Management & Research Company ("FMR")
is the fund's manager.
-EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
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<PAGE> 42
-GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and
established companies, and smaller, less well-known companies which may
have a narrow product line or whose securities are thinly traded. These
latter securities will often involve greater risk than may be found in
the ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and
investment in the Portfolio may involve greater risk than is inherent in
other underlying mutual funds. It is also important to point out that the
Portfolio makes most sense for you if you can afford to ride out changes
in the stock market, because it invests primarily in common stocks. FMR
also can make temporary investments in securities such as
investment-grade bonds, high-quality preferred stocks and short-term
notes, for defensive purposes when it believes market conditions warrant.
-HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, lower-rated, high-yielding,
fixed-income securities, while also considering growth of capital. The
Portfolio manager will seek high current income normally by investing the
Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as part
of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or
lower by Moody's; BB or lower by Standard & Poor's and may be deemed to
be of a speculative nature. The Portfolio may also purchase lower-quality
bonds such as those rated Ca3 by Moody's or C- by Standard & Poor's which
provide poor protection for payment of principal and interest (commonly
referred to as "junk bonds"). For a further discussion of lower-rated
securities, please see the "Risks of Lower-Rated Debt Securities" section
of the Portfolio's prospectus.
-OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Variable Insurance Products Fund II is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
March 21, 1988. The fund's shares are purchased by insurance companies to fund
benefits under variable insurance and annuity policies. Fidelity Management &
Research Company ("FMR") is the fund's manager.
-ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed income instruments.
- CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the fund manager believes to be undervalued due to an
overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The fund primarily invests in common stock
and securities convertible into common stock, but it has the flexibility
to invest in any type of security that may produce capital appreciation.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company created under the laws of Massachusetts. The Trust
offers shares in the four separate mutual funds listed below, each with its own
investment objectives. Currently, shares of the Trust will be sold only to life
insurance company separate accounts to fund the benefits under variable
insurance or annuity policies issued by life insurance companies. The assets of
the Trust are managed by Nationwide Financial Services, Inc. of
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<PAGE> 43
One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of
Nationwide Life Insurance Company.
-CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the long
term.
-GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with the preservation of capital. It seeks to achieve its
objective by investing in a diversified portfolio of securities issued or
backed by the U.S.
Government, its agencies or instrumentalities.
-MONEY MARKET FUND
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
-TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested capital
from a flexible combination of current return and capital gains through
investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST (FORMERLY "ADVISERS MANAGEMENT
TRUST")
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
-GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide investors
with above average potential for capital appreciation. To maximize this
potential, the investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and options to
purchase such stocks.
-LIMITED MATURITY BOND PORTFOLIO (FORMERLY "BOND PORTFOLIO")
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be available
without significant risk to principal. It seeks to achieve its objectives
through investments in a diversified portfolio of limited maturity debt
securities.
-PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This portfolio will seek to
achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed
to be undervalued based on fundamentals such as low price-to-earnings
ratios, consistent cash flows, and support from asset values. The
objective of the Partners Portfolio is not fundamental and can be changed
by the Trustees of the Trust without shareholder approval. Shareholders
will, however, receive at least 30 days prior notice thereof. There is no
assurance the investment objective will be met.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-end, diversified
management investment company organized as a Massachusetts business trust in
1984. Shares of the Funds are sold only to provide benefits
41
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<PAGE> 44
under variable life insurance policies and variable annuity contracts.
Oppenheimer Management Corporation is the Funds' investment adviser.
-OPPENHEIMER BOND FUND
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
the fund seeks capital growth when consistent with its primary objective.
-OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by investing
a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not
an objective. These securities may be considered to be speculative.
-OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG VARIABLE INSURANCE PRODUCTS FUNDS
The Strong Variable Insurance Products Funds are diversified, open-end
management investment companies, commonly called mutual funds. Strong Special
Fund II, Inc. ("Special Fund II") and Strong Discover Fund II, Inc. ("Discovery
Fund II") were separately incorporated in Wisconsin on December 28, 1990. Shares
of the Funds may only be purchased by the separate accounts of insurance
companies for the purpose of funding variable annuity and variable life
insurance contracts. Strong/Corneliuson Capital Management, Inc. is the
investment advisor for each of the Funds.
-DISCOVERY FUND II, INC.
Investment Objective: The Discovery Fund II's investment objective is to
seek maximum capital appreciation through investments in a diversified
portfolio of securities.
-SPECIAL FUND II, INC.
Investment Objective: The Special Fund II's investment objective is to
seek capital appreciation through investments in a diversified portfolio
of equity securities.
TCI PORTFOLIOS, INC., A MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS
TCI Portfolio, Inc. was organized as a Maryland corporation in 1987. It is a
diversified, open-end management investment company, designed only to provide
investment vehicles for variable annuity and variable life insurance products of
insurance companies. A member of the Twentieth Century Family of Mutual Funds,
TCI Portfolios is managed by Investors Research Corporation.
-TCI BALANCED
Investment Objective: Capital growth and current income. The fund will
seek to achieve its objective by maintaining approximately 60% of the
assets of the fund in common stocks (including securities convertible
into common stocks and other equity equivalents) that are considered by
management to have better-than-average prospects for appreciation and
approximately 40% in fixed income securities. A minimum of 25% of the
fixed income portion of the fund will be invested in fixed income senior
securities. There can be no assurance that the Fund will achieve its
investment objective.
-TCI GROWTH
Investment Objective: Capital growth. The fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion
of the fund's investment manager, better than average potential for
appreciation. The fund tries to stay fully invested in such securities,
regardless of the movement of stock prices generally.
The fund may invest in cash and cash equivalents temporarily or when it
is unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at
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<PAGE> 45
least three years continuous operation. There can be no assurance that
the Fund will achieve its investment objective.
-TCI INTERNATIONAL
Investment Objective: To seek capital growth. The fund will seek to
achieve its investment objective by investing primarily in securities of
foreign companies that meet certain fundamental and technical standards
of selection and, in the opinion of the investment manager, have
potential for appreciation. Under normal conditions, the fund will invest
at least 65% of its assets in common stocks or other equity securities of
issuers from at least three countries outside the United States.
Securities of United States issuers may be included in the portfolio from
time to time. Although the primary investment of the fund will be common
stocks (defined to include depository receipts for common stocks), the
fund may also invest in other types of securities consistent with the
fund's objective. When the manager believes that the total return
potential of other securities equals or exceeds the potential return of
common stocks, the fund may invest up to 35% of its assets in such other
securities. There can be no assurance that the fund will achieve its
objectives.
(Although the Statement of Additional Information concerning TCI
Portfolios, Inc. refers to redemptions of securities in kind under certain
conditions, all surrendering or redeeming Contract Owners will receive cash from
the Company.)
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY "VAN ECK INVESTMENT TRUST")
Van Eck Worldwide Insurance Trust is an open-end management investment
company organized as a "Business Trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Trust shares are offered only to separate
accounts of various insurance companies to fund the benefits of variable
insurance and annuity policies. The investment adviser and manager is Van Eck
Associates Corporation.
-WORLDWIDE BOND FUND (FORMERLY "GLOBAL BOND FUND")
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities.
-GOLD AND NATURAL RESOURCES FUND Investment Objective: To seek long-term
capital appreciation by investing in equity and debt securities of
companies engaged in the exploration, development, production and
distribution of gold and other natural resources, such as strategic and
other metals, minerals, forest products, oil, natural gas and coal.
Current income is not an objective.
WARBURG PINCUS TRUST
The Warburg Pincus Trust ("Trust") is an open-end management investment company
organized in March 1995 as a business trust under the laws of The Commonwealth
of Massachusetts. The Trust offers its shares to insurance companies for
allocation to separate accounts for the purpose of funding variable annuity and
variable life contracts. Trust portfolios are managed by Warburg, Pincus
Counsellors, Inc. ("Counsellors.")
- INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: To seek long-term capital appreciation by investing
primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that in the judgment of "Counsellors" have
their principal business activities and interests outside the United
States. The Portfolio will ordinarily invest substantially all of its
assets, but no less than 65% of its total assets, in common stocks,
warrants and securities convertible into or exchangeable for common
stocks. The Portfolio intends to invest principally in the securities of
financially strong companies with opportunities for growth within growing
international economies and markets through increased earning power and
improved utilization or recognition of assets.
- SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a portfolio
of equity securities of small-sized domestic companies. The Portfolio
ordinarily will invest at least 65% of its total assets in common stocks
or warrants of small-sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the time of
purchase) that represent attractive opportunities for capital growth. The
Portfolio intends to invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. The
Portfolio's investments will be made on the basis of their equity
characteristics and securities ratings generally will not be a factor in
the selection process.
43
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<PAGE> 46
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1995
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY THE NATIONWIDE VARIABLE ACCOUNT-II
OF NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the Prospectus
and should be read in conjunction with the Prospectus dated May 1, 1995. The
Prospectus may be obtained from Nationwide Life Insurance Company by writing
P.O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-243-6295, TDD
1-800-238-3035.
TABLE OF CONTENTS
PAGE
General Information and History.......................................... 1
Services................................................................. 1
Purchase of Securities Being Offered..................................... 1
Underwriters............................................................. 2
Calculations of Performance.............................................. 2
Fund Performance Summary................................................. 3
Annuity Payments......................................................... 4
Financial Statements..................................................... 5
GENERAL INFORMATION AND HISTORY
The Nationwide Variable Account-II is a separate investment account of
Nationwide Life Insurance Company ("Company"). The Nationwide Variable
Account-II was formerly known as the "Nationwide Spectrum Variable Account." The
Company is a member of the Nationwide Insurance Enterprise and all of the
Company's common stock is owned by Nationwide Corporation. Nationwide
Corporation is a holding company. All of its common stock is held by Nationwide
Mutual Insurance Company (95.3%) and Nationwide Mutual Fire Insurance Company
(4.7%).
SERVICES
The Company, which has responsibility for administration of the Contracts
and the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of the
underlying Mutual Funds.
The financial statements and schedule have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the authority
of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may 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. Contract Owners may at the maturity of an
Interest Rate Guarantee Period transfer a portion of the Contract Value of the
Fixed Account to the Variable Account. Such portion will be determined by the
Company at its sole discretion (but will not be less than 10% of the total value
of the portion of the Fixed Account that is maturing), and will be declared upon
the expiration date of the then current Interest Rate Guarantee Period. The
Interest Rate Guarantee Period expires on the final day of a calendar quarter.
Transfer under this provision must be made within 45 days after the termination
date of the guarantee period. Owners who have entered into a Dollar Cost
Averaging agreement with the Company may transfer from the Fixed Account under
the terms of that agreement.
1
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<PAGE> 47
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 Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43216, a wholly owned subsidiary of the Company. During the fiscal years
ended December 31, 1994, 1993 and 1992, no underwriting commissions were paid by
the Company to NFS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Nationwide Separate Account Trust
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 Contract Owner accounts, and dividing the net change in account
value by the value of the account at the beginning of the period to obtain a
base period return, and multiplying the base period return by (365/7) or (366/7)
in a leap year. As of December 30, 1994, the Nationwide Separate Account Trust
Money Market Fund sub-account's seven-day current unit value yield was 4.22%.
The Nationwide Separate Account Trust Money Market Fund sub-account's effective
yield is computed similarly but includes the effect of assumed compounding on an
annualized basis of the current unit value yield quotations of the Nationwide
Separate Account Trust Money Market Fund, and for the period ending December 30,
1994 was 4.30%.
The Nationwide Separate Account Trust 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 Separate Account Trust
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 a Contract Owner's investment in the Nationwide Separate Account Trust
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.
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
2
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<PAGE> 48
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.
A Contract Owner's account when redeemed may be more or less than original cost.
Below are quotations of standardized average annual total return and
nonstandardized total return calculated as described above, for each of the
sub-accounts available within the Variable Account.
FUND PERFORMANCE SUMMARY
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/94 12/31/94 To 12/31/94 Effective
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund -0.53% 6.65% 6.68% 9-29-89
--------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible 0.08% N/A 5.69% 10-06-93
Growth Fund
--------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 5.57% 8.97% 9.40% 10-09-86
Port.
--------------------------------------------------------------------------------------------------
Fidelity VIP Growth Port. -1.42% 9.32% 10.99% 10-09-86
--------------------------------------------------------------------------------------------------
Fidelity VIP High Income Port. -2.92% 12.43% 9.33% 09-19-85
--------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Port. 0.30% 4.30% 5.52% 01-28-87
--------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Mgr. -7.40% 9.18% 8.66% 09-06-89
--------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund -2.28% N/A 3.79% 04-15-92
--------------------------------------------------------------------------------------------------
NSAT Govt. Bond Fund -4.58% 6.36% 7.83%* 11-08-82
--------------------------------------------------------------------------------------------------
NSAT Money Market Fund 2.43% 3.30% 4.64%* 11-10-81
--------------------------------------------------------------------------------------------------
NSAT Total Return Fund -0.34% 7.56% 11.30%* 11-08-82
--------------------------------------------------------------------------------------------------
NB Growth Portfolio -6.32% 4.29% 10.32%* 09-10-84
--------------------------------------------------------------------------------------------------
NB Limited Mat. Bond Port. -1.55% 4.71% 6.44%* 09-10-84
--------------------------------------------------------------------------------------------------
NB Partners Portfolio N/A N/A -4.30% 3-22-94
--------------------------------------------------------------------------------------------------
Oppenheimer Bond Fund -3.31% 6.91% 8.08% 04-30-85
--------------------------------------------------------------------------------------------------
Oppenheimer Global Securities -7.04% N/A 9.60% 11-12-90
Fund
--------------------------------------------------------------------------------------------------
Oppenheimer Mult. Strat. Fund -3.32% 5.88% 8.32% 02-09-87
--------------------------------------------------------------------------------------------------
Strong Discovery Fund II -6.71% N/A 7.50% 05-08-92
--------------------------------------------------------------------------------------------------
Strong Special Fund II 2.15% N/A 15.10% 05-08-92
--------------------------------------------------------------------------------------------------
TCI Balanced -0.79% N/A 5.42% 05-01-91
--------------------------------------------------------------------------------------------------
TCI Growth -2.55% 7.02% 8.94% 11-20-87
--------------------------------------------------------------------------------------------------
TCI International N/A N/A -8.68% 05-01-94
--------------------------------------------------------------------------------------------------
Van Eck Worldwide Bond -2.70% 4.34% 4.11% 09-01-89
--------------------------------------------------------------------------------------------------
Van Eck Gold & Nat. Res. -6.12% 3.19% 4.52% 09-01-89
--------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12/31/94.
3
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<PAGE> 49
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
1 Year To 5 Years To Life of Fund Date Fund
SUB-ACCOUNT OPTIONS 12/31/94 12/31/94 To 12/31/94 Effective
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund -5.90% 6.37% 6.42% 9-29-89
--------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible -5.32% N/A 1.36% 10-06-93
--------------------------------------------------------------------------------------------------
Growth Fund
--------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 0.17% 8.71% 9.40% 10-09-86
Port.
--------------------------------------------------------------------------------------------------
Fidelity VIP Growth Port. -6.73% 9.07% 10.99% 10-09-86
--------------------------------------------------------------------------------------------------
Fidelity VIP High Income Port. -8.15% 12.21% 9.33% 9-19-85
--------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Port. -5.10% 4.00% 5.52% 1-28-87
--------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Mgr. -12.36% 8.93% 8.43% 9-06-89
--------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund -7.55% N/A 2.21% 4-15-92
--------------------------------------------------------------------------------------------------
NSAT Govt. Bond Fund -9.71% 6.08% 7.83%* 11-08-82
--------------------------------------------------------------------------------------------------
NSAT Money Market Fund -2.97% 2.99% 4.64%* 11-10-81
--------------------------------------------------------------------------------------------------
NSAT Total Return Fund -5.72% 7.29% 11.30%* 11-08-82
--------------------------------------------------------------------------------------------------
NB Growth Portfolio -11.34% 3.98% 10.32%* 9-10-84
--------------------------------------------------------------------------------------------------
NB Limited Mat. Bond Port. -6.86% 4.40% 6.44%* 9-10-84
--------------------------------------------------------------------------------------------------
NB Partners Portfolio N/A N/A -11.00% 03-22-94
--------------------------------------------------------------------------------------------------
Oppenheimer Bond Fund -8.51% 6.63% 8.08% 4-30-85
--------------------------------------------------------------------------------------------------
Oppenheimer Global Securities -12.02% N/A 9.10% 11-12-90
Fund
--------------------------------------------------------------------------------------------------
Oppenheimer Mult. Strat. Fund -8.52% 5.59% 8.32% 2-09-87
--------------------------------------------------------------------------------------------------
Strong Discovery Fund II -11.71% N/A 5.98% 5-08-92
--------------------------------------------------------------------------------------------------
Strong Special Fund II -3.25% N/A 13.74% 5-08-92
--------------------------------------------------------------------------------------------------
TCI Balanced -6.15% N/A 4.56% 5-01-91
--------------------------------------------------------------------------------------------------
TCI Growth -7.80% 6.74% 8.94% 11-20-87
--------------------------------------------------------------------------------------------------
TCI International N/A N/A -15.08% 05-01-94
--------------------------------------------------------------------------------------------------
Van Eck Worldwide Bond -7.94% 4.04% 3.83% 9-01-89
--------------------------------------------------------------------------------------------------
Van Eck Gold & Nat. Res. -11.16% 2.87% 4.24% 9-01-89
--------------------------------------------------------------------------------------------------
</TABLE>
*Represents 10 years to 12/31/94.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity payments" located in the prospectus.
4
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<PAGE> 50
Independent Auditors' Report
----------------------------
The Board of Directors and Contract Owners of
Nationwide Variable Account-II
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-II as of December 31,
1994, and the related statements of operations and changes in contract owners'
equity for each of the years in the three year period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1994, by correspondence with
the custodian and the transfer agents of the underlying mutual funds. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Variable
Account-II as of December 31, 1994, and the results of its operations and its
changes in contract owners' equity for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule I is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
KPMG Peat Marwick LLP
Columbus, Ohio
February 3, 1995
5
50 of 108
<PAGE> 51
================================================================================
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
American VI Series - Growth Fund (AVISGro)
590,389 shares (cost $14,970,581) . . . . . . . . . . . . . . . . $ 18,414,233
American VI Series - High-Yield Bond Fund (AVISHiYld)
211,459 shares (cost $2,979,179) . . . . . . . . . . . . . . . . . 2,660,151
American VI Series - U.S. Government/AAA-Rated
Securities Fund (AVISGvt)
919,657 shares (cost $10,241,641) . . . . . . . . . . . . . . . . 9,831,138
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
582,669 shares (cost $7,874,254) . . . . . . . . . . . . . . . . . 7,708,705
Dreyfus Stock Index Fund (DryStkIx)
1,071,677 shares (cost $14,040,081) . . . . . . . . . . . . . . . 13,867,506
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
41,010,206 shares (cost $595,749,488) . . . . . . . . . . . . . . 629,506,663
Fidelity VIP - Growth Portfolio (FidGro)
28,510,139 shares (cost $601,541,999) . . . . . . . . . . . . . . 618,384,917
Fidelity VIP - High Income Portfolio (FidHiInc)
21,524,712 shares (cost $235,076,653) . . . . . . . . . . . . . . 231,605,905
Fidelity VIP - Overseas Portfolio (FidOSeas)
31,571,795 shares (cost $497,851,760) . . . . . . . . . . . . . . 494,730,027
Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr)
57,652,695 shares (cost $805,885,137) . . . . . . . . . . . . . . 795,030,663
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
2,155,948 shares (cost $23,525,236) . . . . . . . . . . . . . . . 23,542,952
Nationwide SAT - Government Bond Fund (NWGvtBd)
21,314,889 shares (cost $235,572,549) . . . . . . . . . . . . . . 217,411,868
Nationwide SAT - Money Market Fund (NWMyMkt)
693,927,633 shares (cost $693,927,633) . . . . . . . . . . . . . . 693,927,633
Nationwide SAT - Total Return Fund (NWTotRet)
20,292,981 shares (cost $195,150,109) . . . . . . . . . . . . . . 196,841,919
Neuberger & Berman - Growth Portfolio (NBGro)
10,090,728 shares (cost $220,608,063) . . . . . . . . . . . . . . 204,942,684
Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat)
10,421,342 shares (cost $148,881,463) . . . . . . . . . . . . . . 146,107,214
Neuberger & Berman - Partners Portfolio (NBPart)
688,263 shares (cost $6,795,062) . . . . . . . . . . . . . . . . . 6,724,330
Oppenheimer - Bond Fund (OppBdFd)
8,105,233 shares (cost $92,272,853) . . . . . . . . . . . . . . . 87,374,414
Oppenheimer - Global Securities Fund (OppGlSec)
12,185,645 shares (cost $197,431,792) . . . . . . . . . . . . . . 183,881,376
Oppenheimer - Multiple Strategies Fund (OppMult)
8,427,439 shares (cost $108,462,704) . . . . . . . . . . . . . . . 108,798,242
Strong VIP - Strong Discovery Fund II, Inc. (StDisc2)
11,443,135 shares (cost $124,602,967) . . . . . . . . . . . . . . 115,232,369
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
20,598,037 shares (cost $294,886,137) . . . . . . . . . . . . . . 293,110,074
TCI Portfolios - TCI Balanced (TCIBal)
9,965,805 shares (cost $58,656,775) . . . . . . . . . . . . . . . 59,396,197
TCI Portfolios - TCI Growth (TCIGro)
37,398,419 shares (cost $323,092,249) . . . . . . . . . . . . . . 344,439,442
TCI Portfolios - TCI International (TCIInt)
3,667,722 shares (cost $18,381,121) . . . . . . . . . . . . . . . 17,421,678
Van Eck - Global Bond Fund (VEGlobBd)
7,947,638 shares (cost $84,344,932) . . . . . . . . . . . . . . . 81,145,385
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
8,406,217 shares (cost $114,737,636) . . . . . . . . . . . . . . . 110,289,565
------------------
Total investments . . . . . . . . . . . . . . . . . . . . . . . 5,712,327,250
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 22,177
------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 5,712,349,427
ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,544,774
------------------
CONTRACT OWNERS' EQUITY (NOTE 4) . . . . . . . . . . . . . . . . . . . . . $ 5,710,804,653
==================
</TABLE>
See accompanying notes to financial statements.
================================================================================
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<PAGE> 52
================================================================================
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends..................... $ 219,361,059 87,058,811 62,428,553
-------------- -------------- -------------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares........... 2,081,239,624 1,118,924,497 684,227,731
Cost of mutual fund shares sold........................... (1,966,796,733) (1,023,878,546) (633,612,394)
-------------- -------------- -------------
Realized gain on investments.............................. 114,442,891 95,045,951 50,615,337
Change in unrealized gain (loss) on investments........... (372,586,662) 239,514,450 4,660,809
-------------- -------------- -------------
Net gain (loss) on investments..................... (258,143,771) 334,560,401 55,276,146
-------------- -------------- -------------
Net investment activity.................... (38,782,712) 421,619,212 117,704,699
-------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners............ 2,110,347,434 1,441,981,228 913,511,619
Redemptions................................................ (229,544,830) (142,035,153) (106,624,969)
Annuity benefits........................................... (155,993) (112,491) (86,055)
Adjustments to maintain reserves........................... 29,075 (21,397) 2,223
-------------- -------------- -------------
Net equity transactions.................... 1,880,675,686 1,299,812,187 806,802,818
-------------- -------------- -------------
EXPENSES (NOTE 2):
Contract charges........................................... (67,631,096) (42,061,726) (25,054,447)
Contingent deferred sales charges.......................... (4,253,379) (2,613,738) (1,937,912)
-------------- -------------- -------------
Total expenses............................. (71,884,475) (44,675,464) (26,992,359)
-------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS'EQUITY.......................... 1,770,008,499 1,676,755,935 897,515,158
CONTRACT OWNERS'EQUITY BEGINNING OF PERIOD.................... 3,940,796,154 2,264,040,219 1,366,525,061
-------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD......................... $5,710,804,653 3,940,796,154 2,264,040,219
============== ============== =============
</TABLE>
See accompanying notes to financial statements.
================================================================================
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<PAGE> 53
================================================================================
NATIONWIDE VARIABLE ACCOUNT - II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Nationwide Variable Account-II (the Account) was established pursuant to
a resolution of the Board of Directors of Nationwide Life Insurance Company (the
Company) on October 7, 1981. The Account has been registered as a unit
investment trust under the Investment Company Act of 1940.
(b) The Contracts
Only flexible purchase payment contracts without a front-end sales charge,
but with a contingent deferred sales charge and certain other fees, are offered
for purchase. See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or the
payout phase may invest in the following:
Funds of the American Variable Insurance Series (American VI Series)
(available only for contracts issued on or after May 1, 1987 and before
September 1, 1989);
American VI Series - Growth Fund (AVISGro)
American VI Series - High-Yield Bond Fund (AVISHiYld)
American VI Series - U.S. Government/AAA-Rated Securities Fund
(AVISGvt)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)(formerly Dreyfus Life and Annuity Index
Fund, Inc. (DLAI))
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
Fidelity VIP - Growth Portfolio (FidGro)
Fidelity VIP - High Income Portfolio (FidHiInc)
Fidelity VIP - Overseas Portfolio (FidOSeas)
Portfolio of the Fidelity Variable Insurance Products Fund II (Fidelity
VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed for
a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
Nationwide SAT - Government Bond Fund (NWGvtBd)
Nationwide SAT - Money Market Fund (NWMyMkt)
Nationwide SAT - Total Return Fund (NWTotRet)
Portfolios of the Neuberger & Berman Advisers Management Trust (Neuberger &
Berman);
Neuberger & Berman - Growth Portfolio (NBGro)
Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat)
Neuberger & Berman - Partners Portfolio (NBPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer);
Oppenheimer - Bond Fund (OppBdFd)
Oppenheimer - Global Securities Fund (OppGlSec)
Oppenheimer - Multiple Strategies Fund (OppMult)
Funds of the Strong Variable Insurance Products Funds (Strong VIP);
Strong VIP - Strong Discovery Fund II, Inc. (StDisc2)
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
Portfolios of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Balanced (TCIBal)
TCI Portfolios - TCI Growth (TCIGro)
TCI Portfolios - TCI International (TCIInt)
53 of 108
<PAGE> 54
Funds of the Van Eck Investment Trust (Van Eck);
Van Eck - Global Bond Fund (VEGlobBd)
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
At December 31, 1994, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of each
fund and certain contract expenses (see note 2).
The accompanying financial statements include only contract owners' purchase
payments pertaining to the variable portions of their contracts and exclude any
purchase payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of investments is based on the closing bid prices at
December 31, 1994. The cost of investments sold is determined on a specific
identification basis. Investment transactions are accounted for on the trade
date (date the order to buy or sell is executed) and dividend income is recorded
on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations of
the Company which is taxed as a life insurance company under the Internal
Revenue Code.
The Company does not provide for income taxes within the Account. Taxes are
the responsibility of the contract owner upon termination or withdrawal.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of such
contracts is surrendered, the Company will, with certain exceptions, deduct from
a contract owner's contract value a contingent deferred sales charge. For
contracts issued prior to December 15, 1988, 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 December 15, 1988, the
Company will deduct a contingent deferred sales charge not to exceed 7% of the
lesser of purchase payments or the amount surrendered, such charge declining 1%
per year, to 0%, after the purchase payment has been held in the contract for 84
months. No sales charges are deducted on redemptions used to purchase units in
the fixed investment options of the Company.
The following administrative charges are deducted by the Company: (a) for The
BEST OF AMERICA(R) contracts an annual contract maintenance charge of $30, with
certain exceptions, which is satisfied by surrendering units; and (b) for The
BEST OF AMERICA(R) contracts issued prior to December 15, 1988, 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 The BEST OF
AMERICA(R) contracts issued on or after December 15, 1988, 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, and for The BEST OF AMERICA(R) Non-Qualified/IRA Rollover Annuity
contracts, 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 0.15%, respectively.
(3) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented for each
series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends (This amount reflects the
increase in the unit value due to capital gains and dividend
distributions from the underlying mutual funds.)
- Unrealized gain (loss) (This amount reflects the increase (decrease)
in the unit value resulting from the market appreciation
(depreciation) of the fund.)
- Contract charges (This amount reflects the decrease in the unit value
due to the mortality risk charge, an expense risk charge and an
administration charge discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%, used
in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
54 of 108
<PAGE> 55
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1994,
for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
Contract owners' equity represented by: Units Unit Value
---------- ---------------
<S> <C> <C> <C>
Contracts in accumulation phase:
The BEST OF AMERICA(R) contracts:
American VI Series - Growth Fund:
Tax qualified ................................................. 568,831 $ 16.632869 $ 9,461,292
Non-tax qualified ............................................. 538,005 16.632869 8,948,567
American VI Series - High-Yield Bond Fund:
Tax qualified ................................................. 90,073 17.247186 1,553,506
Non-tax qualified ............................................. 63,653 17.247186 1,097,835
American VI Series - U.S. Government/AAA-Rated
Securities Fund:
Tax qualified ................................................. 346,442 15.872495 5,498,899
Non-tax qualified ............................................. 272,776 15.872495 4,329,636
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified ................................................. 301,426 10.721141 3,231,631
Non-tax qualified ............................................. 263,764 10.721141 2,827,851
Dreyfus Stock Index Fund:
Tax qualified ................................................. 539,188 10.087774 5,439,207
Non-tax qualified ............................................. 418,990 10.087774 4,226,676
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ................................................. 15,283,540 18.646331 284,981,946
Non-tax qualified ............................................. 15,217,260 18.646331 283,746,067
Fidelity VIP - Growth Portfolio:
Tax qualified ................................................. 11,689,858 25.451479 297,524,175
Non-tax qualified ............................................. 10,492,508 25.451479 267,049,847
Fidelity VIP - High Income Portfolio:
Tax qualified ................................................. 4,924,388 18.327364 90,251,051
Non-tax qualified ............................................. 6,177,851 18.327364 113,223,724
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................................. 15,065,853 13.701507 206,424,890
Non-tax qualified ............................................. 17,550,925 13.701507 240,474,122
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ................................................. 24,788,850 15.641016 387,722,799
Non-tax qualified ............................................. 20,692,145 15.641016 323,646,171
Nationwide SAT - Capital Appreciation Fund:
Tax qualified ................................................. 890,035 11.311683 10,067,794
Non-tax qualified ............................................. 897,902 11.311683 10,156,783
Nationwide SAT - Government Bond Fund:
Tax qualified ................................................. 4,217,320 25.309101 106,736,578
Non-tax qualified ............................................. 3,855,380 25.242252 97,318,474
Nationwide SAT - Money Market Fund:
Tax qualified ................................................. 11,466,217 20.457373 234,568,678
Non-tax qualified ............................................. 16,632,423 20.457373 340,255,681
Nationwide SAT - Total Return Fund:
Tax qualified ................................................. 2,189,971 40.926247 89,627,294
Non-tax qualified ............................................. 2,396,609 39.872391 95,558,531
Neuberger & Berman - Growth Portfolio:
Tax qualified ................................................. 4,909,356 21.247525 104,311,664
Non-tax qualified ............................................. 4,342,056 21.247525 92,257,943
Neuberger & Berman - Limited Maturity
Bond Portfolio:
Tax qualified ................................................. 3,859,535 14.896724 57,494,428
Non-tax qualified ............................................. 4,238,249 14.896724 63,136,026
</TABLE>
55 of 108
<PAGE> 56
<TABLE>
<S> <C> <C> <C>
Neuberger & Berman - Partners Portfolio:
Tax qualified................................................. 223,285 10.017795 2,236,823
Non-tax qualified............................................. 324,320 10.017795 3,248,971
Oppenheimer - Bond Fund:
Tax qualified................................................. 2,694,486 14.531774 39,155,662
Non-tax qualified............................................. 2,666,115 14.531774 38,743,381
Oppenheimer - Global Securities Fund:
Tax qualified................................................. 6,376,101 11.307851 72,100,000
Non-tax qualified............................................. 6,373,740 11.307851 72,073,302
Oppenheimer - Multiple Strategies Fund:
Tax qualified................................................. 3,897,893 13.216172 51,515,224
Non-tax qualified............................................. 3,363,638 13.216172 44,454,418
Strong VIP - Strong Discovery Fund II, Inc.:
Tax qualified................................................. 3,921,214 12.143604 47,617,670
Non-tax qualified............................................. 4,385,371 12.143604 53,254,209
Strong VIP - Strong Special Fund II, Inc.:
Tax qualified................................................. 8,576,003 14.551898 124,797,121
Non-tax qualified............................................. 8,937,552 14.551898 130,058,345
TCI Portfolios - TCI Balanced:
Tax qualified................................................. 2,670,990 10.801286 28,850,127
Non-tax qualified............................................. 2,324,933 10.801286 25,112,266
TCI Portfolios - TCI Growth:
Tax qualified................................................. 9,394,094 19.378026 182,038,998
Non-tax qualified............................................. 7,577,109 19.378026 146,829,415
TCI Portfolios - TCI International:
Tax qualified................................................. 688,372 9.392316 6,465,407
Non-tax qualified............................................. 845,551 9.392316 7,941,682
Van Eck - Global Bond Fund:
Tax qualified................................................. 2,731,900 12.465907 34,055,611
Non-tax qualified............................................. 3,204,016 12.465907 39,940,965
Van Eck - Gold and Natural Resources Fund:
Tax qualified................................................. 3,213,104 12.728311 40,897,387
Non-tax qualified............................................. 4,473,812 12.728311 56,944,070
The BEST OF AMERICA(R) Non-Qualified/IRA
Rollover Annuity contracts:
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified................................................. 56,245 10.146464 570,688
Non-tax qualified............................................. 106,285 10.146464 1,078,417
Dreyfus Stock Index Fund:
Tax qualified................................................. 142,221 10.046079 1,428,763
Non-tax qualified............................................. 276,005 10.046079 2,772,768
Fidelity VIP - Equity-Income Portfolio:
Tax qualified................................................. 2,320,419 10.760332 24,968,479
Non-tax qualified............................................. 3,315,450 10.760332 35,675,343
Fidelity VIP - Growth Portfolio:
Tax qualified................................................. 2,012,595 10.082986 20,292,967
Non-tax qualified............................................. 3,322,957 10.082986 33,505,329
Fidelity VIP - High Income Portfolio:
Tax qualified................................................. 1,188,719 9.844496 11,702,339
Non-tax qualified............................................. 1,667,761 9.844496 16,418,266
Fidelity VIP - Overseas Portfolio:
Tax qualified................................................. 1,746,850 10.536141 18,405,058
Non-tax qualified............................................. 2,782,899 10.536141 29,321,016
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified................................................. 3,610,795 9.571852 34,561,995
Non-tax qualified............................................. 5,121,023 9.571852 49,017,674
Nationwide SAT - Capital Appreciation Fund:
Tax qualified................................................. 147,498 10.044095 1,481,484
Non-tax qualified............................................. 182,857 10.044095 1,836,633
</TABLE>
56 of 108
<PAGE> 57
<TABLE>
<S> <C> <C> <C>
Nationwide SAT - Government Bond Fund:
Tax qualified.................................................. 592,092 9.562079 5,661,630
Non-tax qualified.............................................. 794,271 9.562079 7,594,882
Nationwide SAT - Money Market Fund:
Tax qualified.................................................. 3,886,019 10.254838 39,850,495
Non-tax qualified.............................................. 7,565,949 10.254838 77,587,581
Nationwide SAT - Total Return Fund:
Tax qualified.................................................. 441,098 10.057257 4,436,236
Non-tax qualified.............................................. 657,733 10.057257 6,614,990
Neuberger & Berman - Growth Portfolio:
Tax qualified.................................................. 264,982 9.458916 2,506,442
Non-tax qualified.............................................. 616,908 9.458916 5,835,281
Neuberger & Berman - Limited Maturity
Bond Portfolio:
Tax qualified.................................................. 1,228,030 9.860649 12,109,173
Non-tax qualified.............................................. 1,355,362 9.860649 13,364,749
Neuberger & Berman - Partners Portfolio:
Tax qualified.................................................. 33,992 10.013591 340,382
Non-tax qualified.............................................. 89,689 10.013591 898,109
Oppenheimer - Bond Fund:
Tax qualified.................................................. 438,846 9.733460 4,271,490
Non-tax qualified.............................................. 538,413 9.733460 5,240,621
Oppenheimer - Global Securities Fund:
Tax qualified.................................................. 1,500,105 10.394970 15,593,546
Non-tax qualified.............................................. 2,319,507 10.394970 24,111,206
Oppenheimer - Multiple Strategies Fund:
Tax qualified.................................................. 567,718 9.830640 5,581,031
Non-tax qualified.............................................. 737,041 9.830640 7,245,585
Strong VIP - Strong Discovery Fund II, Inc.:
Tax qualified.................................................. 521,530 10.071698 5,252,693
Non-tax qualified.............................................. 904,088 10.071698 9,105,701
Strong VIP - Strong Special Fund II, Inc.:
Tax qualified.................................................. 1,448,992 10.710138 15,518,904
Non-tax qualified.............................................. 2,121,641 10.710138 22,723,068
TCI Portfolios - TCI Balanced:
Tax qualified.................................................. 190,646 9.975959 1,901,877
Non-tax qualified.............................................. 353,974 9.975959 3,531,230
TCI Portfolios - TCI Growth:
Tax qualified.................................................. 581,271 9.896469 5,752,530
Non-tax qualified.............................................. 984,162 9.896469 9,739,729
TCI Portfolios - TCI International:
Tax qualified.................................................. 93,487 9.388381 877,692
Non-tax qualified.............................................. 227,593 9.388381 2,136,730
Van Eck - Global Bond Fund:
Tax qualified.................................................. 237,637 9.919400 2,357,216
Non-tax qualified.............................................. 473,752 9.919400 4,699,336
Van Eck - Gold and Natural Resources Fund:
Tax qualified.................................................. 416,949 10.464922 4,363,339
Non-tax qualified.............................................. 771,280 10.464922 8,071,385
========= =========
Reserves for annuity contracts in payout phase:
Tax qualified.................................................. 368,775
Non-tax qualified.............................................. 1,042,980
---------------
$ 5,710,804,653
===============
</TABLE>
57 of 108
<PAGE> 58
SCHEDULE I
NATIONWIDE VARIABLE ACCOUNT -- II
THE BEST OF AMERICA(R) CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
AVISGro+ AVISHiYld+ AVISGvt+ DrySRGro DryStkIx FidEqInc FidGro
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $16.767635 18.696382 16.810323 10.702195 10.130946 17.644458 25.790764
Reinvested capital gains
and dividends .539769 1.648226 1.072204 .276343 .283238 1.324090 1.551366
Unrealized gain (loss) (.458197) (2.863015) (1.799954) (.117315) (.195244) (.084066) (1.565204)
Contract charges (.216338) (.234407) (.210078) (.140082) (.131166) (.238151) (.325447)
Ending unit value - Dec. 31 $16.632869 17.247186 15.872495 10.721141 10.087774 18.646331 25.451479
Percentage increase
(decrease) in
unit value*(a) (1)% (8)% (6)% 0% 0% 6% (1)%
1993
Beginning unit value - Jan. 1 $14.603954 16.269615 15.319654 10.000000 10.000000 15.123262 21.890060
Reinvested capital gains
and dividends .676117 1.606197 1.097138 .031105 1.497786 .440973 .486821
Unrealized gain (loss) 1.690570 1.051273 .607970 .703067 (1.333974) 2.298480 3.727181
Contract charges (.203006) (.230703) (.214439) (.031977) (.032866) (.218257) (.313298)
Ending unit value - Dec. 31 $16.767635 18.696382 16.810323 10.702195 10.130946 17.644458 25.790764
Percentage increase
(decrease) in
unit value*(a) 15% 15% 10% 7%(b) 1%(b) 17% 18%
1992
Beginning unit value - Jan. 1 $13.356752 14.656040 14.425067 ** ** 13.099125 20.287900
Reinvested capital gains
and dividends .251749 1.441209 1.037749 .466700 .525410
Unrealized gain (loss) 1.171898 .374264 .408963 1.739860 1.340775
Contract charges (.176445) (.201898) (.192125) (.182423) (.264025)
Ending unit value - Dec. 31 $14.603954 16.269615 15.319654 15.123262 21.890060
Percentage increase
(decrease) in
unit value*(a) 9% 11% 6% 15% 8%
<CAPTION>
FidHiInc FidOSeas
----------------------
<S> <C> <C>
1994
Beginning unit value - Jan. 1 18.859652 13.646118
Reinvested capital gains
and dividends 1.728139 .070437
Unrealized gain (loss) (2.016825) .168983
Contract charges (.243602) (.184031)
Ending unit value - Dec. 31 18.327364 13.701507
Percentage increase
(decrease) in
unit value*(a) (3)% 0%
1993
Beginning unit value - Jan. 1 15.855840 10.074553
Reinvested capital gains
and dividends 1.303797 .235418
Unrealized gain (loss) 1.928892 3.494272
Contract charges (.228877) (.158125)
Ending unit value - Dec. 31 18.859652 13.646118
Percentage increase
(decrease) in
unit value*(a) 19% 35%
1992
Beginning unit value - Jan. 1 13.055215 11.432117
Reinvested capital gains
and dividends 1.105839 .156875
Unrealized gain (loss) 1.891167 (1.369738)
Contract charges (.196381) (.144701)
Ending unit value - Dec. 31 15.855840 10.074553
Percentage increase
(decrease) in
unit value*(a) 21% (12)%
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance
charge discussed in note 2; and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
+ See note 1(b).
</TABLE>
58 of 108
<PAGE> 59
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT -- II
THE BEST OF AMERICA(R) CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
FidAsMgr NWCapApp Qual Non-Qual NWMyMkt
-------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $16.874276 11.564256 26.497619 26.427634 19.951530
Reinvested capital gains
and dividends .820188 .182737 1.662261 1.657870 .769331
Unrealized gain (loss) (1.841072) (.286833) (2.516459) (2.509816) .000000
Contract charges (.212376) (.148477) (.334320) (.333436) (.263488)
Ending unit value - Dec. 31 $15.641016 11.311683 25.309101 25.242252 20.457373
Percentage increase
(decrease) in
unit value* (a) (7)% (2)% (4)% (4)% 3%
1993
Beginning unit value - Jan. 1 $14.123234 10.689287 24.513489 24.448737 19.672720
Reinvested capital gains
and dividends .655581 .260100 1.565876 1.561741 .538378
Unrealized gain (loss) 2.296222 .755961 .758226 .756217 .000000
Contract charges (.200761) (.141092) (.339972) (.339061) (.259568)
Ending unit value - Dec. 31 $16.874276 11.564256 26.497619 26.427634 19.951530
Percentage increase
(decrease) in
unit value* (a) 19% 8% 8% 8% 1%
1992
Beginning unit value - Jan. 1 $12.789976 10.000000 23.025331 22.964507 19.275668
Reinvested capital gains
and dividends .651375 .116916 2.455973 2.449485 .652507
Unrealized gain (loss) .857747 .662532 (.658791) (.657048) .000000
Contract charges (.175864) (.090161) (.309024) (.308207) (.255455)
Ending unit value - Dec. 31 $14.123234 10.689287 24.513489 24.448737 19.672720
Percentage increase
(decrease) in
unit value* (a) 10% 7%(b) 6% 6% 2%
<CAPTION>
NWTotRet NWTotRet
Qual Non-Qual NBGro NBLtdMat NBPart
-------- -------- ----- -------- ------
<S> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 41.023082 39.966728 22.656907 15.115753 10.000000
Reinvested capital gains
and dividends 2.069920 2.016621 2.730116 .638336 .000000
Unrealized gain (loss) (1.626696) (1.584802) (3.855326) (.662388) .072563
Contract charges (.540059) (.526156) (.284172) (.194977) (.054768)
Ending unit value - Dec. 31 40.926247 39.872391 21.247525 14.896724 10.017795
Percentage increase
(decrease) in
unit value* (a) 0% 0% (6)% (1)% 0%(b)
1993
Beginning unit value - Jan. 1 37.471598 36.506693 21.495392 14.362908 **
Reinvested capital gains
and dividends 1.528737 1.489372 .498087 .590488
Unrealized gain (loss) 2.538282 2.472924 .947061 .357208
Contract charges (.515535) (.502261) (.283633) (.194851)
Ending unit value - Dec. 31 41.023082 39.966728 22.656907 15.115753
Percentage increase
(decrease) in
unit value* (a) 9% 9% 5% 5%
1992
Beginning unit value - Jan. 1 35.094975 34.191261 19.882145 13.836035 **
Reinvested capital gains
and dividends 1.320343 1.286344 .212563 .665345
Unrealized gain (loss) 1.525734 1.486456 1.660516 .045778
Contract charges (.469454) (.457368) (.259832) (.184250)
Ending unit value - Dec. 31 37.471598 36.506693 21.495392 14.362908
Percentage increase
(decrease) in
unit value* (a) 7% 7% 8% 4%
<FN>
*An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
**This investment option was not being utilized or was not available.
</TABLE>
59 of 108
<PAGE> 60
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA* CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
OppBdFd OppGlSec OppMult StDisc2 StSpec2
------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 $15.013579 12.151882 13.655607 13.003747 14.230988
Reinvested capital gains and dividends .845781 .214070 .695235 .971108 .407882
Unrealized gain (loss) (1.135198) (.900281) (.959283) (1.670219) .103551
Contract charges (.192388) (.157820) (.175387) (.161032) (.190523)
Ending unit value - Dec. 31 $14.531774 11.307851 13.216172 12.143604 14.551898
Percentage increase (decrease) in unit
value* (a) (3)% (7)% (3)% (7)% 2%
1993
Beginning unit value - Jan. 1 $13.456350 10.000000 11.932236 10.796708 11.519061
Reinvested capital gains and dividends .935484 .000000 .527244 .809269 .057233
Unrealized gain (loss) .810882 2.187556 1.363520 1.547378 2.824331
Contract charges (.189137) (.035674) (.167393) (.149608) (.169637)
Ending unit value - Dec. 31 $15.013579 12.151882 13.655607 13.003747 14.230988
Percentage increase (decrease) in unit
value* (a) 12% 22%(b) 14% 20% 24%
1992
Beginning unit value - Jan. 1 $12.801628 ** 11.091678 10.000000 10.000000
Reinvested capital gains and dividends 1.009044 .505257 .686629 .254117
Unrealized gain (loss) (.182684) .485096 .192133 1.351307
Contract charges (.171638) (.149795) (.082054) (.086363)
Ending unit value - Dec. 31 $13.456350 11.932238 10.796708 11.519061
Percentage increase (decrease) in unit
value* (a) 5% 8% 8%(b) 15%(b)
<CAPTION>
TCIBal TCIGro TCIInt VEGlobBd VEGoldNR
------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
1994
Beginning unit value - Jan. 1 10.876699 19.864882 10.000000 12.798654 13.544828
Reinvested capital gains and dividends .260548 .002124 .000000 .051478 .068031
Unrealized gain (loss) (.194362) (.235006) (.554314) (.222396) (.711769)
Contract charges (.141599) (.253974) (.053370) (.161829) (.172779)
Ending unit value - Dec. 31 10.801286 19.378026 9.392316 12.465907 12.728311
Percentage increase (decrease) in unit
value* (a) (1)% (2)% (6)%(b) (3)% (6)%
1993
Beginning unit value - Jan. 1 10.232829 18.214594 ** 12.031194 8.325308
Reinvested capital gains and dividends .193822 .049563 .966990 .039162
Unrealized gain (loss) .588305 1.819573 (.037324) 5.323236
Contract charges (.138257) (.218848) (.162206) (.142878)
Ending unit value - Dec. 31 10.876699 19.864882 12.798654 13.544828
Percentage increase (decrease) in unit
value* (a) 6% 9% 6% 63%
1992
Beginning unit value - Jan. 1 10.000000 18.736465 ** 12.872259 8.795164
Reinvested capital gains and dividends .088865 .118812 1.091925 .039632
Unrealized gain (loss) .231821 (.379955) (1.767233) (.395154)
Contract charges (.087857) (.230728) (.165757) (.114034)
Ending unit value - Dec. 31 10.232829 18.244594 12.031194 8.325308
Percentage increase (decrease) in unit
value* (a) 2%(b) (3)% (7)% (5)%
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
</TABLE>
60 of 108
<PAGE> 61
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R) NON QUALIFIED/IRA
ROLLOVER ANNUITY CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
DrySRGro DryStkIx FidEqInc FidGro FidHiInc FidOSeas
---------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1994**
Beginning unit value - Jan. 1..... $10.138790 10.099271 10.192462 10.227729 10.140663 10.504149
Reinvested capital gains
and dividends................... .261532 .282153 .764674 .615160 .929117 .054214
Unrealized gain (loss)............ (.110944) (.194528) (.048662) (.620912) (1.084223) .130333
Contract charges.................. (.142914) (.140817) (.148142) (.138991) (.141061) (.152555)
Ending unit value - Dec. 31....... $10.146464 10.046079 10.760332 10.082986 9.844496 10.536141
Percentage increase
(decrease) in unit value*....... 0% (1)% 6% (1)% (3)% 0%
<CAPTION>
FidAsMgr NWCapApp NWGvtBd NWMyMkt NWTotRet
---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994**
Beginning unit value - Jan. 1..... 10.337032 10.278752 10.021251 10.011385 10.091256
Reinvested capital gains
and dividends................... .502389 .162311 .628252 .385849 .508763
Unrealized gain (loss)............ (1.127465) (.254834) (.951262) .000000 (.399693)
Contract charges.................. (.140104) (.142134) (.136162) (.142396) (.143069)
Ending unit value - Dec. 31....... 9.571852 10.044095 9.562079 10.254838 10.057257
Percentage increase
(decrease) in unit value*....... (7)% (2)% (5)% 2% 0%
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** These investment options were not utilized prior to 1994.
</TABLE>
61 of 108
<PAGE> 62
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R) NON QUALIFIED/IRA
ROLLOVER ANNUITY CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NBGro NBLtdMat NBPart OppBdFd OppGlSec OpMult StDisc2
----- -------- ------ ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
1994**
Beginning unit value -
Jan. 1............... $10.096549 10.015749 10.000000 10.066342 11.182167 10.167774 10.796000
Reinvested capital
gains and dividends.. 1.216477 .422915 .000000 .566682 .196942 .517326 .805515
Unrealized gain
(loss)............... (1.717723) (.438889) (.072593) (.760661) (.827742) (.713828) (1.385836)
Contract charges....... (.136387) (.139126) (.059002) (.138903) (.156397) (.140632) (.143981)
Ending unit value -
Dec. 31.............. $ 9.458916 9.860649 10.013591 9.733460 10.394970 9.830640 10.071698
Percentage increase
(decrease) in unit
value*(a)............ (6)% (2)% 0%(b) (3)% (7)% (3)% (7)%
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** These investment options were not being utilized or were not available prior
to 1994.
</TABLE>
62 of 108
<PAGE> 63
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R) NON QUALIFIED/IRA
ROLLOVER ANNUITY CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
StSpec2 TCIBal TCIGro TCIInt VEGlobBd VEGoldNR
------- ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
1994**
Beginning unit value - Jan. 1.... $10.484543 10.055760 10.155359 10.000000 10.194477 11.147499
Reinvested capital gains and
dividends...................... .300283 .240728 .001086 .000000 .040987 .055957
Unrealized gain (loss)........... .076473 (.179560) (.120150) (.554133) (.177244) (.585405)
Contract charges................. (.151161) (.140969) (.139826) (.057486) (.138820) (.153129)
Ending unit value - Dec. 31...... $10.710138 9.975959 9.896469 9.388381 9.919400 10.464922
Percentage increase (decrease)
in unit value*(a).............. 2% (1)% (3)% (6)%(b) (3)% (6)%
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** These investment options were not being utilized or were not available prior
to 1994.
</TABLE>
63 of 108
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, shareholder's equity and cash flows for each of the years
in the three-year period ended December 31, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Participating insurance and the related surplus are discussed in note 13. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in note 2 to the consolidated financial statements, in 1994 the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 27, 1995
64 of 108
<PAGE> 65
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
<TABLE>
Consolidated Balance Sheets
December 31, 1994 and 1993
(000's omitted)
<CAPTION>
Assets 1994 1993
------ ----------- ----------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $8,318,865 in 1994) $ 8,045,906 -
Equity securities (cost $18,373 in 1994; $8,263 in 1993) 24,713 16,593
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310
in 1994; $10,886,820 in 1993) 3,688,787 10,120,978
Mortgage loans on real estate 4,222,284 3,871,560
Real estate 252,681 253,831
Policy loans 340,491 315,898
Other long-term investments 63,914 118,490
Short-term investments (note 14) 131,643 41,797
----------- -----------
16,770,419 14,739,147
----------- -----------
Cash 7,436 21,835
Accrued investment income 220,540 190,886
Deferred policy acquisition costs 1,064,159 811,944
Deferred Federal income tax 36,515 -
Other assets 790,603 636,161
Assets held in Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
$31,112,133 25,406,361
=========== ===========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) 16,321,461 14,092,255
Policyholders' dividend accumulations 338,058 322,686
Other policyholder funds 72,770 71,959
Accrued Federal income tax (note 7):
Current 13,126 12,294
Deferred - 31,659
----------- -----------
13,126 43,953
----------- -----------
Other liabilities 235,778 217,952
Liabilities related to Separate Accounts (note 8) 12,222,461 9,006,388
----------- -----------
29,203,654 23,755,193
----------- -----------
Shareholder's equity (notes 3, 4, 7 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Paid-in additional capital 622,753 422,753
Unrealized gains (losses) on securities available-for-sale, net of adjustment
to deferred policy acquisition costs of $82,525 ($0 in 1993) and net of
deferred Federal income tax benefit of $64,425 ($1,583 expense in 1993) (119,668) 6,747
Retained earnings 1,401,579 1,217,853
----------- -----------
1,908,479 1,651,168
----------- -----------
Commitments and contingencies (notes 9 and 16)
$31,112,133 25,406,361
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
65 of 108
<PAGE> 66
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues (note 17):
Traditional life insurance premiums $ 209,538 215,715 226,888
Accident and health insurance premiums 324,524 312,655 430,009
Universal life and investment product policy charges 239,021 188,057 148,464
Net investment income (note 5) 1,289,501 1,204,426 1,120,157
Net ceded commissions from disposition of credit life and
credit accident and health business (note 12) - - 27,115
Realized gains (losses) on investments (notes 5 and 14) (16,384) 113,673 (19,315)
---------- ---------- ----------
2,046,200 2,034,526 1,933,318
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,279,763 1,236,906 1,319,735
Provision for policyholders' dividends on participating
policies (note 13) 46,061 53,189 61,834
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Other operating costs and expenses 352,402 329,396 321,993
---------- ---------- ----------
1,772,970 1,721,625 1,802,759
---------- ---------- ----------
Income before Federal income tax and cumulative
effect of changes in accounting principles 273,230 312,901 130,559
---------- ---------- ----------
Federal income tax (note 7):
Current expense 79,847 75,124 47,402
Deferred expense (benefit) 9,657 31,634 (13,660)
---------- ---------- ----------
89,504 106,758 33,742
---------- ---------- ----------
Income before cumulative effect of changes in
accounting principles 183,726 206,143 96,817
Cumulative effect of changes in accounting principles,
net of tax (note 3) - 5,365 -
---------- ---------- ----------
Net income $ 183,726 211,508 96,817
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
66 of 108
<PAGE> 67
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Paid-in on securities Total
Capital additional available-for- Retained shareholder's
shares capital sale, net earnings equity
--------- ----------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1992:
Balance, beginning of year $ 3,815 311,753 96,048 933,179 1,344,795
Dividends paid to shareholder - - - (5,846) (5,846)
Net income - - - 96,817 96,817
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (5,524) - (5,524)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 311,753 90,524 1,024,150 1,430,242
========= =========== ============== ========== =============
1993:
Balance, beginning of year 3,815 311,753 90,524 1,024,150 1,430,242
Capital contributions - 111,000 - - 111,000
Dividends paid to shareholder - - - (17,805) (17,805)
Net income - - - 211,508 211,508
Unrealized losses on equity
securities, net of deferred
Federal income tax - - (83,777) - (83,777)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 422,753 6,747 1,217,853 1,651,168
========= =========== ============== ========== =============
1994:
Balance, beginning of year 3,815 422,753 6,747 1,217,853 1,651,168
Capital contribution - 200,000 - - 200,000
Net income - - - 183,726 183,726
Adjustment for change in
accounting for certain
investments in debt and
equity securities, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax (note 3) - - 216,915 - 216,915
Unrealized losses on securities
available-for-sale, net of
adjustment to deferred policy
acquisition costs and deferred
Federal income tax - - (343,330) - (343,330)
--------- ----------- -------------- ---------- -------------
Balance, end of year $ 3,815 622,753 (119,668) 1,401,579 1,908,479
========= =========== ============== ========== =============
</TABLE>
See accompanying notes to consolidated financial statements.
67 of 108
<PAGE> 68
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1994, 1993 and 1992
(000's omitted)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 183,726 211,508 96,817
Adjustments to reconcile net income to net cash provided by
operating activities:
Capitalization of deferred policy acquisition costs (264,434) (191,994) (177,928)
Amortization of deferred policy acquisition costs 94,744 102,134 99,197
Amortization and depreciation 6,207 11,156 5,607
Realized losses (gains) on invested assets, net 15,949 (113,648) 19,092
Deferred Federal income tax benefit (2,166) (6,006) (13,105)
Increase in accrued investment income (29,654) (4,218) (11,518)
(Increase) decrease in other assets (112,566) (549,277) 6,132
Increase in policyholder account balances 1,038,641 509,370 19,087
Increase in policyholders' dividend accumulations 15,372 17,316 18,708
Increase (decrease) in accrued Federal income tax payable 832 16,838 (15,723)
Increase in other liabilities 17,826 26,958 73,512
Other, net (19,303) (11,745) (10,586)
---------- ---------- ----------
Net cash provided by operating activities 945,174 18,392 109,292
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 579,067 - -
Proceeds from sale of securities available-for-sale 247,876 247,502 27,844
Proceeds from maturity of fixed maturities held-to-maturity 516,003 1,192,093 1,030,397
Proceeds from sale of fixed maturities - 33,959 123,422
Proceeds from repayments of mortgage loans on real estate 220,744 146,047 259,659
Proceeds from sale of real estate 46,713 23,587 22,682
Proceeds from repayments of policy loans and
sale of other invested assets 134,998 59,643 99,189
Cost of securities available-for-sale acquired (2,569,672) (12,550) (12,718)
Cost of fixed maturities held-to-maturity acquired (675,835) (2,016,831) (2,687,975)
Cost of mortgage loans on real estate acquired (627,025) (475,336) (654,403)
Cost of real estate acquired (15,962) (8,827) (137,843)
Policy loans issued and other invested assets acquired (118,012) (76,491) (97,491)
---------- ---------- ----------
Net cash used in investing activities (2,261,105) (887,204) (2,027,620)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from capital contributions 200,000 111,000 -
Dividends paid to shareholder - (17,805) (5,846)
Increase in universal life and investment product account balances 3,640,958 2,249,740 2,468,236
Decrease in universal life and investment product account balances (2,449,580) (1,458,504) (575,180)
---------- ---------- ----------
Net cash provided by financing activities 1,391,378 884,431 1,887,210
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 75,447 15,619 (31,118)
Cash and cash equivalents, beginning of year 63,632 48,013 79,131
---------- ---------- ----------
Cash and cash equivalents, end of year $ 139,079 63,632 48,013
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
68 of 108
<PAGE> 69
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
(000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned
subsidiary of Nationwide Corporation (Corp.). Wholly-owned
subsidiaries of NLIC include Financial Horizons Life Insurance
Company (FHLIC), West Coast Life Insurance Company (WCLIC), National
Casualty Company and subsidiaries (NCC), Nationwide Financial
Services, Inc. (NFS), and effective December 31, 1994, Employers Life
Insurance Company of Wausau and subsidiary (ELICW). NLIC and its
subsidiaries are collectively referred to as "the Company".
NLIC, FHLIC, WCLIC and ELICW are life and accident and health
insurers and NCC is a property and casualty insurer. The Company is
licensed in all 50 states, the District of Columbia, the Virgin
Islands and Puerto Rico. The Company offers a full range of life,
health and annuity products through exclusive agents and other
distribution channels and is subject to competition from other
insurers throughout the United States. The Company is subject to
regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal
or regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing
its products. That is, regulatory initiatives designed to
reduce insurer profits, new legal theories or insurance
company insolvencies through guaranty fund assessments may create
costs for the insurer beyond those recorded in the consolidated
financial statements. The Company mitigates this risk by offering
a wide range of products and by operating throughout the United
States, thus reducing its exposure to any single product or
jurisdiction, and also by employing underwriting practices
which identify and minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes
this risk by adhering to a conservative investment strategy, by
maintaining sound reinsurance and credit and collection policies
and by providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change
and cause a decrease in the value of an insurer's investments.
This change in rates may cause certain interest-sensitive
products to become uncompetitive or may cause disintermediation.
The Company mitigates this risk by charging fees for
non-conformance with certain policy provisions, by offering
products that transfer this risk to the purchaser, and/or by
attempting to match the maturity schedule of its assets with the
expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the consolidated
financial statements and revenues and expenses for the period. Actual
results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for future policy benefits and claims and
those used in determining valuation allowances for mortgage loans on
real estate and real estate. Although some variability is inherent in
these estimates, management believes the amounts provided are adequate.
69 of 108
<PAGE> 70
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(a) Consolidation Policy
--------------------
The December 31, 1994, 1993 and 1992 consolidated
financial statements include the accounts of NLIC and its
wholly owned subsidiaries FHLIC, WCLIC, NCC and NFS. The
December 31, 1994 consolidated balance sheet also
includes the accounts of ELICW, which was acquired by
NLIC effective December 31, 1994. See Note 14. All
significant intercompany balances and transactions have
been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
Prior to January 1, 1994, the Company classified fixed
maturities in accordance with the then existing accounting
standards, and accordingly, fixed maturity securities were
carried at amortized cost, adjusted for amortization of
premium or discount, since the Company had both the
ability and intent to hold those securities until
maturity. Equity securities were carried at fair value
with the unrealized gains and losses, net of deferred
Federal income tax, reported as a separate component of
shareholder's equity.
In May 1993, the Financial Accounting Standards Board
(FASB) issued STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES (SFAS 115). SFAS 115 requires fixed
maturities and equity securities to be classified as either
held-to-maturity, available-for-sale, or trading. The
Company has no trading securities. The Company adopted
SFAS 115 as of January 1, 1994, with no effect on
consolidated net income. See note 3 regarding the effect
on consolidated shareholder's equity.
Fixed maturity securities are classified as held-to-
maturity when the Company has the positive intent
and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities
are classified as available-for-sale and are stated at
fair value, with the unrealized gains and losses, net of
adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate
component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change
in amortization of deferred policy acquisition costs that
would have been required as a charge or credit to
operations had such unrealized amounts been realized.
Mortgage loans on real estate are carried at the unpaid
principal balance less valuation allowances. The Company
provides valuation allowances for impairments of mortgage
loans on real estate based on a review by portfolio
managers. Loans in foreclosure and loans considered
in-substance foreclosed as of the balance sheet date are
placed on non-accrual status and written down to the fair
value of the existing property to derive a new cost basis.
Real estate is carried at cost less accumulated
depreciation and valuation allowances. Other long-term
investments are carried on he equity basis, adjusted for
valuation allowances.
Realized gains and losses on the sale of investments are
determined on the basis of specific security
identification. Estimates for valuation allowances and
other than temporary declines are included in realized
gains and losses on investments.
In May, 1993, the FASB issued STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN (SFAS 114). SFAS 114, which was
amended by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
118 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN -
INCOME RECOGNITION AND DISCLOSURE in October, 1994,
requires the measurement of impaired loans be based on the
present value of expected future cash flows discounted at
the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral
dependent. The impact on the consolidated financial
statements of adopting SFAS 114 as amended is not expected
to be material. Previously issued consolidated financial
statements shall not be restated. The Company will adopt
SFAS 114 as amended in 1995.
70 of 108
<PAGE> 71
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life
insurance products include those products with fixed and
guaranteed premiums and benefits and consist primarily of
whole life, limited-payment life, term life and certain
annuities with life contingencies. Premiums for
traditional life insurance products are recognized as
revenue when due and collected. Benefits and expenses
are associated with earned premiums so as to result in
recognition of profits over the life of the contract.
This association is accomplished by the provision for
future policy benefits and the deferral and amortization
of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life
products include universal life, variable universal life
and other interest-sensitive life insurance policies.
Investment products consist primarily of individual and
group deferred annuities, annuities without life
contingencies and guaranteed investment contracts.
Revenues for universal life and investment products
consist of cost of insurance, policy administration and
surrender charges that have been earned and assessed
against policy account balances during the period.
Policy benefits and claims that are charged to expense
include benefits and claims incurred in the period in
excess of related policy account balances and interest
credited to policy account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health
insurance premiums are recognized as revenue over the
terms of the policies. Policy claims are charged to
expense in the period that the claims are incurred.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally
commissions, certain expenses of the policy issue
and underwriting department and certain variable
agency expenses have been deferred. For traditional
life and individual health insurance products, these
deferred acquisition costs are predominantly being
amortized with interest over the premium paying period
of the related policies in proportion to the ratio of
actual annual premium revenue to the anticipated total
premium revenue. Such anticipated premium revenue was
estimated using the same assumptions as were used for
computing liabilities for future policy benefits. For
universal life and investment products, deferred policy
acquisition costs are being amortized with interest over
the lives of the policies in relation to the present
value of estimated future gross profits from projected
interest margins, cost of insurance, policy
administration and surrender charges. For years in
which gross profits are negative, deferred policy
acquisition costs are amortized based on the present
value of gross revenues. Beginning January 1, 1994,
deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on
fixed maturity securities available-for-sale. See note
2(b).
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent
contractholders' funds which have been segregated into
accounts with specific investment objectives. The
investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except
for the fees the Company receives for administrative
services and risks assumed.
(f) Future Policy Benefits
----------------------
Future policy benefits for traditional life and individual
health policies have been calculated using a net level
premium method based on estimates of mortality,
morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the
policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits for annuity policies in the
accumulation phase, universal life and variable universal
life policies have been calculated based on participants'
contributions plus interest credited less applicable
contract charges.
Future policy benefits and claims for group long-term
disability policies are the present value (primarily
discounted at 5.5%) of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred
but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on
other group health policies are not discounted.
71 of 108
<PAGE> 72
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 45%
(48% in 1993 and 1992) of the Company's ordinary
life insurance in force, 72% (72% in 1993; 71% in 1992)
of the number of policies in force, and 41% (45% in 1993
and 1992) of life insurance premiums. The provision for
policyholder dividends is based on current dividend
scales. Future dividends are provided for ratably in
future policy benefits based on dividend scales in effect
at the time the policies were issued. Dividend scales are
approved by the Board of Directors.
Income attributable to participating policies in excess
of policyholder dividends is accounted for as belonging to
the shareholder. See note 13.
(h) Federal Income Tax
------------------
NLIC, FHLIC, WCLIC and NCC file a consolidated Federal
income tax return with Nationwide Mutual Insurance Company
(NMIC), the majority shareholder of Corp. Through 1994,
ELICW filed a consolidated Federal income tax return with
Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW will file a separate Federal
income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109 - ACCOUNTING FOR INCOME
TAXES, which required a change from the deferred method
of accounting for income tax of APB Opinion 11 to the
asset and liability method of accounting for income tax.
Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future
tax consequences attributable to differences between
the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are
expected to be recovered or settled. Under this
method, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to
be realized.
Prior to 1993, the Company applied the deferred method
of accounting for income tax which recognized deferred
income tax for income and expense items that are reported
in different years for financial reporting purposes and
income tax purposes using the tax rate applicable for
the year of calculation. Under the deferred method,
deferred tax is not adjusted for subsequent changes in tax
rates. See note 7.
The Company has reported the cumulative effect of the
change in method of accounting for income tax in the
1993 consolidated statement of income. See note 3.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries
on benefits and claims incurred are deducted from the
respective income and expense accounts. Assets and
liabilities related to reinsurance ceded are reported on
a gross basis.
(j) Cash Equivalents
----------------
For purposes of the consolidated statements of cash
flows, the Company considers all short-term investments
with original maturities of three months or less to be
cash equivalents.
(k) Reclassification
----------------
Certain items in the 1993 and 1992 consolidated financial
statements have been reclassified to conform to the 1994
presentation.
72 of 108
<PAGE> 73
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(3) Changes in Accounting Principles
--------------------------------
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of a new accounting standard by the FASB
as described in Note 2(b). As of January 1, 1994, the company
classified fixed maturity securities with amortized cost and fair value
of $6,593,844 and $7,024,736, respectively, as available-for-sale
and recorded the securities at fair value. Previously, these
securities were recorded at amortized cost. The effect as of January
1, 1994 has been recorded as a direct credit to shareholder's equity
as follows:
<TABLE>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
--------
$216,915
========
</TABLE>
During 1993, the Company adopted accounting principles in
connection with the issuance of two accounting standards by the FASB.
The effect as of January 1, 1993, the date of adoption, has been
recognized in the 1993 consolidated statement of income as the
cumulative effect of changes in accounting principles, as follows:
<TABLE>
<S> <C>
Asset/liability method of recognizing income tax (note 7) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296), (note 11) (20,979)
--------
Net cumulative effect of changes in accounting principles $ 5,365
========
</TABLE>
(4) Basis of Presentation
---------------------
The consolidated financial statements have been prepared in
accordance with GAAP. Annual Statements for NLIC and FHLIC, WCLIC,
ELICW and NCC, filed with the Department of Insurance of the State of
Ohio, California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by
such regulatory authorities. Prescribed statutory accounting
practices include a variety of publications of the National Association
of Insurance Commissioners (NAIC), as well as state laws, regulations
and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed. The
Company has no material permitted statutory accounting practices.
The following reconciles the statutory net income of NLIC as
reported to regulatory authorities to the net income as shown
in the accompanying consolidated financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Statutory net income $ 76,532 185,943 33,812
Adjustments to restate to the basis of GAAP:
Consolidating statutory net income of subsidiaries 14,350 19,545 21,519
Increase in deferred policy acquisition costs, net 167,166 89,860 78,731
Future policy benefits (76,310) (70,640) (63,355)
Deferred Federal income tax (expense) benefit (9,657) (31,634) 13,660
Equity in earnings of affiliates 1,013 7,121 4,618
Valuation allowances and other than temporary
declines accounted for directly in surplus 6,275 (6,638) 3,402
Interest maintenance reserve (7,332) 13,754 7,588
Cumulative effect of changes in accounting principles,
net of tax - 5,365 -
Other, net 11,689 (1,168) (3,158)
-------- ------- -------
Net income per accompanying consolidated
statements of income $183,726 211,508 96,817
======== ======= =======
</TABLE>
73 of 108
<PAGE> 74
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The following reconciles the statutory capital shares and
surplus of NLIC as reported to regulatory authorities to the
shareholder's equity as shown in the accompanying consolidated
financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Statutory capital shares and surplus $1,262,861 992,631 647,307
Add (deduct) cumulative effect of adjustments:
Deferred policy acquisition costs 1,064,159 811,944 722,084
Nonadmitted assets and furniture and equipment charged to
income in the year of acquisition, net of accumulated
depreciation 16,120 22,573 15,712
Asset valuation reserve 153,387 105,596 138,727
Interest maintenance reserve 18,843 21,069 7,315
Future policy benefits (310,302) (238,231) (167,591)
Deferred Federal income tax, including effect of changes in
accounting principles in 1993 36,515 (31,659) (82,724)
Cumulative effect of change in accounting principles for
postretirement benefits other than pensions, gross - (32,275) -
Difference between amortized cost and fair value of fixed
maturity securities available-for-sale, gross (272,959) - -
Other, net (60,145) (480) 149,412
---------- ---------- ----------
Shareholder's equity per accompanying consolidated
balance sheets $1,908,479 1,651,168 1,430,242
========== ========== ==========
</TABLE>
(5) Investments
-----------
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 674,346 - -
Equity securities 550 7,230 6,949
Fixed maturities held-to-maturity 193,009 800,255 754,876
Mortgage loans on real estate 376,783 364,810 334,769
Real estate 40,280 39,684 27,410
Short-term 6,990 5,080 7,298
Other 42,831 33,832 30,717
---------- -------- --------
Total investment income 1,334,789 1,250,891 1,162,019
Less investment expenses 45,288 46,465 41,862
---------- ---------- ----------
Net investment income $1,289,501 1,204,426 1,120,157
========== ========== ==========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ (703,851) - -
Equity securities (1,990) (128,837) (9,195)
Fixed maturities held-to-maturity (421,427) 223,392 17,774
----------- -------- --------
$(1,127,268) 94,555 8,579
=========== ======== ========
</TABLE>
74 of 108
<PAGE> 75
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
An analysis of realized gains (losses) on investments by investment
type follows for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Realized on disposition of investments:
Securities available-for-sale:
Fixed maturities $(13,720) - -
Equity securities 1,427 129,728 7,215
Fixed maturities - 21,159 13,399
Mortgage loans on real estate (16,130) (17,763) (30,334)
Real estate and other 5,765 (12,813) (12,997)
---------- -------- --------
(22,658) 120,311 (22,717)
---------- -------- --------
Valuation allowances:
Securities available-for-sale:
Fixed maturities 6,600 - -
Fixed maturities - (934) 1,792
Mortgage loans on real estate (4,332) (10,478) (5,969)
Real estate and other 4,006 4,774 7,579
---------- -------- --------
6,274 (6,638) 3,402
---------- -------- --------
$(16,384) 113,673 (19,315)
========== ======== ========
</TABLE>
The amortized cost and estimated fair value of securities
available-for-sale and fixed maturities held-to-maturity were as
follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities available-for-sale
-----------------------------
Fixed maturities:
US Treasury securities and obligations of US
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political
subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
----------- ---------- ---------- ----------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,373 6,636 (296) 24,713
----------- ---------- ---------- ----------
$8,337,238 77,887 (344,506) 8,070,619
=========== ========== ========== ==========
Fixed maturity securities held-to-maturity
------------------------------------------
Obligations of states and political
subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
----------- ---------- ---------- ----------
$3,688,787 34,383 (120,860) 3,602,310
=========== ========== ========== ==========
</TABLE>
75 of 108
<PAGE> 76
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of investments of fixed
maturity securities were as follows as of December 31, 1993:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US
government corporations and agencies $ 287,738 18,204 (392) 305,550
Obligations of states and political
subdivisions 16,519 2,700 (5) 19,214
Debt securities issued by foreign governments 137,092 7,719 (1,213) 143,598
Corporate securities 6,819,355 647,778 (15,648) 7,451,485
Mortgage-backed securities 2,860,274 121,721 (15,022) 2,966,973
----------- ---------- ---------- ----------
$10,120,978 798,122 (32,280) 10,886,820
=========== ========== ========== ==========
</TABLE>
As of December 31, 1993 the net unrealized gain on equity
securities, before providing for deferred Federal income tax, was
$8,330, comprised of gross unrealized gains of $8,345 and gross
unrealized losses of $15.
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale and fixed maturity securities
held-to-maturity as of December 31, 1994, by contractual maturity,
are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
---------- -----------
<S> <C> <C>
Fixed maturity securities available-for-sale
--------------------------------------------
Due in one year or less $ 294,779 294,778
Due after one year through five years 2,553,825 2,490,886
Due after five years through ten years 1,382,311 1,327,089
Due after ten years 544,091 558,514
---------- -----------
4,775,006 4,671,267
Mortgage-backed securities 3,543,859 3,374,639
---------- -----------
$8,318,865 8,045,906
========== ===========
Fixed maturity securities held-to-maturity
------------------------------------------
Due in one year or less $ 333,517 333,000
Due after one year through five years 1,953,179 1,942,260
Due after five years through ten years 1,080,069 1,013,083
Due after ten years 322,022 313,967
---------- -----------
$3,688,787 3,602,310
========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during
1994 were $247,876, while proceeds from sales of investments in
fixed maturity securities during 1993 were $33,959 ($123,422 during
1992). Gross gains of $3,406 ($2,413 in 1993 and $3,194 in 1992) and
gross losses of $21,866 ($39 in 1993 and $513 in 1992) were realized
on those sales.
Investments that were non-income producing for the twelve month
period preceding December 31, 1994 amounted to $11,513 ($13,158 for
1993) and consisted of $11,111 ($10,907 in 1993) in real estate and
$402 ($2,251 in 1993) in other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$29,275 in 1994 ($24,717 in 1993) and valuation allowances of $27,330
in 1994 ($31,357 in 1993). Other valuation allowances are $0 in 1994
($6,680 in 1993) on fixed maturities and $47,892 in 1994 ($42,350 in
1993) on mortgage loans on real estate.
76 of 108
<PAGE> 77
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company generally initiates foreclosure proceedings on all
mortgage loans on real estate delinquent sixty days. Foreclosures
of mortgage loans on real estate were $37,187 in 1994 ($39,281 in
1993) and mortgage loans on real estate in process of foreclosure or
in-substance foreclosed as of December 31, 1994 totaled $19,878
($24,658 as of December 31, 1993), which approximates fair value.
Investments with an amortized cost of $11,137 and $11,383 as of
December 31, 1994 and 1993, respectively, were on deposit with various
regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for traditional life and
individual health policies has been established based upon the
following assumptions:
Interest rates: Interest rates vary as follows:
<TABLE>
<CAPTION>
Year of issue Life Health
------------- ---- ------
<S> <C> <C>
1994 7.2 %, not graded - permanent contracts with loan provisions; 5.0%
6.0%, not graded - all other contracts
1984-1993 7.4% to 10.5%, not graded 5.0% to 6%
1966-1983 6% to 8.1%, graded over 20 years to 4% to 6.6% 3.5% to 6%
1965 and prior generally lower than post 1965 issues 3.5% to 4%
</TABLE>
Withdrawals: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
Mortality: Mortality and morbidity rates are based on
published tables, modified for the Company's actual experience.
The liability for future policy benefits for investment contracts
(approximately 81% and 80% of the total liability for future policy
benefits as of December 31, 1994 and 1993, respectively) has been
established based on policy term, interest rates and various contract
provisions. The average interest rate credited on investment product
policies was 6.5%, 7.0% and 7.5% for the years ended December 31, 1994,
1993 and 1992, respectively.
Future policy benefits and claims for group long-term disability
policies are the present value (primarily discounted at 5.5%) of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve
discounting is not material. Future policy benefits and claims on
other group health policies are not discounted.
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Balance as of January 1 $591,258 760,312 672,581
Less reinsurance recoverables 429,798 547,786 445,934
--------- -------- --------
Net balance as of January 1 161,460 212,526 226,647
--------- -------- --------
Incurred related to:
Current year 273,299 309,721 360,545
Prior years (26,156) (26,248) (17,433)
--------- -------- --------
Total incurred 247,143 283,473 343,112
--------- -------- --------
Paid related to:
Current year 175,700 208,978 226,886
Prior years 73,889 125,561 130,347
--------- -------- --------
Total paid 249,589 334,539 357,233
--------- -------- --------
Unpaid claims of ELICW (note 14) 40,223 - -
--------- -------- --------
Net balance as of December 31 199,237 161,460 212,526
Plus reinsurance recoverables 457,694 429,798 547,786
--------- -------- --------
Balance as of December 31 $656,931 591,258 760,312
======== ======== ========
</TABLE>
77 of 108
<PAGE> 78
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
As a result of changes in estimates for insured events of prior
years, the provision for claims and claim adjustment expenses
decreased in each of the three years ended December 31, 1994 due to
lower-than-anticipated costs to settle accident and health claims.
(7) Federal Income Tax
------------------
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the
deferral from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was
accumulated in the Policyholders' Surplus Account (PSA). Management
considers the likelihood of distributions from the PSA to be remote;
therefore, no Federal income tax has been provided for such
distributions in the consolidated financial statements. The DRA
eliminated any additional deferrals to the PSA. Any distributions
from the PSA, however, will continue to be taxable at the then current
tax rate. The balance of the PSA is approximately $35,344 as of
December 31, 1994.
The Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
109 - ACCOUNTING FOR INCOME TAXES (SFAS 109), as of January 1, 1993.
See note 3. The 1992 consolidated financial statements have not
been restated to apply the provisions of SFAS 109.
The significant components of deferred income tax expense for the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Deferred income tax expense (exclusive of the
effects of other components listed below) $9,657 29,930
Adjustments to deferred income tax assets and
liabilities for enacted changes in tax laws
and rates - 1,704
------ ------
$9,657 31,634
====== ======
</TABLE>
For the year ended December 31, 1992, the deferred income tax
benefit results from timing differences in the recognition of
income and expense for income tax and financial reporting purposes.
The primary sources of those timing differences were deferred policy
acquisition costs (deferred expense of $16,457) and reserves for future
policy benefits (deferred benefit of $32,045).
Total Federal income tax expense for the years ended December 31,
1994, 1993 and 1992 differs from the amount computed by applying the
U.S. Federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
Amount % Amount % Amount %
------- ---- -------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $95,631 35.0 $109,515 35.0 $44,390 34.0
Tax exempt interest and dividends
received deduction (194) (0.1) (2,322) (0.7) (4,172) (3.2)
Current year increase in U.S. Federal
income tax rate - - 1,704 0.5 - -
Real estate valuation allowance
adjustment - - - - (3,463) (2.7)
Other, net (5,933) (2.1) (2,139) (0.7) (3,013) (2.3)
------- ---- -------- ---- ------- ----
Total (effective rate of each
year) $89,504 32.8 $106,758 34.1 $33,742 25.8
======= ==== ======== ==== ======= ====
</TABLE>
Total Federal income tax paid was $87,576, $58,286 and $63,124 during
the years ended December 31, 1994, 1993 and 1992, respectively.
78 of 108
<PAGE> 79
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- ---------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $124,044 129,995
Fixed maturity securities available-for-sale 95,536 -
Liabilities in Separate Accounts 94,783 64,722
Mortgage loans on real estate and real estate 25,632 24,020
Other policyholder funds 7,137 7,759
Other assets and other liabilities 57,528 41,390
-------- ---------
Total gross deferred tax assets 404,660 267,886
-------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 317,224 243,731
Fixed maturities, equity securities and other
long-term investments 3,620 11,137
Other 47,301 44,677
-------- ---------
Total gross deferred tax liabilities 368,145 299,545
-------- ---------
Net deferred tax asset (liability) $ 36,515 (31,659)
======== =========
</TABLE>
The Company has determined that valuation allowances are not
necessary as of December 31, 1994 and 1993 and January 1, 1993 (date of
adoption of SFAS 109) based on its analysis of future deductible
amounts. All future deductible amounts can be offset by future
taxable amounts or recovery of Federal income tax paid within the
statutory carryback period. In addition, for future deductible
amounts for securities available-for-sale, affiliates of the Company
which are included in the same consolidated Federal income tax return
hold investments that could be sold for capital gains that could offset
capital losses realized by the Company should securities
available-for-sale be sold at a loss.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of
fair value information about existing on and off-balance sheet financial
instruments. In cases where quoted market prices are not available,
fair value is based on estimates using present value or other valuation
techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities that
are classified as investment contracts, are specifically exempted from
SFAS 107 disclosures, estimated fair value of policy reserves on
insurance contracts are provided to make the fair value disclosures more
meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the balance sheets for these instruments
approximate their fair value.
79 of 108
<PAGE> 80
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
INVESTMENT SECURITIES: Fair value for fixed maturity
securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services
or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on quoted
market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices.
The fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on
real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans
to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is valued at the estimated fair
value of the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value
is the amount payable on demand. For investment contracts with
known or determined maturities, fair value is estimated using
discounted cash flow analysis. Interest rates used are similar
to currently offered contracts with maturities consistent with
those remaining for the contracts being valued.
POLICY RESERVES ON INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the
amount payable on demand. Also included are disclosures for the
Company's limited payment policies, which the Company has used
discounted cash flow analyses similar to those used for investment
contracts with known maturities to estimate fair value.
POLICYHOLDERS DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated
balance sheets for these instruments approximates their fair value.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on insurance contracts were as
follows as of December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturities $ 8,045,906 8,045,906 - -
Equity securities 24,713 24,713 16,593 16,593
Fixed maturities held-to-maturity 3,688,787 3,602,310 10,120,978 10,886,820
Mortgage loans on real estate 4,222,284 4,173,284 3,871,560 4,175,271
Policy loans 340,491 340,491 315,898 315,898
Short-term investments 131,643 131,643 41,797 41,797
Cash 7,436 7,436 21,835 21,835
Assets held in Separate Accounts 12,222,461 12,222,461 9,006,388 9,006,388
Liabilities
-----------
Investment contracts 12,189,894 11,657,556 10,332,661 10,117,288
Policy reserves on insurance contracts 3,170,085 2,934,384 2,945,120 2,873,503
Policyholders' dividend accumulations 338,058 338,058 322,686 322,686
Other policyholder funds 72,770 72,770 71,959 71,959
Liabilities related to Separate Accounts 12,222,461 11,807,331 9,006,388 8,714,586
</TABLE>
80 of 108
<PAGE> 81
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to
extend credit in the form of loans. These instruments involve, to
varying degrees, elements of credit risk in excess of amounts
recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and
the borrower's loan collateral. The underlying mortgage property
represents the collateral if the commitment is funded. The Company's
policy for new mortgage loans on real estate is to lend no more than
80% of collateral value. Should the commitment be funded, the
Company's exposure to credit loss in the event of nonperformance by
the borrower is represented by the contractual amounts of these
commitments less the net realizable value of the collateral. The
contractual amounts also represent the cash requirements for all
unfunded commitments. Commitments on mortgage loans on real estate
of $243,200 extending into 1995 were outstanding as of December 31,
1994.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (23% in 1993) in any geographic area and no more than 2%
(2% in 1993) with any one borrower. The summary below depicts loans
by remaining principal balance as of each December 31:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
-------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
-------- --------- --------- --------- ----------
$669,832 613,707 2,176,705 816,831 4,277,075
======== ========= ========= =========
Less valuation allowances and unamortized discount 54,791
----------
Total mortgage loans on real estate, net $4,222,284
==========
1993:
East North Central $109,208 108,478 470,755 158,964 847,405
East South Central 27,562 1,460 117,341 69,991 216,354
Mountain 3,228 4,742 105,560 23,065 136,595
Middle Atlantic 56,664 52,766 132,821 15,414 257,665
New England 10,565 48,398 142,530 8 201,501
Pacific 174,409 185,116 389,428 65,497 814,450
South Atlantic 112,640 58,165 391,102 238,337 800,244
West North Central 104,933 13,458 78,408 3,917 200,716
West South Central 50,955 47,103 183,420 161,033 442,511
-------- --------- ------- --------- ----------
$650,164 519,686 2,011,365 736,226 3,917,441
======== ========= ========= =========
Less valuation allowances and unamortized discount 45,881
----------
Total mortgage loans on real estate, net $3,871,560
==========
</TABLE>
81 of 108
<PAGE> 82
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
NLIC, FHLIC, WCLIC, NCC, and NFS participate together with other
affiliated companies, in a pension plan covering all employees who
have completed at least one thousand hours of service within a
twelve-month period and who have met certain age requirements. Plan
contributions are invested in a group annuity contract of NLIC.
Benefits are based upon the highest average annual salary of any
three consecutive years of the last ten years of service. The Company
funds pension costs accrued for direct employees plus an allocation of
pension costs accrued for employees of affiliates whose work efforts
benefit the Company.
Pension costs charged to operations by the Company during the years
ended December 31, 1994, 1993 and 1992 were $10,451, $6,702 and
$4,613, respectively.
The Company's net accrued pension expense as of December 31, 1994
and 1993 was $1,836 and $1,472, respectively.
The net periodic pension cost for the plan as a whole for the years
ended December 31, 1994, 1993 and 1992 follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $64,740 47,694 44,343
Interest cost on projected benefit obligation 73,951 70,543 68,215
Actual return on plan assets (21,495) (105,002) (62,307)
Net amortization and deferral (62,150) 20,832 (24,281)
-------- -------- --------
Net periodic pension cost $55,046 34,067 25,970
======== ======== ========
Basis for measurements, net periodic pension cost:
Weighted average discount rate 5.75% 6.75% 7.25%
Rate of increase in future compensation levels 4.50% 4.75% 5.25%
Expected long-term rate of return on plan assets 7.00% 7.50% 8.00%
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $ 914,850 972,475
Nonvested 7,570 10,227
---------- ----------
$ 922,420 982,702
========== ==========
Projected benefit obligation for
services rendered to date 1,305,547 1,292,477
Plan assets at fair value 1,241,771 1,208,007
---------- ----------
Plan assets less than projected benefit
obligation (63,776) (84,470)
Unrecognized prior service cost 46,201 49,551
Unrecognized net losses 39,408 55,936
Unrecognized net assets at January 1, 1987 (21,994) (24,146)
---------- ----------
Net accrued pension expense $ (161) (3,129)
========== ==========
Basis for measurements, funded status of plan:
Weighted average discount rate 7.50% 5.75%
Rate of increase in future compensation levels 6.75% 4.50%
</TABLE>
82 of 108
<PAGE> 83
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, NLIC, FHLIC, WCLIC,
NCC and NFS participate with other affiliated companies in life and
health care defined benefit plans for qualifying retirees.
Postretirement life and health care benefits are contributory and
available to full time employees who have attained age 55 and
have accumulated 15 years of service with the Company after reaching
age 40. Postretirement life insurance contributions are based on age
and coverage amount of each retiree. Postretirement health care
benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. The accounting for the
health care plan anticipates future cost-sharing changes to the
written plan that are consistent with the Company's expressed intent
to increase the retiree contribution amount annually for expected
health care inflation. The Company's policy is to fund the cost of
health care benefits in amounts determined at the discretion of
management. The Company began funding in 1994. Plan assets are
invested in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106),
which requires the accrual method of accounting for postretirement
life and health care insurance benefits based on actuarially
determined costs to be recognized over the period from the date of
hire to the full eligibility date of employees who are expected to
qualify for such benefits. Postretirement benefit cost for 1992, which
was recorded on a cash basis, has not been restated.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly,
a noncash charge of $32,275 ($20,979 net of related income tax
benefit) was recorded in the consolidated statement of income as a
cumulative effect of a change in accounting principle. See note 3.
The adoption of SFAS 106, including the cumulative effect of the
change in accounting principle, increased the expense for
postretirement benefits by $35,277 to $36,544 in 1993. Net periodic
postretirement benefit cost for 1994 was $4,627. The Company's
accrued postretirement benefit obligation as of December 31, 1994 and
1993 was $36,001 and $35,277, respectively.
Actuarial assumptions for the measurement of the December 31, 1994
accumulated postretirement benefit obligation include a discount rate
of 8% and an assumed health care cost trend rate of 11%, uniformly
declining to an ultimate rate of 6% over 12 years.
Actuarial assumptions for the measurement of the December 31, 1993
accumulated postretirement benefit obligation and the 1994 net
periodic postretirement benefit cost include a discount rate of 7% and
an assumed health care cost trend rate of 12%, uniformly declining to
an ultimate rate of 6% over 12 years.
Actuarial assumptions used to determine the accumulated postretirement
benefit obligation as of January 1, 1993 and the 1993 net periodic
postretirement benefit cost include a discount rate of 8% and an
assumed health care cost trend rate of 14%, uniformly declining to an
ultimate rate of 6% over 12 years.
Information regarding the funded status of the plan as a whole as of
December 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 76,677 90,312
Fully eligible, active plan participants 22,013 24,833
Other active plan participants 59,089 84,103
--------- ---------
Accumulated postretirement benefit obligation 157,779 199,248
Plan assets at fair value 49,012 -
--------- ---------
Plan assets less than accumulated postretirement benefit
obligation (108,767) (199,248)
Unrecognized net (gains) losses (41,497) 15,128
--------- ---------
Accrued postretirement benefit obligation $(150,264) (184,120)
========= =========
</TABLE>
83 of 108
<PAGE> 84
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amount of net periodic postretirement benefit cost for the plan as
a whole for the years ended December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Net periodic postretirement benefit cost:
Service cost - benefits attributed to employee service during the year $ 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,011 13,928
Actual return on plan assets (1,622) -
Net amortization and deferral 1,622 -
------- ------
Net periodic postretirement benefit cost $22,597 21,018
======= ======
</TABLE>
The health care cost trend rate assumption has a significant effect
on the amounts reported. A one percentage point increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1994 and 1993 by
$8,109 and $15,621, respectively, and the net periodic postretirement
benefit cost for the years ended December 31, 1994 and 1993 by $866 and
$2,377, respectively.
(12) Portfolio Transfer of Credit Life and Credit Accident and Health
----------------------------------------------------------------
On March 13, 1992, WCLIC entered into an assignment and assumption
agreement with American Bankers Life Assurance Company of Florida
(ABLAC) under which ABLAC assumed, by portfolio transfer, substantially
all of WCLIC's credit life and accident and health policies in force as
of January 1, 1992. A pre-tax loss of approximately $15,000 was
recognized from this transaction in 1992. The loss represents
approximately $34,000 of amortization of deferred policy acquisition
costs, less approximately $27,000 in ceded commissions earned, plus
death benefits incurred and other expenses. Under the terms defined in
the assignment and assumption agreement, WCLIC is contingently liable
for adverse development of claims activity up to a defined limit. As
of December 31, 1994, WCLIC has provided for a contingent liability
based on the development of claims experience through December 31,
1994. As of December 31, 1993, WCLIC had provided for the maximum
contingent liability in the absence of conclusive claims experience
development.
(13) Regulatory Risk-Based Capital, Retained Earnings and Dividend
-------------------------------------------------------------
Restrictions
------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The
formulas for determining the amount of risk-based capital specify
various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk.
Regulatory compliance is determined by a ratio of the company's
regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level risk-based capital, as defined by the NAIC.
Companies below specific trigger points or ratios are classified
within certain levels, each of which requires specified corrective
action. NLIC and each of its insurance subsidiaries exceed the minimum
risk-based capital requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, at the year-end shall
inure to the benefit of the shareholders. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall be
used only for the payment or apportionment of dividends to participating
policyholders at least to the extent required by statute or for the
purpose of making up any loss on participating policies.
In the opinion of counsel for the Company, the ultimate ownership of
the entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
84 of 108
<PAGE> 85
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable
to participating policies in excess of the amounts paid as dividends
to policyholders belong to the shareholder rather than the
policyholders, and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares
was $1,904,664, $1,647,353, and $1,426,427 as of December 31,
1994, 1993 and 1992, respectively. The amount thereof not
presently available for dividends to the shareholder due to the New
York restrictions and to adjustments relating to GAAP was $929,934,
$954,037 and $841,583 as of December 31, 1994, 1993 and 1992,
respectively.
Ohio law limits the payment of dividends to shareholders. The
maximum dividend that may be paid by the Company without prior
approval of the Director of the Department of Insurance of the State
of Ohio is limited to the greater of statutory gain from operations of
the preceding calendar year or 10% of statutory shareholder's surplus
as of the prior December 31. Therefore, $1,707,110, of shareholder's
equity, as presented in the accompanying consolidated financial
statements, is restricted as to dividend payments in 1995.
California law limits the payment of dividends to shareholders of
WCLIC. The maximum dividend that may be paid by WCLIC without
prior approval of the Commissioner of the State of California
Department of Insurance is limited to the greater of WCLIC's
statutory net income of the preceding calendar year or 10% of
WCLIC's statutory shareholder's surplus as of the prior December 31.
Therefore, $126,489 of WCLIC's shareholder's equity is restricted as
to dividend payments in 1995.
Wisconsin law limits the payment of dividends to shareholders of ELICW.
The maximum dividend that may be paid by ELICW without prior approval
of the Commissioner of the State of Wisconsin is limited to the greater
of ELICW's statutory net income of the preceding calendar year or 10%
of ELICW s statutory surplus as of the prior December 31, Therefore,
$135,369 of ELICW's shareholder's equity is restricted as to dividend
payments in 1995.
Michigan law limits the payment of dividends to shareholders of NCC.
The maximum dividend that may be paid by NCC without prior approval
of the Commissioner of the State of Michigan Bureau of Insurance is
limited to the greater of NCC's statutory net income, not including
realized capital gains, of the preceding calendar year or 10% of
NCC's statutory shareholder's surplus as of the prior December 31.
Therefore, $66,564 of NCC's shareholder's equity is restricted as to
dividend payments in 1995. In addition, prior approval is not required
for a dividend which does not increase gross leverage to a point in
excess of the United States consolidated industry average for the most
recent available year.
(14) Transactions With Affiliates
----------------------------
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of ELICW from Wausau Service Corporation (WSC) for an
amount approximating $165,000, subject to specified adjustments, if
any, subsequent to year end. NLIC transferred fixed maturity
securities and cash with a fair value of $155,000 to WSC on
December 28, 1994, which resulted in a realized loss of $19,239 on
the disposition of the securities. An accrual approximating $10,000
is reflected in the accompanying consolidated balance sheet. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share
home office, other facilities, equipment and common management and
administrative services with WSC.
The deferred compensation annuity line of business of the Company
is primarily sold through Public Employees Benefit Services
Corporation (PEBSCO). The Company paid PEBSCO commissions and
administrative fees of $26,699, $22,681 and $20,146 in 1994, 1993 and
1992, respectively. PEBSCO is a wholly owned subsidiary of Corp.
The Company and NEA Valuebuilder Investor Services, Inc. (NEAVIS) have
contracted with the National Education Association (NEA) to provide
individual annuity contracts to be marketed exclusively to members of
the NEA. The Company paid NEAVIS a marketing development fee of
$11,095, $9,229 and $6,426 in 1994, 1993 and 1992, respectively.
NEAVIS is a wholly owned subsidiary of Corp.
The Company shares home office, other facilities, equipment and
common management and administrative services with affiliates.
85 of 108
<PAGE> 86
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the
securities will be repurchased by the seller at the original sales
price plus a price differential. Transactions under the agreements
during 1994 and 1993 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC,
NLIC and WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and
ELICW as of December 31, 1994. These contracts are immaterial to
the consolidated financial statements.
NCC participates in several 100% quota share reinsurance agreements
with NMIC. NCC serves as the licensed insurer as required for an
affiliated excess and surplus lines company and cedes 100% of direct
written premiums to NMIC. In 1989, NCC transferred 100% of assets and
unearned premiums and loss reserves related to a discontinued block of
assumed reinsurance to NMIC (95.3%) and Nationwide Mutual Fire
Insurance Company (4.7%). Effective January 1, 1993, NCC entered into
a 100% quota share reinsurance agreement to cede to NMIC 100% of all
written premiums not subject to any other reinsurance agreements.
As a result of these agreements, and in accordance with STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 113 - ACCOUNTING AND REPORTING FOR
REINSURANCE OF SHORT-DURATION AND LONG-DURATION CONTRACTS, the
following amounts are included in the consolidated financial statements
as of December 31, 1994 and 1993 for reinsurance ceded:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Reinsurance recoverable $575,721 533,401
Unearned premium reserves (118,092) (102,644)
Loss and claim reserves (371,974) (352,303)
Loss and expense reserves (85,655) (78,454)
-------- --------
$ 0 0
======== ========
</TABLE>
The ceding of reinsurance does not discharge the original insurer
from primary liability to its policyholder. The insurer which assumes
the coverage assumes the related liability and it is the practice of
insurers to treat insured risks, to the extent of reinsurance ceded,
as though they were risks for which the original insurer is not liable.
Management believes the financial strength of NMIC reduces to an
acceptable level any risk to NCC under these intercompany reinsurance
agreements.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $92,531 and $28,683 at December 31,
1994 and 1993, respectively, and are included in short-term
investments on the accompanying consolidated balance sheets.
(15) Bank Lines of Credit
--------------------
As of December 31, 1994 and 1993, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization. Additionally, NFS had $27,000 of confirmed
but unused bank lines of credit.
86 of 108
<PAGE> 87
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) Contingencies
-------------
The Company is a defendant in various lawsuits. In the
opinion of management, the effects, if any, of such lawsuits
are not expected to be material to the Company's financial
position or results of operations.
(17) Major Lines of Business
-----------------------
The Company operates in the life and accident and health lines of
business in the life insurance and property and casualty insurance
industries. Life insurance operations include whole life, universal
life, variable universal life, endowment and term life insurance and
annuity contracts issued to individuals and groups. Accident and
health operations also provide coverage to individuals and groups.
The following table summarizes the revenues and income before Federal
income tax and cumulative effect of changes in accounting principles
for the years ended December 31, 1994, 1993 and 1992 and assets as of
December 31, 1994, 1993 and 1992, by line of business.
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Life insurance $ 1,577,809 1,479,956 1,406,417
Accident and health 345,544 339,764 475,290
Investment income allocated to capital and surplus 122,847 214,806 51,611
----------- --------- ---------
Total $ 2,046,200 2,034,526 1,933,318
=========== ========= =========
Income before Federal income tax and cumulative
effect of changes in accounting principles:
Life insurance 141,650 83,917 78,627
Accident and health 13,220 15,043 436
Investment income allocated to capital and surplus 118,360 213,941 51,496
----------- --------- ---------
Total $ 273,230 312,901 130,559
=========== ========= =========
Assets:
Life insurance 28,351,628 22,982,186 19,180,561
Accident and health 852,026 773,007 343,535
Capital and surplus 1,908,479 1,651,168 1,430,242
----------- --------- ---------
Total $31,112,133 25,406,361 20,954,338
=========== ========= =========
</TABLE>
Included in life insurance revenues are premiums from certain annuities
with life contingencies of $20,134 ($35,341 and $54,066 for the years
ended December 31, 1993 and 1992, respectively) as well as universal
life and investment product policy charges of $239,021 ($188,057 and
$148,464 for the years ended December 31, 1993 and 1992 respectively)
for the year ended December 31, 1994.
Allocations of investment income and certain general expenses were
based on a number of assumptions and estimates, and reported operating
results would change by line if different methods were applied.
Investment income and realized gains allocable to policyholders in 1994
were $1,193,292 and $1,775, respectively.
(18) Subsequent Event
----------------
On January 30, 1995, FHLIC received approval from the Ohio Secretary of
State to change its name to Nationwide Life and Annuity Insurance
Company.
87 of 108
<PAGE> 88
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: PAGE
(1) Financial statements and schedule included
in Prospectus.
(Part A):
Condensed Financial Information. 14
(2) Financial statements and schedule included
in Part B:
Those financial statements and schedule 50
required by Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account-II:
Independent Auditors' Report. 50
Statement of Assets, Liabilities and Contract 51
Owners' Equity as of December 31, 1994.
Statements of Operations and Changes in 52
Contract Owners' Equity for the years ended
December 31, 1994, 1993 and 1992.
Notes to Financial Statements. 53
Schedule 1. 58
Nationwide Life Insurance Company:
Independent Auditors' Report. 64
Consolidated Balance Sheets as of December 65
31, 1994 and 1993.
Consolidated Statements of Income for the 66
years ended December 31, 1994, 1993 and
1992.
Consolidated Statements of Shareholder's 67
Equity for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows for 68
the years ended December 31, 1994, 1993
and 1992.
Notes to Consolidated Financial Statements. 69
88 of 108
<PAGE> 89
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing the establishment of the Registrant -
Filed previously with the Registration Statement for
the Nationwide Variable Account-II (File No.
2-75059), and hereby incorporated herein by
reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts between
the Registrant and Principal Underwriter - Filed
previously with the Registration Statement for the
Nationwide Variable Account-II (File No. 2-75059),
and hereby incorporated herein by reference.
(4) The form of the variable annuity contract -
Attached hereto.
(5) Variable Annuity Application - Attached
hereto
(6) Articles of Incorporation of Depositor - Filed
previously with the Registration Statement for the
Nationwide Variable Account-II (File No. 2-75059),
and hereby incorporated herein by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Attached hereto.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
89 of 108
<PAGE> 90
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Peter F. Frenzer President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson President and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
</TABLE>
90 of 108
<PAGE> 91
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Investment Product Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health, and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales
One Nationwide Plaza Financial Services
Columbus, OH 43215
Carl J. Santillo Senior Vice President
One Nationwide Plaza Life and Health Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
Joseph F. Ciminero Vice President-
One Nationwide Plaza Financial Operations
Columbus, OH 43215
</TABLE>
91 of 108
<PAGE> 92
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic
One Nationwide Plaza Planning/Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
92 of 108
<PAGE> 93
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Nationwide Mutual Insurance Company Ohio Insurance Company
(Casualty)
Nationwide Mutual Fire Insurance Company Ohio Insurance Company
Nationwide Investing Foundation Michigan Investment Company
Nationwide Insurance Enterprise Foundation Ohio Membership Non-Profit
Corporation
Nationwide Insurance Golf Charities, Inc. Ohio Membership Non-Profit
Corporation
Farmland Mutual Insurance Company Iowa Insurance Company
F & B, Inc. Iowa Insurance Agency
Farmland Life Insurance Company Iowa Life Insurance Company
Nationwide Agribusiness Insurance Company Iowa Insurance Company
Colonial Insurance Company of California California Insurance Company
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Property & Casualty Insurance Ohio Insurance Company
Company
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Indemnity Company Ohio Insurance Company
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
Neckura General Insurance Company Germany Insurance Company
Columbus Service, GMBH Germany Insurance Broker
Auto-Direkt Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative service for
Neckura Insurance Group
SVM Sales GMBH, Neckura Insurance Group Germany Sales support for Neckura
Insurance Group
</TABLE>
93 of 108
<PAGE> 94
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
Colonial County Mutual Insurance Company Texas Insurance Company
Nationwide Communications Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Redevelopment Ohio Redevelopment of blighted
Corporation areas within the City of
Columbus, Ohio
Insurance Intermediaries, Inc. Ohio Insurance Broker and
Insurance Agency
Nationwide Cash Management Company Ohio Investment Securities Agent
California Cash Management Company California Investment Securities Agent
Nationwide Development Company Ohio Owns, leases and manages
commercial real estate
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
Gates, McDonald & Company of New York New York Workers Compensation Claims
Administration
Nationwide Indemnity Company Ohio Reinsurance Company
NWE, Inc. Ohio Special Investments
</TABLE>
94 of 108
<PAGE> 95
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<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 Health Care Corporation Ohio Develops and operates
Managed Care Delivery System
InHealth, Inc. Ohio Health Maintenance
Organization (HMO)
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates
Managed Care Delivery System
**West Coast Life Insurance Company California Life Insurance Company
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance
Administration, Claims
Examining, and Data
Processing Services
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
Leber Direkt Insurance Company Germany Life Insurance Company
**Nationwide Life Insurance Company Ohio Life Insurance Company
</TABLE>
95 of 108
<PAGE> 96
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and
deals in Real Property.
** MRM Investments, Inc. Ohio Owns and operates a
Recreational Ski Facility
** National Casualty Company Michigan Insurance Company
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and
Administrator
* Nationwide Separate Account Trust Massachusetts Investment Company
* Nationwide Investing Foundation II Massachusetts Investment Company
* Financial Horizons Investment Trust Massachusetts Investment Company
PEBSCO Securities Corp. Oklahoma Registered Broker-Dealer in
Deferred Compensation Market
** National Premium and Benefit Delaware Insurance Administrative
Administration Company Services
Public Employees Benefit Services Delaware Marketing and Administration
Corporation of Deferred Employee
Compensation Plans for
Public Employees
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers
Agency, Inc. Deferred Compensation Plans
for Public Employees
</TABLE>
96 of 108
<PAGE> 97
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation Plans
for Public Employees
Wausau Lloyds Texas Texas Lloyds Company
Wausau Service Corporation Wisconsin Holding Company
American Marine Underwriters, Inc. Florida Underwriting Manager
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and
Medicare Supplement Insurance
Wausau Business Insurance Company Illinois Insurance Company
Wausau Preferred Health Insurance Company Wisconsin Insurance and Reinsurance
Company
Wausau Insurance Co. Limited (U.K.) United Kingdom Insurance and Reinsurance
Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
Employers Life Insurance Company of Wausau Wisconsin Life Insurance Company
</TABLE>
97 of 108
<PAGE> 98
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
Wausau General Insurance Company Illinois Insurance Company
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
Wausau International Underwriters California Special Risks, Excess and
Surplus Lines Insurance
Underwriting Manager
Companies Agency, Inc. (Wisconsin) Wisconsin Insurance Broker
Companies Agency Insurance Services of California Insurance Broker
California, Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Key Health Plan, Inc. California Pre-paid health plans
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration,
record keeping and
consulting and compensation
consulting
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for
Policies placed through
Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Massachusetts, Inc. Massachusetts Insurance Broker
</TABLE>
98 of 108
<PAGE> 99
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Companies Agency of New York, Inc. New York Insurance Broker
Nationwide Financial Institution Oklahoma Life Insurance Agency
Distributors Agency of Oklahoma, Inc.
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Institution Ohio Insurance Agency
Distributors Agency of Ohio, Inc.
Landmark Financial Services of New York, New York Life Insurance Agency
Inc.
Nationwide Financial Institution Alabama Life Insurance Agency
Distributors Agency of Alabama, Inc.
Financial Horizons Securities Corporation Oklahoma Broker Dealer
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services, Inc. Delaware Life Insurance Agency
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Ohio, Ohio Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
Nationwide Financial Institution Texas Life Insurance Agency
Distributors Agency of Texas, Inc.
Colonial General Insurance Agency, Inc. Arizona Insurance Agency
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
Video Eagle, Inc. Ohio Operates Several Video Cable
Systems
</TABLE>
99 of 108
<PAGE> 100
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
UNLESS OTHERWISE
COMPANY STATE OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VA Separate Account-A Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance
Annuity Separate Account Contracts
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Issuer of Annuity Contracts
Annuity Separate Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
</TABLE>
100 of 108
<PAGE> 101
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| |=================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | |
| | | | | WAUSAU LLOYDS |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | |
| ------------- Shares | | ------------- Shares |=============| |
| | | | | |
| Cost | | Cost | | |
| ---- | | ---- | | A TEXAS LLOYDS |
| Employers-- | | Employers-- | | |
| 100% $15,683,300 | | 100% $106,763,000 | | |
|_______________________________| |________________________________| |_____________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 5,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $11,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $24,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
|
|
|
|
|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. (AMU) |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | (WISCONSIN) | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| NATIONWIDE ENTERPRISE INSURANCE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
===| NATIONWIDE MUTUAL |=============================================| NATIONWIDE MUTUAL |
| (CASUALTY) | | FIRE |
|_________________________________________| |___________________________|
| | | |__________________________________________________________________ :
| | | | | :
______________|__________ | | | _____________________________ _____________|_:____________________
| ALLNATIONS | | | | | NATIONWIDE | | NATIONWIDE |
| | | | | | GENERAL | | CORPORATION |
| Common Stock: 2,939 | | | | | | | |
| ------------- Shares | | | | | Common Stock: 20,000 Shares | | Common Stock: Control |
| | | | |___| ------------- | | ------------- ------- |
| Cost | | | | | | | $13,092,790 100% |
| ---- | | | | | Cost | | |
| Casualty-26% $88,320 | | | | | ---- | | Shares Cost |
| Fire-26% $88,463 | | | | | Casualty-100% $5,944,422 | | ----- ---- |
|_________________________| | | | |_____________________________| | Casualty $12,443,280 $710,293,557 |
| | | | Fire 649,510 24,007,936 |
_________________________ | | | _____________________________ | |
| FARMLAND MUTUAL | | | | | NATIONWIDE PROPERTY | | (See Page 2) |
| INSURANCE COMPANY | | | | | AND CASUALTY | |____________________________________|
| | | | | | |
| Guaranty Fund |____| | | | Common Stock: 60,000 Shares |
| ------------- |______| |___| ------------- |
| Certificate | | | |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | COLONIAL INS. CO. |
_______________|___________ | | OF CALIFORNIA |
| F & B, INC. | | | |
| | | | Common Stock: 1,750 Shares |
| Common Stock: 1 Share | |___| ------------- |
| ------------- | | | |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | SCOTTSDALE | | COLONIAL GENERAL |
| FARMLAND LIFE | | | INSURANCE COMPANY | | INSURANCE AGENCY, INC. |
| INSURANCE COMPANY | | | | | |
| | | | Common Stock: 30,136 Shares | | Common Stock: 1 Share |
| Common Stock: 1,000,000 |___|___| ------------- |______| ------------ |
| ------------- Shares | | | | | |
| | | | Cost | | Cost |
| Cost | | | ---- | | ---- |
| ---- | | | Casualty-100% $150,000,000 | | Scottsdale- $1,082,336 |
| Casualty-100% $23,826,196 | | |_____________________________| | 100% |
|____________________________| | |__________________________|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| _____________________________
| | NATIONWIDE AGRIBUSINESS |
| | INS. CO. |
| | |
| | Common Stock: 1,000,000 |
| | ------------- Shares |
| | |
|___| Casualty- Cost |
| | 99.9% ---- |
| | $26,300,981 |
| | Other Capital: |
| | Casualty- |
| | Ptd. $713,567 |
| |_____________________________|
|
| _____________________________ ______________________________
| | NECKURA HOLDING CO. | | NECKURA |
| | (NECKURA) | | INSURANCE CO. |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | AUTO INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIRECT |
| | | INSURANCE CO. |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
|
|
|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE INDEMNITY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares | | Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | |______| |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty $5,000,000 | | Colonial $500,000 |
| | 100% | | Lone Star 150,000 |
| |_____________________________| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | CASH MANAGEMENT |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________ __________________________
| | CALIFORNIA | | VIDEO EAGLE INC. |
| | CASH MANAGEMENT | | |
| | | | Common Stock: 750 Shares |
| | Common Stock: 90 Shares | | ------------- |
|___| ------------- | ____| |
| | | | | Cost |
| | Cost | | | ---- |
| | ---- | | | NW Comm.- $0 |
| | Casualty-100% $9,000 | | | 100% |
| |_____________________________| | |__________________________|
| |
| |
|
|
|
|
|
| |
| _____________________________ | __________________________
| | NATIONWIDE | | | THE BEAK AND |
| | COMMUNICATIONS INC. | | | WIRE CORPORATION |
| | | | | |
| | Common Stock: 14,750 Shares | | | Common Stock: 750 Shares |
|___| ------------- |__|___| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Associated Companies - Dotted Line
Contractural Association - Double Line
December 31, 1994
</TABLE>
101 of 108
<PAGE> 103
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|__________________
| NATIONWIDE LIFE |
| Common Stock: 3,814,779 |
| ------------- Shares |
| |
| NW Corp.- Cost |
| 100% ---- |
| $909,179,664 |
|______________________________|
|
_________________________________________________________________________________|
| | |
____________|____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | FINANCIAL HORIZONS |
| FINANCIAL SERVICES | | Common Stock: 100 Shares | | | LIFE |
| Common Stock: 7,676 | | ------------- | | | Common Stock: 66,000 |
______| ------------- Shares | _____| | |_______| ------------- Shares |
| ____| Cost | | | Cost | | | NW Life- Cost |
| | | ---- | | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |_________________________| | |___________________________| | |______________________________|
| | | | | |
| | _________________________ | ___________|_|_____________ |
| | | NATIONWIDE | | | | |
| | | INVESTOR SERVICES | | | | |
| | | Common Stock: 5 Shares | | | NCC OF AMERICA, | |
| |____| ------------- | | | INC. (INACTIVE) | | ______________________________
| | | | | | | | | WEST COAST LIFE |
| | | NW Fin. Serv.- Cost | | | | | | Common Stock: 1,000,000 |
| | | 100% ---- | | | | | | ------------- Shares |
| | | $5,000 | | | | |_______| Cost |
| | |_________________________| | |___________________________| | | ---- |
| | | | | NW Life-100% $92,762,014 |
| | _________________________ | ___________________________ | |______________________________|
| | | NATIONWIDE | | | HICKEY-MITCHELL | |
| | | INVESTING | | | INSURANCE AGENCY | |
| | | FOUNDATION | | | Common Stock: 101 Shares | |
| |____| | |_____| ----------- | |
| ____| | | | | ______________________________
| | | | | Cost | | | EMPLOYERS LIFE INSURANCE CO. |
| | | | | ---- | | | OF WAUSAU (EL) |
| | | COMMON LAW TRUST | | Nat. Cas.-100% $4,701,200 | | | |
| | |_________________________| |___________________________| | | Common Stock: 250,000 Shares |
| | | |_______| ------------- |
| | _________________________ ____________|______________ | | ---- |
| | | NATIONWIDE | | NATIONAL PREMIUM & | | | NW Life-100% $165,627,416 |
| | | INVESTING | | BENEFIT ADMINISTRATION | | |______________________________|
| |____| FOUNDATION II | | Common Stock: 10,000 | | |
| ____| | | ------------ Shares | | |
| | | | | Cost | | |
| | | | | Hickey- ---- | | ___________|_________________
| | | COMMON LAW TRUST | | Mitchell-100% $1,319,469 | | | WAUSAU PREFERRED |
| | |_________________________| |___________________________| | | HEALTH INS. CO. |
| | | | |
| | | | Common Stock: 200 Shares |
| | _________________________ | | ------------- |
| | | NATIONWIDE | | | EL -- 100% Cost |
| |____| SEPARATE ACCOUNT | | | ---- |
| ____| TRUST | | | $51,413,193 |
| | | COMMON LAW TRUST | | |_____________________________|
| | |_________________________| |
| | |
| | |
| | _________________________ |
| | | FINANCIAL HORIZONS | | ______________________________
| |____| INVESTMENT TRUST | | | NATIONWIDE |
|______| TRUST | | | PROPERTY MANAGEMENT |
| COMMON LAW TRUST | | | Common Stock: 59 Shares |
|_________________________| |_______| ------------- |
| | |
| | Cost |
| | ---- |
| | NW Life-100% $1,907,896 |
| |______________________________|
| |
| |
| |
| |
| ____________|_________________
| | MRM INVESTMENTS, INC. |
| | Common Stock: 1 Share |
| | ------------ |
| | |
| | Cost |
| | Nat. Prop. ---- |
| | Mgmt.-100% $550,000 |
| |______________________________|
|
|
| ___________________________
| | NWE, INC. |
| | |
| | Common Stock: 100 Shares |
|_______| |
| NW Life-100% Cost |
| ---- |
| $35,971,375 |
|___________________________|
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| (CASUALTY) |___________________________________________________________
| |
|_______________________________________|
| _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
__________________|______________|___
| NATIONWIDE CORPORATION |
| Common Stock: Control: |
| ------------- ------- |
| 13,092,790 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty $12,443,280 $710,293,557 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_______________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES | | GATES, McDONALD | | FINANCIAL HORIZONS |
| BENEFIT SERV. CORP. | | & COMPANY (GATES) | | DISTRIBUTORS AGY., INC. |
______| Common Stock: 236,494 | | Common Stock: 254 Shares | | Common Stock: 1,000 Shares|
| ____| ------------- Shares | | ------------- |___ _____| ------------- |
| | | Cost | | | | | ___| |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $12,830,936 | | ---- | | | | | NW Corp. ---- |
| | |___________________________| | MW Corp.- $22,126,323 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- Shares | | | | | |___| Common Stock: 10,000 |
| | | Cost | | Cost | | | | | ----------- Shares |
| | | Pub. Emp. Ben. ---- | | ---- | | | | | Cost |
| | | Serv.Corp.-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |___________________________| | | | | | | FHDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ___________________________ | GATES, McDONALD & Co. | | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | NEW MEXICO | | | | | | | LANDMARK FINANCIAL |
| | | Common Stock: 1,000 | | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____| ------------- Shares | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | ---- | | | | ------------- Shares |
| | | Serv.Corp.-100% $1,000 | | $93,750 | | | | Cost |
| | |___________________________| |___________________________| | | | ---- |
| | | | | FHDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 | | | | FINANCIAL HORIZONS |
| |____| ------------- Shares | | | | SECURITIES CORP. |
| | | Cost | | |___| Common Stock: 10,000 |
| | | Pub. Emp. Ben. ---- | | | | ------------- Shares |
| | | Serv.Corp. 100% $500 | | | | Cost |
| | |___________________________| | | | ---- |
| | | | | FHDAI-100% $153,000 |
| | | | |___________________________|
| | | |
| | ___________________________ | |
| | | PEBSCO OF | ___________________________ | |
| | | MONTANA | | AFFILIATE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 500 | | | | | | |
| | | ------------- Shares | | Common Stock: 100 Shares |__ | | | FINANCIAL HORIZONS |
| | | Cost | | | | |___| DISTRIBUTORS |
| | | Pub. Emp. Ben. ---- | | FHDAI-100% Cost | | ___| AGENCY OF TEXAS, |
| | | Serv.Corp.-100% $500 | | ---- | | | | INC. |
| | |___________________________| | $100 | | | |___________________________|
| | |___________________________| | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | ALABAMA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 100,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OHIO, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ---- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | MASSACHUSETTS | | | | |
| | | INSURANCE AGENCY, INC. | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 1,000 | | ___| DISTRIBUTORS AGY. |
| | | ------------- Shares | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | Pub. Emp. Ben. ----- | | |
| | | Serv.Corp.-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____ AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE (FIRE) |
| |
|_______________________________________|
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | INHEALTH, INC. |
| INVESTOR SERVICES, INC. | | | Common Stock: 100 |
_______| Common Stock: 500 | | | ------------ Shares |
| _____| ------------- Shares | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $12,046,413 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | NATIONWIDE |
| | | INVESTOR SERVICES | | | HEALTH CARE |
| |_____| OF ALABAMA, INC. | |_____| Common Stock: 15 Shares |
| | | Common Stock: 500 | _____| ------------ |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW Corp.- ---- |
| | | NEA-100% $5,000 | | | 100% $16,850,000 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MGT. |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| | | OF OHIO, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 100 | |_____| ------------- |
| | | ------------- Shares | | | |
| | | Cost | | | Cost |
| | | ----- | | | NW Health ---- |
| | | NEA-91% $5,000 | | | Care-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | | | | INHEALTH |
| | | | | | AGENCY, INC. |
| | | NEA VALUEBUILDER | | | Common Stock: 99 Shares |
| |_____| INVESTOR SERVICES | |_____| ------------- |
| | | OF TEXAS, INC. | | Cost |
| | | | | NW Health ---- |
| | | | | Corp.-99% $116,077 |
| | |___________________________| |___________________________|
| |
| | ___________________________
| | | |
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
<FN>
Subsidiary Companies -- Solid Line
Associated Companies -- Dotted Line
Contractual Association -- Double Line
December 31, 1994
</TABLE>
Page 2
102 of 108
<PAGE> 106
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract Owners of Qualified and Non-Qualified
Contracts as of February 17, 1995 was 5,579 and 7,451
respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State
of Ohio, for indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or
employee of the Company, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Financial Services, Inc. ("NFS") acts as general
distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Variable Account-8,
Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL
Separate Account-A, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, NACo Variable Account and
the Nationwide Variable Account, all of which are separate
investment accounts of the Company or its affiliates.
NFS also acts as principal underwriter for the Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide
Investing Foundation II, which are open-end management
investment companies.
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olivet, NC 28365
Willard J. Engel Director
1100 E. Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
103 of 108
<PAGE> 107
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
Peter F. Frenzer Vice Chairman, President
One Nationwide Plaza and Director
Columbus, OH 43215
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Henry S. Holloway Director
1247 Stafford Road
Darlington, MD 21034
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
D. Richard McFerson President and
One Nationwide Plaza Chief Executive Officer--Nationwide
Columbus, OH 43215 Insurance Enterprise and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Roy Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
Robert H. Rickel Director
P.O. Box 319
Bayview, ID 83803
Arden L. Shisler Director
2724 West Lebanon Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Chairman of the Board of Directors
14282 King Road
Bowling Green, OH 43402
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
104 of 108
<PAGE> 108
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager and Treasurer
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
Harry S. Schermer Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Rae I. Mercer Secretary
One Nationwide Plaza
Columbus, OH 43215
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
----------- ---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Financial
Services,
Inc.
</TABLE>
105 of 108
<PAGE> 109
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Joseph F. Ciminero
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Internal Revenue Code of 1986, as amended, is issued by the
Registrant in reliance upon, and in compliance with, the
Securities and Exchange Commission's no-action letter to the
American Council of Life Insurance (publicly available November
28, 1988) which permits withdrawal restrictions to the extent
necessary to comply with IRC Section 403(b)(11).
106 of 108
<PAGE> 110
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide Variable Account - II
Individual Deferred Variable Annuity Contract
PROSPECTUS
May 1, 1995
107 of 108
<PAGE> 111
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT-II, certifies that it meets
the requirements of Securities Act Rule 485(a) 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 11th
day of August, 1995.
NATIONWIDE VARIABLE ACCOUNT-II
-----------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-----------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
-----------------------------------------
Joseph P. Rath
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 11th day
of August, 1995.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
----------------------------
Lewis J. Alphin
WILLARD J. ENGEL Director
----------------------------
Willard J. Engel
FRED C. FINNEY Director
----------------------------
Fred C. Finney
PETER F. FRENZER President/Chief
---------------------------- Operating Officer and Director
Peter F. Frenzer
CHARLES L. FUELLGRAF, JR. Director
----------------------------
Charles L. Fuellgraf, Jr.
HENRY S. HOLLOWAY Chairman of the Board
---------------------------- and Director
Henry S. Holloway
D. RICHARD McFERSON Chief Executive Officer
---------------------------- and Director
D. Richard McFerson
DAVID O. MILLER Director
----------------------------
David O. Miller
C. RAY NOECKER Director
----------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
---------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By: JOSEPH P. RATH
---------------------------- --------------------------------
James F. Patterson Joseph P. Rath, Attorney-in-Fact
ROBERT H. RICKEL Director
----------------------------
Robert H. Rickel
ARDEN L. SHISLER Director
----------------------------
Arden L. Shisler
ROBERT L. STEWART Director
----------------------------
Robert L. Stewart
NANCY C. THOMAS Director
----------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
----------------------------
Harold W. Weihl
</TABLE>
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