<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [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)
================================================================================
The Registrant elects to register an indefinite number of securities 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 accompanies
this registration.
Approximate date of proposed public offering: (Upon the effective date of this
Registration Statement.)
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall therefore become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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NATIONWIDE VARIABLE ACCOUNT - II
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<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 .................................................... N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies .............. 13
Item 6. Deductions and Expenses ............................................................ 15
Item 7. General Description of Variable Annuity Contracts .................................. 15
Item 8. Annuity Period ..................................................................... 19
Item 9. Death Benefit and Distributions .................................................... 21
Item 10. Purchases and Contract Value ..................................................... 24
Item 11. Redemptions ...................................................................... 26
Item 12. Taxes ............................................................................ 27
Item 13. Legal Proceedings ................................................................ 31
Item 14. Table of Contents of the Statement of Additional Information ..................... 31
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page ....................................................................... 39
Item 16. Table of Contents ................................................................ 39
Item 17. General Information and History .................................................. 39
Item 18. Services ......................................................................... 39
Item 19. Purchase of Securities Being Offered ............................................. 39
Item 20. Underwriters ..................................................................... 40
Item 21. Calculation of Performance Information ........................................... 40
Item 22. Annuity Payments ................................................................. 40
Item 23. Financial Statements ............................................................. 41
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits ................................................ 70
Item 25. Directors and Officers of the Depositor .......................................... 72
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant ... 74
Item 27. Number of Contract Owners ........................................................ 83
Item 28. Indemnification .................................................................. 83
Item 29. Principal Underwriter ............................................................ 83
Item 30. Location of Accounts and Records ................................................. 85
Item 31. Management Services .............................................................. 85
Item 32. Undertakings ..................................................................... 85
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 16609
Columbus, Ohio 43216-6609, 1-800-848-6331
TDD 1-800-238-3035
INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VARIABLE ACCOUNT-II
OF NATIONWIDE LIFE INSURANCE COMPANY
The Individual Deferred Variable Annuity Contracts described in this
prospectus are flexible purchase payment contracts (collectively referred to as
the "Contracts"). The Contracts are sold to individuals for use in retirement
plans which may qualify for special federal tax treatment under the Internal
Revenue Code (the "Code"). Annuity payments under the Contracts are deferred
until a selected later date.
Purchase Payments are allocated to the Nationwide Variable Account-II
("Variable Account"), a separate account of Nationwide Life Insurance Company
(the "Company"). The Variable Account uses its assets to purchase shares at Net
Asset Value in one or more of the following series of the underlying Mutual Fund
options:
DREYFUS
Dreyfus Stock Index Fund The Dreyfus Socially Responsible Growth Fund
FIDELITY VARIABLE INSURANCE PRODUCTS (VIP) FUND
Equity-Income Portfolio Growth Portfolio High Income Portfolio*
Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS (VIP) FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT)
Capital Appreciation Fund Government Bond Fund Money Market Fund
Small Company Fund Total Return Fund
NEUBERGER & BERMAN 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 SPECIAL FUND II, INC.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. Strong International Stock Fund, II
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International
VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund Worldwide Bond Fund
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Real Estate Securities Fund
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 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 November 1,
1996, 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 the number listed above, or writing P.O. Box 16609, Columbus, Ohio
43216-6609.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.
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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 NOVEMBER 1, 1996, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 29 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 1, 1996.
2
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<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person designated to receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of the 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 actually commence.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract and is subject to change by the Owner.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The person designated to receive certain benefits under the
Contract upon the death of the Designated Annuitant prior to the Annuitization
Date. The Beneficiary can be changed by the Contract Owner as set forth in the
Contract.
CODE-The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT BENEFICIARY- The Contingent Beneficiary is the person designated to
be the Beneficiary if the named Beneficiary is not living at the time of the
death of the Designated Annuitant.
CONTINGENT DESIGNATED ANNUITANT- The Contingent Designated Annuitant may be the
recipient of certain rights or benefits under this Contract when the Designated
Annuitant dies before the Annuitization Date. If a Contingent Designated
Annuitant is named on the application, all provisions of the Contract which are
based on the death of the Designated Annuitant will be based on the death of the
last survivor of the Designated Annuitant and the Contingent Designated
Annuitant. A Contingent Designated Annuitant may not be named for Contracts
issued as IRAs or Tax Sheltered Annuities.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. A Contingent Owner
may not be named for Contracts issued as IRAs or Tax Sheltered Annuities.
CONTRACT- The Individual Deferred Variable Annuity Contract described in this
prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Designated Annuitant, Contingent
Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity Payment
Option, or the Annuity Commencement Date.
CONTRACT VALUE- The sum of the value of all Variable Account Accumulation Units
attributable to the Contract.
CONTRACT YEAR- Each year the Contract remains in force, commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant
(or Contingent Designated Annuitant, if applicable) prior to the Annuitization
Date. This benefit does not apply upon the death of the Contract Owner when the
Owner and Designated Annuitant are not the same person. If the Annuitant dies
after the Annuitization Date, any benefit that may be payable shall be as
specified in the Annuity Payment Option elected.
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<PAGE> 6
DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
DISTRIBUTION- Any payment of part or all of the Contract Value.
ERISA- Employee Retirement Income Security Act of 1974, as amended.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA)- An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.
JOINT OWNER- The Joint Owner, if any, possesses an individual interest in the
entire Contact 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 FUND (FUND) - A registered management investment company, in which the
assets of the Sub-Accounts of the Variable Account will be invested.
NET ASSET VALUE- The worth of one share at the end of a market day or at the
close of the New York Stock Exchange. Net Asset Value is computed by adding the
value of all portfolio holdings plus other assets, deducting liabilities and
then dividing the result by the number of shares outstanding.
NON-QUALIFIED CONTRACT- A Contract which does not qualify for favorable tax
treatment under the provisions of Sections 401 and 403(a) (Qualified Plans), 408
(IRAs) or 403(b) (Tax Sheltered Annuities) of the Code.
PLAN PARTICIPANT-The Plan Participant is the person for whom contributions are
being made to a Qualified Plan or Tax Sheltered Annuity either through employer
contributions or employee salary reduction contributions.
PURCHASE PAYMENT- A deposit of new value in the Contract. The term "Purchase
Payment" does not include transfers among the Sub-Accounts.
QUALIFIED CONTRACT- A Contract which receives favorable tax treatment under the
provisions of the Code, including those described in Section 401 and 403(a).
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a sufficient
degree of trading of the 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- 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 underlying 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
UNDERLYING MUTUAL FUND EXPENSES ................................................................. 8
SYNOPSIS ........................................................................................ 11
CONDENSED FINANCIAL INFORMATION ................................................................. N/A
NATIONWIDE LIFE INSURANCE COMPANY ............................................................... 11
THE VARIABLE ACCOUNT ............................................................................ 11
Underlying Mutual Fund Options ......................................................... 12
Voting Rights .......................................................................... 12
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS ............................... 13
Mortality Risk Charge .................................................................. 13
Expense Risk Charge .................................................................... 13
Administration Charge .................................................................. 13
Premium Taxes .......................................................................... 13
Expenses of Variable Account ........................................................... 13
Investments of the Variable Account .................................................... 13
Right to Revoke ........................................................................ 14
Transfers .............................................................................. 14
Assignment ............................................................................. 14
Loan Privilege ......................................................................... 14
Ownership Provisions ................................................................... 16
Contingent Owner and Beneficiary Provisions ............................................ 16
Substitution of Securities ............................................................. 17
Contract Owner Inquiries ............................................................... 17
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT ......................................................... 17
Value of an Annuity Unit ............................................................... 17
Assumed Investment Rate ................................................................ 17
Frequency and Amount of Annuity Payments ............................................... 17
Annuity Commencement Date .............................................................. 18
Change in Annuity Commencement Date .................................................... 18
Change in Form of Annuity .............................................................. 18
Annuity Payment Options ................................................................ 18
Death of Contract Owner ................................................................ 19
Death of Designated Annuitant Prior to the Annuitization Date .......................... 19
Death Benefit After the Annuitization Date ............................................. 20
Required Distribution for Qualified Plans or Tax Sheltered Annuities ................... 20
Required Distributions for Individual Retirement Annuities ............................. 20
Generation-Skipping Transfers .......................................................... 21
GENERAL INFORMATION ............................................................................. 21
Contract Owner Services ................................................................ 21
Statements and Reports ................................................................. 22
Allocation of Purchase Payments and Contract Value ..................................... 22
Value of a Variable Account Accumulation Unit .......................................... 23
Net Investment Factor .................................................................. 23
Valuation of Assets .................................................................... 24
Determining the Contract Value ......................................................... 24
Surrender (Redemption) ................................................................. 24
Surrenders Under a Qualified Plan or Tax Sheltered Annuity Contract .................... 24
Taxes .................................................................................. 25
Non-Qualified Contracts ................................................................ 25
Diversification ........................................................................ 26
Charge for Tax Provisions .............................................................. 27
Qualified Plans, Individual Retirement Annuities, Individual Retirement Accounts and
Tax Sheltered Annuities .............................................................. 27
Advertising ............................................................................ 27
</TABLE>
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<TABLE>
<S> <C>
LEGAL PROCEEDINGS ............................................................................... 29
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION ................................... 29
APPENDIX A ...................................................................................... 30
APPENDIX B ...................................................................................... 31
</TABLE>
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<PAGE> 9
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge ...................... 0%
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE ........................... $ 0
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges ............................ 1.25%
Administration Charge ......................................... 0.20%
Total Variable Account Annual Expenses ........................ 1.45%
</TABLE>
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<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES1
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Stock Index Fund 0.27% 0.12% 0.39%
- - -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund 0.69% 0.58% 1.27%
- - -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.10% 0.61%
- - -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth Portfolio 0.61% 0.09% 0.70%
- - -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund -High Income Portfolio 0.60% 0.11% 0.71%
- - -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund -Overseas Portfolio 0.76% 0.15% 0.91%
- - -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio 0.71% 0.08% 0.79%
- - -------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.11% 0.72%
- - -------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.04% 0.54%
- - -------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- - -------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.02% 0.52%
- - -------------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund 1.00% 0.25% 1.25%
- - -------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.01% 0.51%
- - -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust-Growth 0.84% 0.10% 0.94%
Portfolio
- - -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.65% 0.10% 0.75%
Trust-Limited Maturity Bond Portfolio
- - -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.85% 0.30% 1.15%
Trust-Partners Portfolio
- - -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds -Oppenheimer 0.75% 0.05% 0.80%
Bond Fund
- - -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.74% 0.15% 0.89%
Global Securities Fund
- - -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.74% 0.03% 0.77%
Multiple Strategies Fund
- - -------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.31% 1.31%
- - -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Strong 1.00% 0.97% 1.97%
Discovery Fund II, Inc.
- - -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. -Strong 1.00% 0.20% 1.20%
International Stock Fund II
- - -------------------------------------------------------------------------------------------------------------
TCI Portfolios Inc.-TCI Balanced 1.00% 0.00% 1.00%
- - -------------------------------------------------------------------------------------------------------------
TCI Portfolios Inc.-TCI Growth 1.00% 0.00% 1.00%
- - -------------------------------------------------------------------------------------------------------------
TCI Portfolios Inc.-TCI International 1.50% 0.00% 1.50%
- - -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Gold and Natural 0.79% 0.15% 0.94%
Resources Fund
- - -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Bond 0.80% 0.16% 0.96%
Fund
- - -------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 1.90% 2.90%
Trust-Real Estate Securities Fund
- - -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-International Equity Portfolio 1.00% 0.44% 1.44%
- - -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth Portfolio 0.90% 0.35% 1.25%
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
1 The Mutual Fund expenses shown above are assessed at the underlying Mutual
Fund level and are not direct charges against Variable Account assets or
reductions from Contract Values. These underlying Mutual Fund expenses are
taken into consideration in computing each underlying Mutual Fund's Net
Asset Value, which is the share price used to calculate the unit values of
the Variable Account. The management fees and other expenses, some of which
are subject to fee waivers or expense reimbursements, are more fully
described in the prospectuses for each individual underlying Mutual Fund.
The information relating to the underlying Mutual Fund expenses was
provided by the underlying Mutual Fund and was not independently verified
by the Company.
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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 If you do not surrender If you annuitize your
Contract your Contract at the end of Contract
at the end of the applicable the applicable time period at the end of the 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>
Dreyfus Stock Index Fund 19 60 103 222 19 60 103 222 * 60 103 222
- - ------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 29 88 149 315 29 88 149 315 * 88 149 315
Responsible Growth Fund
- - ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP 22 67 114 246 22 67 114 246 * 67 114 246
Fund-Equity-Income
Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth 23 70 119 256 23 70 119 256 * 70 119 256
Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High 25 76 130 278 25 76 130 278 * 76 130 278
Income Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP 23 70 120 257 23 70 120 257 * 70 120 257
Fund-Overseas Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund 24 72 124 265 24 72 124 265 * 72 124 265
II-Asset Manager Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund 23 70 120 258 23 70 120 258 * 70 120 258
II-Contrafund Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation 21 65 111 239 21 65 111 239 * 65 111 239
Fund
- - ------------------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 21 64 109 235 21 64 109 235 * 64 109 235
- - ------------------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 21 64 110 236 21 64 110 236 * 64 110 236
- - ------------------------------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund 28 87 148 313 28 87 148 313 * 87 148 313
- - ------------------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 21 64 109 235 21 64 109 235 * 64 109 235
- - ------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 25 77 132 281 25 77 132 231 * 77 132 281
Advisers Management
Trust-Growth Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 23 71 122 261 23 71 122 261 * 71 122 261
Advisers Management
Trust-Limited Maturity
Bond Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 27 84 143 303 27 84 143 303 * 84 143 303
Advisers Management
Trust- Partners Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 24 73 125 266 24 73 125 266 * 73 125 266
Account Funds-Oppenheimer
Bond Fund
- - ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 25 76 129 276 25 76 129 276 * 76 129 276
Account Funds-Oppenheimer
Global Securities Fund
- - ------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 23 72 123 263 23 72 123 263 * 72 123 263
Account Funds-Oppenheimer
Multiple Strategies Fund
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------
If you surrender your If you do not surrender If you annuitize your
Contract your Contract at the end of Contract
at the end of the applicable the applicable time period at the end of the 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>
Strong Variable Insurance 29 89 151 319 29 89 151 319 * 89 151 319
Funds, Inc.-Strong
Discovery Fund II, Inc.
- - ------------------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 36 109 185 383 36 109 185 383 * 109 185 383
Funds, Inc.-Strong
International Stock Fund,
II
- - ------------------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, 28 85 145 308 28 85 145 308 * 85 145 308
Inc.
- - ------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios Inc.-TCI 26 79 135 287 26 79 135 287 * 79 135 287
Balanced
- - ------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios Inc.-TCI 26 79 135 287 26 79 135 287 * 79 135 287
Growth
- - ------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios Inc.-TCI 31 95 161 338 31 95 161 338 * 95 161 338
International
- - ------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 25 78 133 283 25 78 133 283 * 78 133 283
Insurance Trust-Gold and
Natural Resources Fund
- - ------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 25 77 132 281 25 77 132 281 * 77 132 281
Insurance Trust-Worldwide
Bond Fund
- - ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American 46 138 230 466 46 138 230 466 * 138 230 466
Capital Life Investment
Trust-Real Estate
Securities Fund
- - ------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 30 93 158 332 30 93 158 332 * 93 158 332
Trust-International
Equity Portfolio
- - ------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 28 87 148 313 28 87 148 313 * 87 148 313
Trust-Small 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
will be borne directly or indirectly when investing in the Contract. The
expenses of the Nationwide Variable Account-II as well as those of the
underlying Mutual Fund options are reflected in the Example. For more complete
descriptions of the expenses of the Variable Account, see "Variable Account
Charges, Purchase Payments, and Other Deductions." For more complete information
regarding expenses paid out of the assets of the underlying Mutual Fund options,
see the underlying Mutual Funds' prospectuses. Deductions 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
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts, nor is any sales charge deducted upon the surrender of the
Contract.
The Company assesses an Administration Charge equal to an annual rate of
0.20% of the underlying Mutual Fund's daily Net Asset Value of the Variable
Account. These charges are to reimburse the Company for administrative expenses
related to the issue and maintenance of the Contracts. The Company does not
expect to recover from these charges an amount in excess of accumulated
administrative expenses (see "Administration Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of
0.80% of the underlying Mutual Fund's 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 underlying Mutual Fund's 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 at least $1000. The cumulative total of all Purchase Payments
under Contracts issued on the life of any one Designated Annuitant may not
exceed $1,000,000 without the prior consent of the Company (see "Allocation of
Purchase Payments and Contract Value").
If the Contract Value at the Annuitization Date is less than $5,000, the
Contract Value may be distributed in one lump sum in lieu of annuity payments.
If any annuity payment would be less than $50, the Company shall have the right
to change the frequency of payments to such intervals as will result in payments
of at least $50. In no event, however, will annuity payments be made less
frequently than annually (see "Frequency and Amount of Annuity Payments").
Premium taxes payable to any governmental entity will be charged against
the Contracts. If any such premium taxes are payable by the Company at the time
Purchase Payments are made, an equal premium tax deduction may be made from the
Contract prior to the allocation of any Purchase Payment to any underlying
Mutual Fund option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract, the
Contract Owner has a ten day free look. Within ten days of the date 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").
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of
the State of Ohio in March 1929. The Company is a member of the "Nationwide
Insurance Enterprise," with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43216. 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
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Account are, in accordance with the Contracts, credited to or charged against
the Variable Account without regard to other income, gains, or losses of the
Company.
Purchase Payments are allocated within the Variable Account among one or
more Sub-Accounts made up of shares in the underlying Mutual Funds designated by
the Contract Owner. There are two Sub-Accounts within the Variable Account for
each of the underlying Mutual Fund options which may be designated by the
Contract Owner. One such Sub-Account contains the underlying Mutual Funds shares
attributable to Accumulation Units under Qualified Contracts and one such
Sub-Account contains the underlying Mutual Funds shares attributable to
Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different underlying
Mutual Fund options. (See Appendix B which contains a summary of investment
objectives for each underlying Mutual Fund.) 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 Funds may also be available to registered separate
accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Contract Owners and those of other companies, or some other reason. In the
event of conflict, the Company will take any steps necessary to protect the
Contract Owners and variable annuity payees, including withdrawal of the
Variable Account from participation in the underlying Mutual Fund or Mutual
Funds which are involved in the conflict.
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to Purchase
Payments or accumulated amounts allocated to the Variable Account.
In accordance with its view of present applicable law, the Company will
vote the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual Funds.
These shares will be voted in accordance with instructions received from
Contract Owners who have an interest in the Variable Account. If the Investment
Company Act of 1940 or any regulation thereunder should be amended or if the
present interpretation thereof should change, and as a result the Company
determines that it is permitted to vote the shares of the underlying Mutual
Funds in its own right, it may elect to do so.
The person having the voting interest under a Contract shall be the
Contract Owner. The number of underlying Mutual Fund shares attributable to each
Contract Owner is determined by dividing the Contract Owner's interest in each
respective Sub-Account of the Variable Account by the Net Asset Value of the
underlying Mutual Fund corresponding to the Sub-Account.
The number of shares which a 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. Voting instructions will be
solicited by written communication at least 21 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which no
timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to the underlying Mutual Fund, proxy material and a
form with which to give such voting instructions.
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VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated into the Contract which cannot be changed regardless of the death
rates of persons receiving annuity payments or of the general population.
For assuming this mortality risk, the Company deducts a Mortality Risk
Charge from the Variable Account. This amount is computed on a daily basis and
is equal to an annual rate of 0.80% of the underlying Mutual Fund's 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
underlying Mutual Fund's daily Net Asset Value of the Variable Account. The
Company expects to generate a profit through assessing this charge.
ADMINISTRATION CHARGE
The Company assesses an Administration Charge equal to an annual rate of
0.20% of the underlying Mutual Fund's daily Net Asset Value of the Variable
Account. The deduction of the Administration Charge is made from each
Sub-Account in the same proportion that the Contract Value in each Sub-Account
bears to the total Contract Value in the Variable Account. These charges are
designed only to reimburse the Company for administrative expenses and the
Company will monitor these charges to ensure that they do not exceed annual
administration expenses.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon Purchase
Payments received by the Company. Premium taxes currently imposed by certain
jurisdictions range from 0% to 3.5%. This range is subject to change. The method
used to recoup premium tax expense will be determined by the Company at its sole
discretion and in compliance with applicable state law. The Company currently
deducts such charges from 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 become subject to such taxes.
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of expenses:
(1) administrative expenses relating to the issuance and maintenance of the
Contracts; (2) the mortality risk charges associated with guaranteeing the
annuity purchase rates at issue for the life of the Contracts; and (3) charges
associated with guaranteeing that the Mortality Risk, Expense Risk, and
Administration Charges described in this prospectus will not be changed
regardless of actual expenses. If these charges are insufficient to cover these
expenses, the loss will be borne by the Company.
For 1995, the Variable Account incurred total expenses equal to 1.47% 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 or her participation in the Variable Account
allocated among one or more of the Sub-Accounts which consist of shares in the
underlying Mutual Funds. Shares of the respective underlying Mutual Funds
specified by the Contract Owner are purchased at Net Asset Value for the
respective Sub-Account(s) and converted into Accumulation Units. At the time of
purchase, the Contract Owner designates the underlying Mutual Funds to which he
or she desires to have Purchase Payments allocated. 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
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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 return of Purchase Payments. In
order to revoke the Contract, the Contract 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
Transfers among Sub-Account underlying Mutual Fund options are permitted
12 times per year. The Owner's value in each Sub-Account will be determined as
of the date the transfer request is received in good order in the Home Office.
Transfers may be made either in writing or, in states allowing such
transfers, by telephone. This telephone exchange privilege is made available to
Contract Owners automatically without the Owner's election. The Company will
employ 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 the
Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign some or all of the rights
under the Contract at any time during the lifetime of the Designated Annuitant.
Such assignment will take effect upon receipt by the Company of a written notice
thereof executed by the Contract Owner. The Company assumes no responsibility
for the validity or sufficiency of any assignment. The Company shall not be
liable as to any payment or other settlement made by the Company before receipt
of the assignment. Where necessary for the proper administration of the terms of
the Contract, an assignment will not be recorded until the Company has received
sufficient direction from the Contract Owner and the assignee as to the proper
allocation of Contract rights under 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. Assignment of the entire Contract Value may cause the portion of the
Contract Value which exceeds the total investment in the Contract to be included
in gross income each year that the assignment is in effect. Individual
Retirement Annuities, Individual Retirement Accounts and Tax Sheltered Annuities
are not eligible for assignment.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Owner of a Qualified Contract or Tax
Sheltered Annuity Contract may receive a loan from the Contract Value subject to
the terms of the Contract, the Plan, and the Code, which impose restrictions on
loans.
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Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000. In non-ERISA plans, for Contract Values up to $20,000, the
maximum loan balance which may be outstanding at any time is 80% of the Contract
Value, but not more than $10,000. If the Contract Value is $20,000 or more, the
maximum loan balance which may be outstanding at any time is 50% of the Contract
Value, but not more than $50,000. For ERISA plans, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. The $50,000 limit will be reduced by the highest loan balances
owed during the prior one-year period. Additional loans are subject to the
Contract minimum amount. The aggregate of all loans may not exceed the Contract
Value limitations stated above.
For salary reduction Tax Sheltered Annuities, loans may only be secured
by the Contract Value. For loans from Qualified Contracts and other Tax
Sheltered Annuities, the Company reserves the right to limit a loan to 50% of
the Contract Value subject to the acceptance by the Contract Owner of the
Company's loan agreement. Where permitted, the Company may require other named
collateral where the loan from a Contract exceeds 50% of the Contract Value.
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 made among the Variable Accounts in the same proportion as
when the loan was made.
If the Contract is surrendered while the loan is outstanding, the
surrender value will be reduced by the amount of the loan outstanding plus
accrued interest. If the Contract Owner/Annuitant dies while the loan is
outstanding, the Death Benefit will be reduced by the amount of the loan
outstanding plus accrued interest. If annuity payments start while the loan is
outstanding, the Contract Value will be reduced by the amount of the outstanding
loan plus accrued interest. Until the loan is repaid, the Company reserves the
right to restrict any transfer of the Contract which would otherwise qualify as
a transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to accrue.
A grace period may be available under the terms of the loan agreement. If a loan
payment is not made when due, or by the end of the applicable grace period, then
that payment, which may be a single periodic payment or payment of the entire
loan, will be treated as a deemed Distribution, as permitted by law, may be
taxable to the borrower, and may be subject to the early withdrawal tax penalty.
Interest which subsequently accrues on defaulted amounts may also be treated as
additional deemed Distributions each year. Any defaulted amounts, plus accrued
interest, will be deducted from the Contract when the participant becomes
eligible for a Distribution of at least that amount, and this amount may again
be treated as a Distribution where required by law. Additional loans may not be
available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions under
the terms of the employer's plan. Loans permitted under this Contract may still
be taxable in whole or part if the participant has additional loans from other
plans or contracts. The Company will calculate the maximum nontaxable loan based
on the information provided by the participant or the employer.
Loan repayments must be identified as such or else they will be treated
as Purchase Payments, and will not be used to reduce the outstanding loan
principal or interest due. The Company reserves the right to modify the term or
procedures of the loan in the event of a change in the laws or regulations
relating to the treatment
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of loans. The Company also reserves the right to assess a loan processing fee.
Individual Retirement Annuities , SEP-IRA accounts and Non-Qualified Contracts
are not eligible for loans.
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's death prior to the Annuitization Date. Unless
otherwise provided, when Joint Owners are named, the exercise of any ownership
right in the Contract (including the right to surrender or partially surrender
the Contract, to change the Owner, the Contingent Owner, the Designated
Annuitant, the Contingent Designated 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 the 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 Designated Annuitant are not the same person, Contract ownership
will be determined in accordance with the "Death of Contract Owner" provision.
If the Designated Annuitant (regardless of whether the Designated Annuitant is
also the Contract Owner) dies prior to the Annuitization Date, ownership will be
determined in accordance with the "Death of Designated 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 it Home Office, and (3)
may include a signature guarantee as specified in the "Surrender" provision.
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 Designated Annuitant, by written notice to the Company. The change, upon
receipt and recording by the Company at the Home Office, will take effect as of
the time the written notice was signed, whether or not the Designated 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.
The Contract Owner may request a change in the Designated Annuitant or
Contingent Designated 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 Designated Annuitant or
Contingent Designated Annuitant. Any such change is subject to underwriting and
approval by the Company.
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 interests 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. Unless the
Contingent Owner (or Joint Owner) is also the named Beneficiary (or Contingent
Beneficiary, if applicable), the Contingent Owner (or Joint Owner) shall have no
rights in the Contract if the Contract Owner/Annuitant dies. If a Contract
Owner/Annuitant dies, disposition of the Contract shall be determined based on
the "Death of Designated Annuitant Prior to the Annuitization Date" provision.
The Beneficiary is the person or persons who may receive certain benefits
under the Contract in the event the Designated Annuitant dies prior to the
Annuitization Date. If more than one Beneficiary survives the Designated
Annuitant, each will share equally unless otherwise specified in the Beneficiary
designation. If no Beneficiary survives the Designated Annuitant, all rights and
interests 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
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predeceases the Designated Annuitant, all rights and 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 Designated 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 Designated 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.
SUBSTITUTION OF SECURITIES
If the shares of the underlying Mutual Funds described in this prospectus
should no longer be available for investment by the Variable Account or if, in
the judgment of the Company's management, further investment in such underlying
Mutual Fund shares should become inappropriate, the Company may eliminate
Sub-Accounts, combine two or more Sub-Accounts or substitute one or more
underlying Mutual Funds for other underlying Mutual Fund shares already
purchased or to be purchased in the future by Purchase Payments under the
Contract. No substitution of securities in the Variable Account may take place
without prior approval of the Securities and Exchange Commission, and under such
requirements as it may impose.
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 and the amount of the first such payment
made shall be determined in accordance with the Annuity Table in the Contract.
Subsequent Variable Annuity payments vary in amount in accordance with
the investment performance of the Variable Account. The dollar amount of the
first annuity payment determined as above is divided by the value of an Annuity
Unit as of the Annuitization Date to establish the number of Annuity Units
representing each monthly annuity payment. This number of Annuity Units remains
fixed during the annuity payment period. The dollar amount of the second and
subsequent payments is not predetermined and may change from month to month. The
dollar amount of each subsequent payment is determined by multiplying the fixed
number of Annuity Units by the Annuity Unit Value for the Valuation Period in
which the payment is due. The Company guarantees that the dollar amount of each
payment after the first will not be affected by variations in mortality
experience from mortality assumptions used to determine the first payment.
VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit was arbitrarily set initially at $10 when
the first underlying Mutual Fund shares were purchased. The value of an Annuity
Unit for a Sub-Account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the immediately preceding Valuation
Period by the Net Investment Factor for the Valuation Period for which the
Annuity Unit Value is being calculated, and multiplying the result by an
interest factor to neutralize the assumed investment rate of 3.5% per annum
built into the Annuity Tables contained in the Contracts (see "Net Investment
Factor").
ASSUMED INVESTMENT RATE
A 3.5% Assumed Investment Rate is built into the Annuity Tables contained
in the Contracts. A higher assumption would mean a higher initial payment but
more slowly rising or more rapidly falling subsequent payments. A lower
assumption would have the opposite effect. If the actual investment rate is at
the annual rate of 3.5%, the annuity payments will be level.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments. However, if the
net amount available to apply under any Annuity Payment Option is less than
$5,000, the Company shall have the right to pay such amount in one lump sum in
lieu of annuity payments. In addition, if the payments provided for would be or
become less than $50, the Company shall have the right to change the frequency
of payments to such intervals as will result in payments of at least $50. In no
event will the Company make payments under an annuity option less frequently
than annually.
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ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
application. Such date must be the first day of a calendar month and must be at
least 2 years after the Date of Issue. In the event the Contract is issued
subject to the terms of a Qualified Plan, Annuitization may occur during the
first 2 years subject to approval by the Company.
CHANGE IN ANNUITY COMMENCEMENT DATE
The Contract Owner may, upon prior written notice to the Company, change
the Annuity Commencement Date. The date to which such a change may be made shall
be the first day of a calendar month.
If the Contract Owner requests in writing, and the Company approves the
request, the Annuity Commencement Date may be deferred. No further changes in
the Designated Annuitant will be permitted under the Contract. The amount of the
Death Benefit will be limited to the Contract Value if the Annuity Commencement
Date is postponed beyond the first day of the calendar month after the
Designated Annuitant's 86th birthday or such other Annuity Commencement Date
provided under the Contract Owner's Qualified Plan.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at any
time prior to the Annuitization Date, elect one of the Annuity Payment Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the lifetime of
the Annuitant, ceasing with the last payment due prior to the death of
the Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE ANNUITANT
TO RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED BEFORE THE
THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable monthly
during the joint lifetimes of the Annuitant and designated second person
and continuing thereafter during the lifetime of the survivor. AS IS THE
CASE UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM NUMBER OF PAYMENTS
GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST
SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
Option 3-Life Annuity With 120 or 240 Monthly Payments Guaranteed-An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been made
for fewer than 120 or 240 months, as selected, payments will be made as
follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments
will be continued during the remainder of the selected period to
the Beneficiary or the Beneficiary may, at any time, elect to have
the present value of the guaranteed number of annuity payments
remaining paid in a lump sum as specified in section (2) below.
(2) If a Beneficiary is 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 Owner may request an alternative non-guaranteed option by giving notice in
writing prior to Annuitization. If such a request is approved by the Company, it
will be permitted under the Contract.
If the Owner of a Non-Qualified Contract fails to elect an Annuity
Payment Option, the Contract Value will continue to accumulate. Qualified Plan
Contracts, Individual Retirement Annuities or Tax Sheltered Annuities are
subject to the minimum Distribution requirements set forth in the Plan,
Contract, or the Code.
DEATH OF CONTRACT OWNER
In the event the Contract Owner dies, the following rules will apply in
those situations where the Contract was not issued in connection with a
Qualified Plan, Tax Sheltered Annuity or Individual Retirement Annuity:
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(1) If the Contract Owner and the Designated 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,
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, the Contract may be continued
without any required Distribution.
(2) If the Designated Annuitant (regardless of whether the Designated
Annuitant is also the Contract Owner) dies prior to the Annuitization
Date, a Death Benefit will be payable in accordance with the "Death of
Designated Annuitant Prior to the Annuitization Date" provision below.
(3) In the event the Contract Owner/Annuitant dies on or after the
Annuitization Date, Distribution, if any, must be made to the Beneficiary
at least as rapidly as under the method of Distribution being used as of
the date of the Contract Owner/Annuitant's death.
If the Contract Owner is not a natural person, the death of the
Designated Annuitant (or a change of the Designated Annuitant) will be treated
like a death of the Contract Owner and will result in a Distribution pursuant to
Section (1) of this provision, regardless of whether a Contingent Designated
Annuitant has also been named. The Distribution will take the form of either:
(a) the Death Benefit described below under the "Death of Designated
Annuitant Prior to the Annuitization Date" (if the Designated
Annuitant has died and there is no Contingent Designated
Annuitant), or, in all other cases,
(b) the benefit described in Section (1) of this provision, except
that in the event of a change of Designated Annuitant, the benefit
will be paid to the Contract Owner if the Designated Annuitant is
living, or as a Death Benefit to the Beneficiary upon the death of
the Designated Annuitant (and the Contingent Designated Annuitant,
if any) prior to the expiration of the period described in Section
(1) of this provision.
Qualified Contracts, Individual Retirement Annuities or Tax Sheltered
Annuities will be subject to specific rules, set forth in the Plan, Contract, or
Code concerning Distributions upon the death of the Owner/Annuitant.
DEATH OF DESIGNATED ANNUITANT PRIOR TO THE ANNUITIZATION DATE
If the Designated Annuitant dies prior to the Annuitization Date, a Death
Benefit is payable unless the Contract Owner has also named a Contingent
Designated Annuitant, in which case the Death Benefit is payable upon the death
of the last survivor of the Designated Annuitant and Contingent Designated
Annuitant. The Death Benefit is payable to the Beneficiary. If no Beneficiary is
named (or if the Beneficiary predeceases the Designated Annuitant), then the
Death Benefit is payable to the Contingent Beneficiary. If no Contingent
Beneficiary is named (or if the Contingent Beneficiary predeceases the
Designated Annuitant), then the Death Benefit will be paid to Contract Owner or
the Contract Owner's estate.
The value of the Death Benefit will be determined as of the Valuation
Date coincident with or next following the date the Company receives in writing
the following: (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; and (3) any
form required by state insurance laws. If single sum payment is requested,
payment will be made in accordance with any applicable laws and regulations
governing the payment of Death Benefit. If an Annuity Payment Option is
requested, election must be made by the Contract Owner during the 90-day period
commencing with the date written notice is received by the Company. If no
election has been made by the end of such 90-day period, the Death Benefit will
be paid in a single sum payment. If the Designated Annuitant dies prior to his
or her 86th birthday, the value of the Death Benefit will be the greatest 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 Designated Annuitant dies on
or after his or her 86th birthday, then the Death Benefit will be equal to the
Contract Value.
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DEATH BENEFIT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may
be payable shall be as specified in the Annuity Payment Option elected.
REQUIRED DISTRIBUTION FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
The entire interest of an Annuitant under a Qualified Contract or Tax
Sheltered Annuity Contract will be distributed in a manner consistent with the
Minimum Distribution and Incidental Benefit (MDIB) provisions of Section
401(a)(9) of the Code and regulations thereunder, as applicable, and will be
paid, notwithstanding anything else contained herein, to the Owner/Annuitant
under the Annuity Payments Option selected, over a period not exceeding:
A. the life of the Owner/Annuitant or the lives of the
Owner/Annuitant and the Owner/Annuitant's designated Beneficiary;
or
B. a period not extending beyond the life expectancy of the
Owner/Annuitant or the life expectancy of the Owner/Annuitant and
the Owner/Annuitant's designated Beneficiary.
If the Owner/Annuitant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such payments
will commence not later than the first day of April following the calendar year
in which the Owner/Annuitant attains age 70-1/2 (the Required Beginning Date).
In the case of a governmental plan or church plan (as defined in Code Section
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 Owner dies prior to the commencement of his or her Distribution,
the interest in the Qualified Contract or Tax Sheltered Annuity must be
distributed by December 31 of the year in which the fifth anniversary of his or
her death occurs unless:
(a) In the case of a Tax Sheltered Annuity, the Owner names his or her
surviving spouse as the Beneficiary and such spouse elects to:
(i) treat the annuity as a Tax Sheltered Annuity established for his
or her benefit; or
(ii) receive Distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70-1/2; or
(b) In the case of a Tax Sheltered Annuity or a Qualified Contract, the Owner
names a Beneficiary other than his or her surviving spouse and such
Beneficiary elects to receive a Distribution of the account in nearly
equal payments over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the Required Beginning Date will not be less than
the lesser of the quotient obtained by dividing the entire interest of the
Owner/Annuitant by the life expectancy of the Owner/Annuitant, or the joint and
last survivor expectancy of the Owner/Annuitant and the Owner/Annuitant's
Designated Beneficiary (whichever is applicable under the applicable Minimum
Distribution or MDIB provisions). Life expectancy and joint and last survivor
expectancy are computed by the use of return multiples contained in Section
1.72-9 of the Treasury Regulations.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the Owner
attains age 70-1/2. Distribution may be accepted in a lump sum or in nearly
equal payments over: (a) the Owner's life or the lives of the Owner and his or
her spouse or Designated Beneficiary, or (b) a period not extending beyond the
Owner's life expectancy or the life expectancy of the Owner and the Owner's
spouse or designated Beneficiary.
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If the Owner dies prior to the commencement of his or her Distribution,
the interest in the Individual Retirement Annuity must be distributed by
December 31 of the year during which the fifth anniversary of his or her death
occurs unless:
(a) The Owner names his or her surviving spouse as the Beneficiary and such
spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity established
for his or her benefit; or
(ii) receive Distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Owner would have attained age 70-1/2; or
(b) The Owner names a Beneficiary other than his or her surviving spouse and
such Beneficiary elects to receive a Distribution of the account in
nearly equal payments over his or her life (or a period not exceeding his
or her life expectancy) commencing not later than December 31 of the year
following the year in which the Owner dies.
If the Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except to the extent that a surviving spouse Beneficiary may elect to
treat the Contract as his or her own, in the same manner as is described in
Section (a)(i) of this provision.
If the amounts distributed do not satisfy the Distribution rules
mentioned above, a penalty tax of 50% is levied on the amount that should have
been distributed for that year.
A pro-rata portion of all Distributions will be included in the gross
income of the person receiving the Distribution and taxed at ordinary income tax
rates. The portion of the Distribution which is taxable is based on the ratio
between the amount by which non-deductible Purchase Payments exceed prior
non-taxable Distributions and total account balances at the time of the
Distribution. The Owner must annually report the amount of non-deductible
Purchase Payments, the amount of any Distribution, the amount by which
non-deductible Purchase Payments for all years exceed non-taxable Distributions
for all years, and the total balance of all Individual Retirement Accounts and
Annuities.
Individual Retirement Annuity Distributions will not receive the benefit
of the tax treatment of a lump sum Distribution from a Qualified Plan. If the
Owner dies prior to the time Distribution of his or her interest in the annuity
is completed, the balance will also be included in his or her gross estate.
GENERATION-SKIPPING TRANSFERS
The Company may be required to determine whether the Death Benefit or any
other payment constitutes a direct skip as defined in Section 2612 of the Code,
and the amount of the tax on the generation-skipping transfer resulting from
such direct skip. If applicable, such payment will be reduced by any tax the
Company is required to pay by Section 2603 of the Code.
A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Contract Owner.
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 first business day after that day. Asset Rebalancing will not
affect future allocations of Purchase Payments. An Asset Rebalancing request
must be made in writing on a form provided by the Company. The Contract Owner
may wish to contact a financial adviser in order to discuss the use of Asset
Rebalancing in his or her Contract.
Contracts issued to a Qualified Plan or a Tax Sheltered Annuity Plan as
defined by the Code may have superseding plan restrictions with regard to the
frequency of fund exchanges and underlying Mutual Fund options.
The Company reserves the right to discontinue offering Asset Rebalancing
upon 30 days written notice; such discontinuation will not affect Asset
Rebalancing programs which have already commenced. The Company also reserves the
right to assess a processing fee for this service.
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DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer from the Money Market Sub-Account or the Limited Maturity
Bond Portfolio Sub-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 Sub-Account or the Limited Maturity Bond Portfolio
Sub-Account. The minimum monthly Dollar Cost Averaging transfer is $100. A
written election of this service, on a form provided by the Company, must be
completed by the Contract Owner in order to begin transfers. Once elected,
transfers from the Money Market Sub-Account or the Limited Maturity Bond
Portfolio Sub-Account will be processed monthly until either the value in the
Money Market Sub-Account or the Limited Maturity Bond Portfolio Sub-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; such discontinuation not affect Dollar
Cost Averaging programs already commenced. The Company also reserves the right
to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing on a form
provided by the Company to take Systematic Withdrawals by surrendering a
specified dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. The Company will process the withdrawals as directed by
surrendering on a pro-rata basis Accumulation Units from all Sub-Accounts in
which the Contract Owner has an interest. Each Systematic Withdrawal is subject
to federal income taxes on the taxable portion. In addition, a 10% federal
penalty tax may be assessed on Systematic Withdrawals if the Contract Owner is
under age 59-1/2. If directed by the Contract Owner, the Company will withhold
federal income taxes from each Systematic Withdrawal. The Contract Owner may
discontinue Systematic Withdrawals at any time by notifying the Company in
writing.
The Company reserves the right to discontinue offering Systematic
Withdrawals upon 30 days written notice; such discontinuation will not affect
any Systematic Withdrawal programs already commenced. The Company also reserves
the right to assess a processing fee for this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address of
record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give the Company prompt notice of any address
change. The Company will send a confirmation statement to Contract Owners each
time a transaction is made affecting the Owners' Variable Account Contract
Value, such as making additional Purchase Payments, transfers, exchanges or
withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plan (such as a dollar cost averaging program) or salary reduction arrangement,
the Contract Owner may receive confirmation of such transactions in their
quarterly statements. The Contract Owner should review the information in these
statements carefully. All errors or corrections must be reported to the Company
immediately to assure proper crediting to the Owner's Contract. The Company will
assume all transactions are accurately reported in quarterly statements or
confirmation statements unless the Contract Owner notifies the Company otherwise
within 30 days after receipt of the statement. The Company will also send to
Contract Owners each year an annual report and a semi-annual report containing
financial statements for the Variable Account, as of December 31 and June 30,
respectively.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to one or more Sub-Accounts within the
Variable Account in accordance with the designation of the underlying Mutual
Funds by the Contract Owner, and converted into Accumulation Units.
The initial first year Purchase Payment must be at least $15,000 and
additional payments, if any, must be at least $1,000. The Company, however,
reserves the right to lower this $1,000 Purchase Payment minimum for certain
employer sponsored programs. The Contract Owner may increase or decrease
Purchase Payments or change the frequency of payment. The Contract Owner is not
obligated to continue Purchase Payments in the amount or at the frequency
elected. There are no penalties for failure to continue Purchase Payments.
The cumulative total of all Purchase Payments under Contracts issued on
the life of any one Designated Annuitant may not exceed $1,000,000 without prior
consent of the Company.
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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. The Company may, however, retain the
Purchase Payment for up to 5 business days while attempting to complete an
incomplete application. If the application cannot be made complete within 5
days, the prospective purchaser will be informed of the reasons for the delay
and the Purchase Payment will be returned immediately unless the prospective
purchaser specifically consents to the Company retaining the Purchase Payment
until the application is made complete. Thereafter, subsequent Purchase Payments
will be priced on the basis of the Accumulation Unit Value next computed for the
appropriate Sub-Account after the additional Purchase Payment is received.
Purchase Payments will not be priced on the following nationally
recognized holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT
The value of a Variable Account Accumulation Unit for each Sub-Account
was arbitrarily set initially at $10 when underlying Mutual Fund shares in that
Sub-Account were available for purchase. The value for any subsequent Valuation
Period is determined by multiplying the Accumulation Unit value for each
Sub-Account for the immediately preceding Valuation Period by the Net Investment
Factor for the Sub-Account during the subsequent Valuation Period. The value of
an Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period. The number of Accumulation Units will not change as a result of
investment experience.
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:
(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 of:
(1) the Net Asset Value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately
preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved for
in the immediately preceding Valuation Period (see "Charge For Tax
Provisions").
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge deducted from the Variable Account. Such
factor is equal to an annual rate of 1.45 % of the underlying Mutual
Fund's 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.
The Net Investment Factor may be greater or less than one; therefore, the
value of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to changes
in the Net Asset Value of underlying Mutual Fund shares, because of the
deduction for Mortality Risk Charge, Expense Risk Charge and Administration
Charge, and any charge or credit for tax reserves.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their Net Asset Value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract is the Contract Value. The number of Accumulation
Units credited per each Sub-Account are determined by dividing
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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 will be
deducted.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of the
Contract Value. "Proper written application" means that the surrender must be
requested in writing by the Contract Owner, satisfy all good order requirements,
and the Company may require that the signature(s) be guaranteed by a member firm
of the New York, American, Boston, Midwest, Philadelphia, or Pacific Stock
Exchange, or by a commercial bank or a savings and loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases (for example, requests
by a corporation, partnership, agent, fiduciary, or surviving joint owner), the
Company will require additional documentation of a customary nature.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account to equal the gross dollar
amount requested. 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.
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 QUALIFIED PLAN OR TAX SHELTERED ANNUITY CONTRACT
Except as provided below, the Owner may Surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a salary reduction agreement (within the meaning of Code
Section 402(g)(3)(A) or (C)), or transfers from a Custodial Account
described in Section 403(b)(7) of the Code, may be executed only -
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the case
of hardship may not include any income attributable to salary
reduction contributions.
B. The surrender limitations described in A. above for Tax Sheltered
Annuities apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except
that earnings, and employer contributions as of December 31, 1988
in such Custodial Accounts may be withdrawn in the case of
hardship).
C. Any Distribution other than the above, including exercise of a
contractual ten-day free look provision (when available) may result in
the immediate application of taxes and penalties of a Qualified Contract
or Tax Sheltered Annuity.
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A premature Distribution may not be eligible for rollover treatment. To
assist in preventing disqualification in the event of a ten-day free look, the
Company will agree to transfer the proceeds to another contract which meets the
requirements of Section 403(b) of the Code, upon proper direction by the
Contract Owner. The foregoing is the Company's understanding of the withdrawal
restrictions which are currently applicable under Section 403(b)(11) and Revenue
Ruling 90-24. Such restrictions are subject to legislative change and/or
reinterpretation from time to time.
The Contract surrender provisions may also be modified pursuant to the
plan terms and Code tax provisions when the Contract is issued to fund a
Qualified Plan.
INFORMATION CONTAINED HEREIN SHOULD NOT BE SUBSTITUTED FOR THE ADVICE OF
A PERSONAL TAX ADVISER.
TAXES
The Company does not make any guarantee regarding the tax status of any
Contract or any transaction involving the Contracts.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth different rules for: (1) Qualified Contracts; (2) Individual
Retirement Annuities and Individual Retirement Accounts; (3) Tax Sheltered
Annuities; or (4) Non-Qualified Contracts. Each type of annuity is discussed
below.
Distributions to participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on the ratio between the after tax investment of
the Owner/Annuitant in the Contract and the value of the Contract at the time of
the withdrawal or Annuitization.
Distributions from Individual Retirement Annuities and Contracts owned by
Individual Retirement Accounts are also generally taxed when received. The
portion of each such payment which is excludable is based on the ratio between
the amount by which nondeductible Purchase Payments to all such Contracts
exceeds prior non-taxable Distributions from such Contracts, and the total
account balances in such Contracts at the time of the Distribution. The Owner of
such Individual Retirement Annuities or the Annuitant under Contracts held by
Individual Retirement Accounts must annually report to the Internal Revenue
Service the amount of nondeductible Purchase Payments, the amount of any
Distribution, the amount by which nondeductible Purchase Payments for all years
exceed non-taxable Distributions for all years, and the total balance in all
Individual Retirement Annuities and Accounts. Owners should consult a financial
consultant, legal counsel or tax advisor to discuss in detail the taxation and
the use of the Contracts.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion of
each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Designated Annuitant dies prior to excluding
from income the entire investment in the Contract, the Designated 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 surrender, dividends, loans,
any portion of the Contract that is assigned or pledged, or any portion of the
Contract transferred by gift. For these purposes, a transfer by gift may occur
upon Annuitization if the Contract Owner and the Designated Annuitant are not
the same individual. In determining the taxable amount of a Distribution, all
annuity contracts issued by the same company to the same contract owner in any
calendar year, will be treated as one annuity contract. 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 the Contracts used to fund Qualified Plans, Individual Retirement Annuities
and Tax Sheltered Annuities;
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immediate annuities; and certain Contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium contract on which payments begin within one year of purchase. If this
Contract is issued as the result of an exchange described in Code Section 1035,
it will generally be considered to have been purchased on the purchase date of
the contract given up in the exchange.
Code Section 72 also provides for a penalty, equal to 10% of any
Distribution which is includable in gross income, if such Distribution is made
prior to attaining age 59-1/2, the death or disability of the Contract Owner.
The penalty does not apply if the Distribution is one of a series of
substantially equal periodic payments made over the life or life expectancy (or
joint lives or life expectancies) of the Designated Annuitant (and the
Designated Annuitant's Beneficiary), or is made from an immediate annuity, or is
allocable to an investment in the Contract before August 14, 1982. A Contract
Owner wishing to begin taking Distributions to which the 10% tax penalty does
not apply should forward a written request to the Company. Upon receipt of a
written request from the Contract Owner, the Company will inform the Contract
Owner of the procedures pursuant to Company Policy and subject to limitations of
the Contract including but not limited to first year withdrawals. If the
Contract Owner/Designated Annuitant selects an annuity for life or life
expectancy, or begins a predefined series of withdrawals based on 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 Designated Annuitant will also pay interest on
the amount of the penalty from the date it would have originally applied until
it is actually paid.
In order to qualify as an Annuity Contract under Section 72 of the Code,
the Contract must provide for Distribution to be made upon the death of the
Contract Owner. In such case the Designated Annuitant, Beneficiary or other
named recipient must receive the Distribution within 5 years of the Owner's
death. However, the recipient may elect for payments to be made over his or her
life or life expectancy if such payments begin within one year from the death of
the Contract Owner. If the Contract Owner's Beneficiary is the surviving spouse,
such spouse may be treated as the Contract Owner and the Contract may be
continued throughout the life of the surviving spouse. 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 Qualified Plans or Tax Sheltered
Annuities").
The Company is required to withhold tax from certain Distributions to the
extent that such Distribution would constitute income to the Contract Owner. The
Contract Owner is entitled to elect not to have federal income tax withheld from
any such Distribution, but may be subject to penalties in the event insufficient
federal income tax is withheld during a calendar year.
Generally the taxable portion of any Distribution from a Contract to a
nonresident alien of the United States is subject to tax withholding at a rate
equal to thirty percent (30%) of such amount or, if applicable, a lower treaty
rate. A payment may not be subject to withholding where the recipient
sufficiently establishes that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and such payment
is includable in the recipient's gross income.
Payment of a benefit or transfer of any property to an individual two or
more generations younger than the Contract Owner may constitute a
generation-skipping transfer, subject to taxation under Section 2601 et seq. of
the Code.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the Code relating to diversification standards for the investments
underlying a variable annuity contract. The regulations provide that a variable
annuity contract which does not satisfy the diversification standards will not
be treated as an annuity contract, unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and the owner or the company pays an
amount to the Internal Revenue Service. The amount will be based on the tax that
would have been paid by the owner if the income, for the period the contract was
not diversified, had been received by the owner. If the failure to diversify is
not corrected in this manner, the owner of an annuity contract will be deemed
the owner of the underlying securities and will be taxed on the earnings of his
or her account. The Company believes, under its interpretation of the Code and
regulations thereunder, that the investments underlying this Contract meet these
diversification standards.
Representatives of the Internal Revenue Service have suggested, from time
to time, that the number of underlying Mutual Funds available or the number of
transfer opportunities available under a variable product
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may be relevant in determining whether the product qualifies for the desired tax
treatment. No formal guidance has been issued in this area. Should the Secretary
of the Treasury issue additional rules or regulations limiting the number of
underlying Mutual Funds, transfers between underlying Mutual Funds, exchanges of
underlying Mutual Funds or changes in investment objectives of underlying Mutual
Funds such that the Contract would no longer qualify as an annuity under Section
72 of the Code, the Company will take whatever steps are available to remain in
compliance.
CHARGE FOR TAX PROVISIONS
The Company is no longer required to maintain a capital gain reserve
liability on Non-Qualified Contracts since capital gains attributable to assets
held in the Company's Variable Account for such Contracts are not taxable to the
Company. However, the Company reserves the right to implement and adjust the tax
charge in the future, if the tax laws change.
QUALIFIED PLANS, INDIVIDUAL RETIREMENT ANNUITIES, INDIVIDUAL RETIREMENT ACCOUNTS
AND TAX SHELTERED ANNUITIES
The Contracts may be used with Qualified Plans, Individual Retirement
Annuities, Individual Retirement Accounts, Tax Sheltered Annuities and other
plans receiving favorable tax treatment. For information regarding eligibility,
limitations on permissible amounts of Purchase Payments, and tax consequences on
Distribution from such plans, the purchasers of such Contracts should seek
competent advice. The terms of such plans may limit the rights available under
the Contracts.
The Code permits the rollover of most Distributions from Qualified Plans
to other Qualified Plans, Individual Retirement Accounts, or Individual
Retirement Annuities. Most Distributions from Tax Sheltered Annuities may be
rolled into another Tax Sheltered Annuity, an Individual Retirement Account, or
an Individual Retirement Annuity. Distributions which may not be rolled over
are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the
employee, b) the joint lives (or joint life expectancies) of the
employee and the employee's designated Beneficiary, or c) for a
specified period of ten years or more, or
2. a required minimum Distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the Distribution is transferred directly
to an appropriate plan as described in this provision.
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
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.
The Contract is available for Qualified Plans electing to comply with
section 404(c) of ERISA. It is the responsibility of the plan and its
fiduciaries to determine and satisfy section 404(c) requirements.
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 mutual funds with similar or different
objectives, or the investment industry as a whole. Other investments to which
the Sub-Accounts may be compared include, but are not limited to: precious
metals; real estate; stocks and bonds; closed-end funds; CDs; bank money market
deposit accounts and passbook savings; and the Consumer Price Index.
The Sub-Accounts of the Variable Account may also be compared to certain
market indexes, which may include, but are not limited to: the S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond
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Index; Shearson/Lehman Long-Term Government/Corporate Bond Index; Donoghue Money
Fund Average; U.S. Treasury Note Index; Bank Rate Monitor National Index of
2-1/2 Year CD Rates; and the 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
underlying mutual 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 held in the Sub-Account has been in
existence, if the underlying Mutual Fund 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. An assumed initial investment of
$10,000 will be used because that figure more closely approximates the size of a
typical Contract than does the $1,000 figure used in calculating the
standardized average annual total return quotations.
For those underlying Mutual Funds which have not been held as
Sub-Accounts within the Variable Account for a quoted period, the standardized
average annual total return and nonstandardized total return quotations will
show the investment performance such underlying Mutual Funds 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.
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.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History ........................................... 1
Services .................................................................. 1
Purchase of Securities Being Offered ...................................... 1
Underwriters .............................................................. 2
Calculations of Performance ............................................... 2
Fund Performance Summary .................................................. N/A
Annuity Payments .......................................................... 2
Financial Statements ...................................................... 3
</TABLE>
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APPENDIX A
ANNUITY PAYMENT PERIOD-FIXED ANNUITY
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 Contract Value to the
applicable Annuity Table in accordance with the Annuity Payment Option elected.
This will be done at the Annuitization Date on an age last birthday basis. Fixed
Annuity payments after the first will not be less than the first Fixed Annuity
payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
ANNUITY TABLES AND ASSUMED INTEREST RATE
The Annuity Tables contained in the Contracts are based on the 1971
Individual Annuity Mortality Table (set back one year) and an assumed interest
rate of 3.5%.
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APPENDIX B
PARTICIPATING UNDERLYING MUTUAL FUNDS
AVAILABLE FOR ALL CONTRACTS
DREYFUS STOCK INDEX FUND
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. The Dreyfus Corporation
("Dreyfus") serves as the Fund's manager while Mellon Equity Associates, an
affiliate of Dreyfus, serves as the Fund's index 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 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
Corporation 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
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 contributed 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 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.
-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.
-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 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
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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. 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 five 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 life
insurance policies or variable annuity contracts issued by life insurance
companies. The assets of the Trust are managed by Nationwide Financial Services,
Inc., 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.
-SMALL COMPANY FUND
Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in equity securities of domestic and foreign
companies with market capitalizations of less then $1 billion at the time
of purchase. Nationwide Financial Services, Inc.("NFS"), the Fund's
adviser, has employed a group of sub-advisers, each of which will manage
a portion of the Fund's portfolio. These sub-advisers are the Dreyfus
Corporation, Neuberger & Berman, L.P., Pictet International Management
Limited, Van Eck
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Associates Corporation, Strong Capital Management, Inc. and Warburg,
Pincus Counsellors, Inc. The sub-advisers were chosen because they
utilize a number of different investment styles when investing in small
company stocks. By utilizing a number of investment styles, NFS hopes to
increase prospects for investment return and to reduce market risk and
volatility.
-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
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
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 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 under variable life
insurance policies and variable annuity contracts. Oppenheimer Management
Corporation is the Funds' investment adviser.
-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.
-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 be speculative.
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-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 SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. is a diversified, open-end management
company commonly called a mutual fund. The Special Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. (the "Advisor")
is the investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in a
diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end
management investment company commonly referred to as a mutual fund.
Incorporated in the State of Wisconsin, the Corporation has been authorized to
issue shares of common stock and series of classes of common stock. The
International Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are
offered by the Corporation to insurance company separate accounts for the
purpose of funding variable annuity contracts and variable life insurance
policies. Strong Capital Management, Inc. is the investment advisor to the
Funds.
-DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities,
the Fund has the flexibility to invest in any type of security that the
Advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate
to long-term corporate or U.S. government debt securities.
-INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in
the equity securities of issuers located outside the United States.
TCI PORTFOLIOS, INC., MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS.
TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It
is a diversified, open-end investment management 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 least
three years continuous operation. There can be no assurance that the Fund
will achieve its investment objective.
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-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
Van Eck Investment 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
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.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen 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 funds 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 Fund's investment adviser.
- REAL ESTATE SECURITIES FUND
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.
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.")
35
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<PAGE> 38
- 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.
36
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<PAGE> 39
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 1996
INDIVIDUAL 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 November 1, 1996.
The prospectus may be obtained from Nationwide Life Insurance Company by writing
P.O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-243-6295, 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...................................................N/A
Annuity Payments.............................................................2
Financial Statements.........................................................3
GENERAL INFORMATION AND HISTORY
The Nationwide Variable Account-II is a separate investment account of
Nationwide Life Insurance Company ("Company"). On April 7, 1988, ownership of
the Company changed from Nationwide Mutual Insurance Company to Nationwide Life
Insurance Company. The Company is a member of the Nationwide Insurance
Enterprise and all of the Company's common stock is owned entirely by Nationwide
Life Insurance Company. The common stock of Nationwide Life Insurance Company is
owned by Nationwide Corporation. Nationwide Corporation is a holding company.
All of the common stock of Nationwide Corporation 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 Company, or subsidiaries of the Company may have
entered into agreements with either the investment adviser or distributor for
several of the underlying Mutual Funds. The agreements relate to administrative
services furnished by the Company or an affiliate of the Company and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular underlying Mutual Funds.
These fees in no way affect the Net Asset Value of the underlying Mutual Funds
or fees paid by the Contract Owner.
The financial statements have been included herein in reliance upon the
report 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").
1
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<PAGE> 40
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio 43216, an affiliate of the Company. No underwriting commissions have been
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. 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 Fund.
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 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
1.45% Mortality, Expense Risk and Administration Charge. 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 $10,000. 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 standardized average annual total return and nonstandardized average
annual 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
average annual total return will be based on rolling calendar quarters and will
cover periods of one, five, and ten years, or a period covering the time the
underlying Mutual Fund held in the Sub-Account has been in existence, if the
underlying Mutual Fund has not been in existence for one of the prescribed
periods. For those underlying Mutual Funds which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
average annual total return and nonstandardized total return quotations will
show the investment performance such underlying Mutual Funds 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 average annual total return and 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.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the
prospectus.
2
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<PAGE> 41
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906
Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787
Mortgage loans on real estate 4,786,599 4,222,284
Real estate 239,089 252,681
Policy loans 370,908 340,491
Other long-term investments 67,280 63,914
Short-term investments (note 13) 45,732 131,643
----------- -----------
19,710,703 16,770,419
----------- -----------
Cash 10,485 7,436
Accrued investment income 239,881 220,540
Deferred policy acquisition costs 1,094,195 1,064,159
Deferred Federal income tax -- 36,515
Other assets 795,169 790,603
Assets held in Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
$40,614,111 31,112,133
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461
Policyholders' dividend accumulations 353,554 338,058
Other policyholder funds 71,155 72,770
Accrued Federal income tax (note 7):
Current 34,064 13,126
Deferred 238,877 -
----------- -----------
272,941 13,126
----------- -----------
Other liabilities 284,143 235,778
Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
37,945,599 29,203,654
----------- -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Additional paid-in capital 673,782 622,753
Retained earnings 1,606,607 1,401,579
Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668)
----------- -----------
2,668,512 1,908,479
----------- -----------
Commitments and contingencies (notes 9 and 15)
$40,614,111 31,112,133
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Traditional life insurance premiums $ 274,957 209,538 215,715
Accident and health insurance premiums 509,658 324,524 312,655
Universal life and investment product policy charges 307,676 239,021 188,057
Net investment income (note 5) 1,482,980 1,289,501 1,204,426
Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673
---------- ---------- ----------
2,576,107 2,046,200 2,034,526
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,656,287 1,279,763 1,236,906
Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Other operating costs and expenses 458,970 352,402 329,396
---------- ---------- ----------
2,256,375 1,772,970 1,721,625
---------- ---------- ----------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 319,732 273,230 312,901
---------- ---------- ----------
Federal income tax expense (note 7):
Current 103,464 79,847 75,124
Deferred 3,790 9,657 31,634
---------- ---------- ----------
107,254 89,504 106,758
---------- ---------- ----------
Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143
Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365
---------- ---------- ----------
Net income $ 212,478 183,726 211,508
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1993:
Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242
Capital contributions -- 111,000 -- -- 111,000
Dividends paid to shareholder -- -- (17,805) -- (17,805)
Net income -- -- 211,508 -- 211,508
Unrealized losses on equity securities, net -- -- -- (83,777) (83,777)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168
========== ========== ========= ========== ==========
1994:
Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168
Capital contribution -- 200,000 -- -- 200,000
Net income -- -- 183,726 -- 183,726
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 216,915 216,915
Unrealized losses on securities available-
for-sale, net -- -- -- (343,330) (343,330)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479
========== ========== ========== ========== ==========
1995:
Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479
Capital contribution (note 13) -- 51,029 -- (4,111) 46,918
Dividends paid to shareholder -- -- (7,450) -- (7,450)
Net income -- -- 212,478 -- 212,478
Unrealized gains on securities available-
for-sale, net -- -- -- 508,087 508,087
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 212,478 183,726 211,508
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994)
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Amortization and depreciation 10,319 6,207 11,156
Realized losses (gains) on invested assets, net 717 15,949 (113,648)
Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006)
Increase in accrued investment income (19,341) (29,654) (4,218)
Increase in other assets (3,227) (112,566) (549,277)
Increase in policy liabilities 198,200 1,038,641 509,370
Increase in policyholders' dividend accumulations 15,496 15,372 17,316
Increase in accrued Federal income tax payable 20,938 832 16,838
Increase in other liabilities 48,365 17,826 26,958
Other, net (20,556) (19,303) (11,745)
----------- ----------- ------------
Net cash provided by operating activities 211,000 945,174 18,392
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 706,442 579,067 --
Proceeds from sale of securities available-for-sale 131,420 247,876 247,502
Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093
Proceeds from sale of fixed maturities -- -- 33,959
Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047
Proceeds from sale of real estate 48,477 46,713 23,587
Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643
Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550)
Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831)
Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336)
Cost of real estate acquired (10,970) (15,962) (8,827)
Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491)
----------- ----------- ------------
Net cash used in investing activities (2,012,182) (2,261,105) (887,204)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions 46,918 200,000 111,000
Dividends paid to shareholder (7,450) -- (17,805)
Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740
Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504)
----------- ----------- -----------
Net cash provided by financing activities 1,718,320 1,391,378 884,431
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619
Cash and cash equivalents, beginning of year 139,079 63,632 48,013
----------- ----------- -----------
Cash and cash equivalents, end of year $ 56,217 139,079 63,632
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
Financial Horizons Life Insurance Company), West Coast Life Insurance
Company (WCLIC), Employers Life Insurance Company of Wausau and
subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
Financial Services, Inc. (NFS). NLIC and its subsidiaries are
collectively referred to as "the Company."
NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
and NCC is a property and casualty insurer. The Company is licensed in
all 50 states, the District of Columbia, the Virgin Islands and Puerto
Rico. The Company offers a full range of life insurance, health insurance
and annuity products through exclusive agents, brokers and other
distribution channels and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
Insurance Departments of states in which it is licensed, and undergoes
periodic examinations by those departments.
The following is a description of the most significant risks facing
life and health insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives designed to reduce insurer
profits, new legal theories or insurance company insolvencies through
guaranty fund assessments may create costs for the insurer beyond
those currently recorded in the consolidated financial statements. The
Company mitigates this risk by offering a wide range of products and
by operating throughout the United States, thus reducing its exposure
to any single product or jurisdiction, and also by employing
underwriting practices which identify and minimize the adverse impact
of this risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by the
Company will default or that other parties, including reinsurers,
which owe the Company money, will not pay. The Company minimizes this
risk by adhering to a conservative investment strategy, by maintaining
sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This change
in rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent
that liabilities come due more quickly than assets mature, an insurer
would have to borrow funds or sell assets prior to maturity and
potentially recognize a gain or loss.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. See note 4.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities as of the
date of the consolidated financial statements and the reported amounts of
revenues and expenses for the reporting period. Actual results could differ
significantly from those estimates.
The most significant estimates include those used in determining deferred
policy acquisition costs, valuation allowances for mortgage loans on real
estate and real estate investments and the liability for future policy benefits
and claims. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate.
(a) CONSOLIDATION POLICY
The December 31, 1995 consolidated financial statements include the
accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
and NFS. The December 31, 1994 and 1993 consolidated financial statements
include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
1994 consolidated balance sheet also includes the accounts of ELICW, which
was acquired by NLIC effective December 31, 1994. See Note 13. All
significant intercompany balances and transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities and
equity securities as either held-to-maturity, available-for-sale or
trading. Fixed maturity securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the securities to
maturity and are stated at amortized cost. Fixed maturity securities not
classified as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the unrealized gains
and losses, net of adjustments to deferred policy acquisition costs and
deferred Federal income tax, reported as a separate component of
shareholder's equity. The adjustment to deferred policy acquisition costs
represents the change in amortization of deferred policy acquisition costs
that would have been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed maturity
securities classified as held-to-maturity or trading as of
December 31, 1995.
Mortgage loans on real estate are carried at the unpaid principal balance
less valuation allowances. The Company provides valuation allowances for
impairments of mortgage loans on real estate based on a review by portfolio
managers. The measurement of impaired loans is based on the present value
of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the fair value of the collateral, if
the loan is collateral dependent. Loans in foreclosure and loans considered
to be impaired are placed on non-accrual status. Interest received on
non-accrual status mortgage loans on real estate are included in interest
income in the period received.
Real estate is carried at cost less accumulated depreciation and valuation
allowances. Other long-term investments are carried on the equity basis,
adjusted for valuation allowances.
Realized gains and losses on the sale of investments are determined on the
basis of specific security identification. Estimates for valuation
allowances and other than temporary declines are included in realized gains
and losses on investments.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121). SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The statement is effective for fiscal years beginning after December 15,
1995 and earlier application is permitted. Previously issued consolidated
financial statements shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the consolidated financial statements is not
expected to be material.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums and
benefits and consist primarily of whole life, limited-payment life, term
life and certain annuities with life contingencies. Premiums for
traditional life insurance products are recognized as revenue when due.
Benefits and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This association
is accomplished by the provision for future policy benefits and the
deferral and amortization of policy acquisition costs.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual and
group deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and investment
products consist of asset fees, cost of insurance, policy administration
and surrender charges that have been earned and assessed against policy
account balances during the period. Policy benefits and claims that are
charged to expense include benefits and claims incurred in the period in
excess of related policy account balances and interest credited to policy
account balances.
ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums
are recognized as revenue over the terms of the policies. Policy claims are
charged to expense in the period that the claims are incurred.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions, certain
expenses of the policy issue and underwriting department and certain
variable agency expenses have been deferred. For traditional life and
individual health insurance products, these deferred policy acquisition
costs are predominantly being amortized with interest over the premium
paying period of the related policies in proportion to the ratio of actual
annual premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same assumptions as
were used for computing liabilities for future policy benefits. For
universal life and investment products, deferred policy acquisition costs
are being amortized with interest over the lives of the policies in
relation to the present value of estimated future gross profits from
projected interest margins, asset fees, cost of insurance, policy
administration and surrender charges. For years in which gross profits are
negative, deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs are
adjusted to reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific investment
objectives. The investment income and gains or losses of these accounts
accrue directly to the contractholders. The activity of the Separate
Accounts is not reflected in the consolidated statements of income and cash
flows except for the fees the Company receives for administrative services
and risks assumed.
(f) FUTURE POLICY BENEFITS
Future policy benefits for traditional life and individual health
insurance policies have been calculated using a net level premium method
based on estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the time the
policies were issued, rather than the assumptions prescribed by state
regulatory authorities. See note 6.
Future policy benefits for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Future policy benefits and claims for collectively renewable long-term
disability policies (primarily discounted at 5.2%) and group long-term
disability policies (primarily discounted at 5.5%) are the present value of
amounts not yet due on reported claims and an estimate of amounts to be
paid on incurred but unreported claims. The impact of reserve discounting
is not material. Future policy benefits and claims on other
group health insurance policies are not discounted.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 45% (45% in 1994 and
48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
45% in 1993) of life insurance premiums. The provision for policyholder
dividends is based on current dividend scales. Future dividends are
provided for ratably in future policy benefits based on dividend scales in
effect at the time the policies were issued. Dividend scales are approved
by the Board of Directors.
Income attributable to participating policies in excess of policyholder
dividends is accounted for as belonging to the shareholder. See note 12.
(h) FEDERAL INCOME TAX
NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
return with Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
income tax return with Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW files a separate Federal income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
from the deferred method of accounting for income tax of APB Opinion 11 to
the asset and liability method of accounting for income tax. Under the
asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Under this method, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to
reduce the deferred tax assets to the amounts expected to be realized.
The Company has reported the cumulative effect of the change in method
of accounting for income tax in the 1993 consolidated statement of income.
See note 3.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits and
claims incurred are deducted from the respective income and expense
accounts. Assets and liabilities related to reinsurance ceded are reported
on a gross basis.
(j) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with original maturities of three
months or less to be cash equivalents.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(k) RECLASSIFICATION
Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(3) CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company changed its method of
accounting for certain investments in debt and equity securities in
connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,593,844
and $7,024,736, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded
at amortized cost. The effect as of January 1, 1994 has been recorded
as a direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
---------
$ 216,915
=========
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in
the 1993 consolidated statement of income as the cumulative effect of
changes in accounting principles, as follows:
Asset/liability method of recognizing income tax (note 2(h)) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296) (note 11) (20,979)
--------
$ 5,365
========
</TABLE>
(4) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
filed with the Department of Insurance of the State of Ohio (the
Department), California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by such
regulatory authorities. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
The statutory capital shares and surplus of NLIC as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$1,363,031, $1,262,861 and $992,631, respectively. The statutory net
income of NLIC as reported to regulatory authorities for the years
ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
$185,943, respectively.
<PAGE> 11
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(5) INVESTMENTS
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 772,589 674,346 --
Equity securities 1,436 550 7,230
Fixed maturities held-to-maturity 232,692 193,009 800,255
Mortgage loans on real estate 410,965 376,783 364,810
Real estate 39,222 40,280 39,684
Short-term investments 12,249 6,990 5,080
Other 61,701 42,831 33,832
---------- ---------- ----------
Total investment income 1,530,854 1,334,789 1,250,891
Less investment expenses 47,874 45,288 46,465
---------- ---------- ----------
Net investment income $1,482,980 1,289,501 1,204,426
========== ========== ==========
</TABLE>
An analysis of realized gains (losses) on investments, net of
valuation allowances, by investment type follows for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 6,792 (7,120) --
Equity securities 3,435 1,427 129,728
Fixed maturities -- -- 20,225
Mortgage loans on real estate (7,312) (20,462) (28,241)
Real estate and other (2,079) 9,771 (8,039)
-------- -------- --------
$ 836 (16,384) 113,673
======== ======== ========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- -------------
<S> <C> <C>
Gross unrealized gains (losses) $ 735,103 (266,618)
Adjustment to deferred policy acquisition costs (143,851) 82,525
Deferred Federal income tax (206,944) 64,425
--------- ---------
$ 384,308 (119,668)
========= =========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 1,001,706 (703,851) --
Equity securities 15 (1,990) (128,837)
Fixed maturities held-to-maturity 86,477 (421,427) 223,392
----------- ----------- -----------
$ 1,088,198 (1,127,268) 94,555
=========== =========== ===========
</TABLE>
<PAGE> 12
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities available-for-sale
were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
-------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 438,109 36,714 (53) 474,770
Obligations of states and political subdivisions 9,742 1,252 (1) 10,993
Debt securities issued by foreign governments 162,442 9,641 (66) 172,017
Corporate securities 8,902,494 524,796 (30,561) 9,396,729
Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868
--------- ----------- ----------- -----------
Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377
Equity securities 27,362 6,441 (85) 33,718
---------- ----------- ----------- -----------
$13,465,992 775,489 (40,386) 14,201,095
=========== =========== ============ ===========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
and fixed maturities held-to-maturity were as follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
---------- ---------- ---------- ---------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,372 6,637 (296) 24,713
---------- ---------- ---------- ---------
$8,337,237 77,888 (344,506) 8,070,619
========== ========= ========== =========
FIXED MATURITY SECURITIES HELD-TO-MATURITY
Obligations of states and political subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
---------- ---------- ---------- ---------
$3,688,787 34,383 (120,860) 3,602,310
========== ========== ========== =========
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
----------- ------------
<S> <C> <C>
FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE
- - --------------------------------------------
Due in one year or less $ 641,490 647,639
Due after one year through five years 5,365,703 5,623,126
Due after five years through ten years 2,477,457 2,609,262
Due after ten years 1,028,137 1,174,482
----------- -----------
9,512,787 10,054,509
Mortgage-backed securities 3,925,843 4,112,868
----------- -----------
$13,438,630 14,167,377
=========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 to available-for-sale
securities due to evidence of a significant deterioration in the issuer's
creditworthiness. The transfer of those fixed maturity securities resulted in
a gross unrealized loss of $4,285.
As permitted by the FASB's Special Report, A GUIDE TO IMPLEMENTATION OF
STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES, issued in November, 1995, the Company transferred all of its fixed
maturity securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the fixed
maturity securities had amortized cost of $3,705,644, resulting in a gross
unrealized gain of $171,531.
Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.
Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).
Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.
As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Allowance, beginning year $ 47,892
Additions charged to operations 7,653
Direct write-downs charged against the allowance (4,850)
--------
Allowance, end of year $ 50,695
========
</TABLE>
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
mortgage loans on real estate in process of foreclosure or in-substance
foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
value.
Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
of December 31, 1995 and 1994, respectively, were on deposit with various
regulatory agencies as required by law.
(6) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts represents
approximately 82% and 81% of the total liability for future policy benefits
as of December 31, 1995 and 1994, respectively. The average interest rate
credited on investment product policies was approximately 6.5%, 6.5% and
7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.
The liability for future policy benefits for traditional life insurance and
individual health insurance policies has been established based upon the
following assumptions:
INTEREST RATES: Interest rates vary as follows:
<TABLE>
<CAPTION>
Health
Year of issue Life Insurance insurance
-------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
1995 7.6%, not graded - permanent contracts with loan provisions 4.5%
7.7%, not graded - all other contracts
1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0%
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0%
1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
</TABLE>
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published tables,
modified for the Company's actual experience.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the liability for unpaid claims and claim adjustment expenses is
summarized for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 637,998 592,180 760,209
Less reinsurance recoverables 438,761 430,720 547,683
--------- --------- ---------
Net balance, beginning of year 199,237 161,460 212,526
--------- --------- ---------
Incurred related to:
Current year 425,907 273,299 309,721
Prior years (17,203) (26,156) (26,248)
--------- --------- ---------
Total incurred 408,704 247,143 283,473
--------- --------- ---------
Paid related to:
Current year 290,605 175,700 208,978
Prior years 111,353 73,889 125,561
--------- --------- ---------
Total paid 401,958 249,589 334,539
--------- --------- ---------
Unpaid claims of acquired companies 2,542 40,223 --
--------- --------- ---------
Net balance, end of year 208,525 199,237 161,460
Plus reinsurance recoverables 491,321 438,761 430,720
--------- --------- ---------
Balance, end of year $ 699,846 637,998 592,180
========= ========= =========
</TABLE>
Reinsurance recoverables include amounts from affiliates, as discussed in
note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31,
1995, 1994, 1993 and 1992, respectively.
The provision for claims and claim adjustment expenses for prior years
decreased in each of the three years ended December 31, 1995 due to
lower-than-anticipated costs to settle accident and health insurance claims.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 179,916 124,044
Fixed maturity securities available-for-sale -- 95,536
Liabilities in Separate Accounts 129,120 94,783
Mortgage loans on real estate and real estate 26,062 25,632
Other policyholder funds 7,752 7,137
Other assets and other liabilities 47,215 57,528
--------- ---------
Total gross deferred tax assets 390,065 404,660
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 312,616 317,224
Fixed maturity securities available-for-sale 266,184 --
Equity securities available-for-sale and other
long-term investments 3,431 3,620
Other 46,711 47,301
--------- ---------
Total gross deferred tax liabilities 628,942 368,145
--------- ---------
$(238,877) 36,515
========= =========
</TABLE>
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company has determined that valuation allowances are not necessary as
of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
of the total gross deferred tax assets will not be realized. All future
deductible amounts can be offset by future taxable amounts or recovery of
Federal income tax paid within the statutory carryback period. In
addition, for future deductible amounts for securities available-for-sale,
affiliates of the Company which are included in the same consolidated
Federal income tax return hold investments that could be sold for capital
gains that could offset capital losses realized by the Company should
securities available-for-sale be sold at a loss.
<TABLE>
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
--------------- ----- -------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0
Tax exempt interest and dividends
received deduction (137) (0.1) (194) (0.1) (2,322) (0.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 1,704 0.5
Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7)
--------- ---- --------- ---- --------- ----
Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1
========= ==== ========= ==== ========= ====
</TABLE>
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the
years ended December 31, 1995, 1994 and 1993, respectively.
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral
from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated in
the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
consolidated financial statements. The DRA eliminated any additional
deferrals to the PSA. Any distributions from the PSA, however, will
continue to be taxable at the then current tax rate. The balance of the
PSA was approximately $35,344 as of December 31, 1995.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT
FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair
value information about existing on and off-balance sheet financial
instruments. SFAS 107 defines the fair value of a financial instrument as
the amount at which the financial instrument could be exchanged in a
current transaction between willing parties. In cases where quoted market
prices are not available, fair value is based on estimates using present
value or other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Although
fair value estimates are calculated using assumptions that management
believes are appropriate, changes in assumptions could cause these
estimates to vary materially. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets
and,in many cases, could not be realized in the immediate settlement of
the instruments. SFAS 107 excludes certain assets and liabilities from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts are provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying
amount reported in the consolidated balance sheets for these
instruments approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where available.
For fixed maturity securities not actively traded, fair value is
estimated using values obtained from independent pricing services or,
in the case of private placements, is estimated by discounting
expected future cash flows using a current market rate applicable to
the yield, credit quality and maturity of the investments. The fair
value for equity securities is based on quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of
assets held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand.
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage
loans on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations. Fair
value for mortgages in default is the estimated fair value of the
underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities under
investment type contracts is disclosed using two methods. For
investment contracts without defined maturities, fair value is the
amount payable on demand. For investment contracts with known or
determined maturities, fair value is estimated using discounted cash
flow analysis. Interest rates used are similar to currently offered
contracts with maturities consistent with those remaining for the
contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures
for individual life, universal life and supplementary contracts with
life contingencies for which the estimated fair value is the amount
payable on demand. Also included are disclosures for the Company's
limited payment policies, which the Company has used discounted cash
flow analyses similar to those used for investment contracts with
known maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS:
The carrying amount reported in the consolidated balance sheets for
these instruments approximates their fair value.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts were
as follow as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
- - ------
Investments:
Securities available-for-sale:
Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906
Equity securities 33,718 33,718 24,713 24,713
Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310
Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284
Policy loans 370,908 370,908 340,491 340,491
Short-term investments 45,732 45,732 131,643 131,643
Cash 10,485 10,485 7,436 7,436
Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461
LIABILITIES
- - -----------
Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556
Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384
Policyholders' dividend accumulations 353,554 353,554 338,058 338,058
Other policyholder funds 71,155 71,155 72,770 72,770
Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
</TABLE>
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a party to
financial instruments with off-balance-sheet risk in the normal course of
business through management of its investment portfolio. These financial
instruments include commitments to extend credit in the form of loans. These
instruments involve, to varying degrees, elements of credit risk in excess
of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are agreements
to lend to a borrower, and are subject to conditions established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a deposit. Commitments
extended by the Company are based on management's case-by-case credit
evaluation of the borrower and the borrower's loan collateral. The
underlying mortgage property represents the collateral if the commitment is
funded. The Company's policy for new mortgage loans on real estate is to
lend no more than 80% of collateral value. Should the commitment be funded,
the Company's exposure to credit loss in the event of nonperformance by the
borrower is represented by the contractual amounts of these commitments less
the net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments. Commitments on
mortgage loans on real estate of $361,974 extending into 1996 were
outstanding as of December 31, 1995.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the United
States. The Company has a diversified portfolio with no more than 20% (22%
in 1994) in any geographic area and no more than 2% (2% in 1994) with any
one borrower.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 140,732 110,361 534,814 184,201 970,108
East South Central 23,978 15,653 183,790 84,588 308,009
Mountain -- 18,940 144,156 48,727 211,823
Middle Atlantic 124,079 72,201 183,562 18,383 398,225
New England 9,594 39,526 153,644 1 202,765
Pacific 190,628 239,687 395,914 107,650 933,879
South Atlantic 101,904 74,731 458,355 279,692 914,682
West North Central 134,866 14,205 81,521 37,586 268,178
West South Central 69,143 99,618 194,717 272,323 635,801
--------- --------- --------- --------- ---------
$ 794,924 684,922 2,330,473 1,033,151 4,843,470
========= ========= ========= =========
Less valuation allowances and unamortized discount 56,871
---------
Total mortgage loans on real estate, net $4,786,599
=========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
--------- --------- --------- --------- ---------
$ 669,832 613,707 2,176,705 816,831 4,277,075
========= ========= ========= =========
Less valuation allowances and unamortized discount 54,791
---------
Total mortgage loans on real estate, net $4,222,284
=========
</TABLE>
(10) PENSION PLAN
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least one
thousand hours of service within a twelve-month period and who have met
certain age requirements. Benefits are based upon the highest average
annual salary of a specified number of consecutive years of the last ten
years of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost of
the enhanced benefit was borne by NMIC and certain of its property and
casualty insurance company affiliates.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual Insurance
Company Employees' Retirement Plan and the Wausau Insurance Companies
Pension Plan to form the Nationwide Insurance Enterprise Retirement
Plan. Immediately prior to the merger, the plans were amended to provide
consistent benefits for service after January 1, 1996. These amendments had
no significant impact on the accumulated benefit obligation or projected
benefit obligation as of December 31, 1995.
Pension costs charged to operations by the Company during the years ended
December 31, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
respectively.
The Company's net accrued pension expense as of December 31, 1995 and
1994 was $1,376 and $1,836, respectively.
The net periodic pension cost for the Nationwide Insurance Companies and
Affiliates Retirement Plan as a whole for the years ended December 31,
1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighed average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
in group annuity contracts of NLIC and ELICW. Prior to the merger, the
assets of the Nationwide Insurance Companies and Affiliates Retirement
Plan were invested in a group annuity contract of NLIC.
(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years of
service with the Company after reaching age 40. Postretirement health
care benefit contributions are adjusted annually and contain cost-sharing
features such as deductibles and coinsurance. In addition, there are caps
on the Company's portion of the per-participant cost of the postretirement
health care benefits. These caps can increase annually, but not more than
three percent. The Company's policy is to fund the cost of health care
benefits in amounts determined at the discretion of management. Plan
assets are invested primarily in group annuity contracts of NLIC.
Effective January 1, 1993, the Company adopted the provisions of STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
accrual method of accounting for postretirement life and health care
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $32,275 ($20,979 net of related income tax benefit) was
recorded in the 1993 consolidated statement of income as a cumulative
effect of a change in accounting principle. See note 3. The adoption of
SFAS 106, including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $35,277
to $36,544 in 1993. Certain affiliated companies elected to amortize their
initial transition obligation over periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of
December 31, 1995 and 1994 was $51,490 and $36,001, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was
$8,269 and $4,627, respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the plan as a whole as of
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND
RESTRICTIONS
-------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance subsidiaries exceed the minimum risk-based capital
requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, as of the year-end shall
inure to the benefit of the shareholder. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall
be used only for the payment or apportionment of dividends to
participating policyholders at least to the extent required by statute
or for the purpose of making up any loss on participating policies.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In the opinion of counsel for the Company, the ultimate ownership of the
entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable to
participating policies in excess of the amounts paid as dividends to
policyholders belong to the shareholder rather than the policyholders,
and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares was
$2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
1993, respectively. The amount thereof not presently available for
dividends to the shareholder due to the New York restrictions was
$1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
respectively.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $2,468,687
of shareholder's equity, as presented in the accompanying consolidated
financial statements, is so restricted as to dividend payments in 1996.
Each of NLIC's insurance company subsidiaries are limited in their
payment of dividends by the state insurance department of their
respective state of domicile. As of December 31, 1995, the maximum amount
of shareholder's equity available for dividend payment to NLIC in 1996 by
its insurance company subsidiaries without prior approval are:
<TABLE>
<S> <C>
Nationwide Life and Annuity Insurance Company $10,143
West Coast Life Insurance Company 13,153
Employers Life Insurance Company of Wausau 10,132
National Casualty Company --
-------
$33,428
=======
</TABLE>
(13) TRANSACTIONS WITH AFFILIATES
----------------------------
On March 1, 1995, Corp. contributed all of the outstanding shares of
Farmland Life Insurance Company (Farmland) to NLIC, which then merged
Farmland into WCLIC effective June 30, 1995. The contribution resulted in
a direct increase to consolidated shareholder's equity of $46,918. The
contribution of Farmland has been accounted for in a manner similar to a
pooling of interests and accordingly, Farmland's results are included in
the consolidated statements of income beginning January 1, 1995. However,
prior period consolidated financial statements have not been restated due
to the impact of Farmland being immaterial.
Effective December 31, 1994, NLIC purchased all of the outstanding shares
of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC
transferred fixed maturity securities and cash with a fair value of
$155,000 to WSC on December 28, 1994, which resulted in a realized loss
of $19,239 on the disposition of the securities. The purchase price
approximated both the historical cost basis and fair value of net assets
of ELICW. ELICW has and will continue to share home office, other
facilities, equipment and common management and administrative services
with WSC.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Corp. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1995 were
$57,969, $50,470 and $44,577, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company participates in intercompany repurchase agreements with
affiliates whereby the seller will transfer securities to the buyer at a
stated value. Upon demand or a stated period, the securities will be
repurchased by the seller at the original sales price plus a price
differential. Transactions under the agreements during 1995 and
1994 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
31, 1995. These contracts are immaterial to the consolidated financial
statements.
NCC participates in several 100% quota share reinsurance agreements with
NMIC and Nationwide Mutual Fire Insurance Company, the minority
shareholder of Corp. As a result of these agreements, the following
assets and (liabilities) are included in the consolidated financial
statements as of December 31, 1995 and 1994 for reinsurance ceded:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Reinsurance recoverable $ 590,379 541,289
Unearned premium reserves (112,467) (110,353)
Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
</TABLE>
The ceding of reinsurance does not discharge the original insurer from
primary liability to its policyholder. The insurer which assumes the
coverage assumes the related liability and it is the practice of insurers
to treat insured risks, to the extent of reinsurance ceded, as though
they were risks for which the original insurer is not liable. Management
believes the financial strength of NMIC reduces to an acceptable level
any risk to NCC under these intercompany reinsurance agreements.
ELICW assumes certain accident and health insurance business from
Employers Insurance of Wausau A Mutual Company, an affiliate. During
1995, total premiums assumed by ELICW under the reinsurance
agreement were $150,622.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash Management
Company (CCMC), both affiliates, under which NCMC and CCMC act as common
agents in handling the purchase and sale of short-term securities for the
respective accounts of the participants. Amounts on deposit with NCMC and
CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994,
respectively, and are included in short-term investments on the
accompanying consolidated balance sheets.
(14) BANK LINES OF CREDIT
--------------------
As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization.
(15) CONTINGENCIES
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to be
material to the Company's financial position or results of operations.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT INFORMATION
-------------------
The Company operates in the long-term savings, life insurance and
accident and health insurance lines of business in the life insurance and
property and casualty insurance industries. Long-term savings operations
include both qualified and non-qualified annuity contracts issued to both
individuals and groups. Life insurance operations include whole life,
universal life, variable universal life and endowment and term life
insurance issued to individuals and groups. Accident and health insurance
operations also provide coverage to individuals and groups. Corporate
primarily includes investments, and the related investment income, which
are not specifically allocated to one of the three operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, the Company changed its reporting segments to better reflect
the way the businesses are managed. Prior periods have been restated to
reflect these changes.
The following table summarizes the revenues and income (loss) before
Federal income tax expense and cumulative effect of changes in accounting
principles for the years ended December 31, 1995, 1994 and 1993 and
assets as of December 31, 1995, 1994 and 1993, by business segment.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 1,406,241 1,125,013 1,048,045
Life insurance 502,885 452,795 432,343
Accident and health insurance 532,383 345,545 339,764
Corporate 134,598 122,847 214,374
------------ ------------ ------------
$ 2,576,107 2,046,200 2,034,526
============ ============ ============
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 129,475 95,530 47,966
Life insurance 63,169 46,119 36,383
Accident and health insurance (12,521) 13,221 15,041
Corporate 139,609 118,360 213,511
------------ ------------ ------------
$ 319,732 273,230 312,901
============ ============ ============
Assets:
Long-term savings 34,634,892 25,815,273 20,695,598
Life insurance 3,675,581 3,231,651 2,897,574
Accident and health insurance 307,643 291,296 297,200
Corporate 1,995,995 1,773,913 1,515,989
------------ ------------ ------------
$ 40,614,111 31,112,133 25,406,361
============ ============ ============
</TABLE>
<PAGE> 26
Schedule I
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Summary of Investments - Other Than Investments in Related Parties
December 31, 1995
(000's omitted)
<TABLE>
<CAPTION>
----------------- --------------- ------------------
Column B Column C Column D
----------------- --------------- ---------------
Amount at which
shown in the
consolidated
Cost Market value balance sheet
----------------- ---------------- -------------------
<S> <C> <C> <C>
Fixed maturities available-for-sale:
Bonds and notes:
U.S. Government and government agencies and authorities $ 3,913,961 4,116,744 4,116,744
States, municipalities and political subdivisions 9,742 10,993 10,993
Foreign governments 162,442 172,016 172,016
Public utilities 2,053,701 2,146,000 2,146,000
All other corporate 7,298,784 7,721,624 7,721,624
----------------- ---------------- -------------------
Total fixed maturities available-for-sale 13,438,630 14,167,377 14,167,377
----------------- ---------------- -------------------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 26,037 32,474 32,474
Non-redeemable preferred stock 1,325 1,244 1,244
----------------- ---------------- -------------------
Total equity securities available-for-sale 27,362 33,718 33,718
----------------- ---------------- -------------------
Mortgage loans on real estate 4,838,432 4,786,599*
Real estate:
Investment properties 213,340 171,739*
Acquired in satisfaction of debt 82,930 67,350*
Policy loans 370,908 370,908
Other long-term investments 73,190 67,280#
Short-term investments 45,732 45,732
----------------- -------------------
Total investments $19,090,524 19,710,703
================= ===================
</TABLE>
* Difference from Column B is primarily due to accumulated depreciation
and valuation allowances due to impairments on real estate and
valuation allowances due to impairments on mortgage loans on real
estate. See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations and note 5 to the consolidated
financial statements.
# Difference from Column B is primarily due to operating losses of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 27
Schedule III
------------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Supplementary Insurance Information
December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- - ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- - ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, claims and
Segment acquisition claims and Unearned premiums benefits payable Premium
costs loss expenses (1) (2) revenue
- - ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
1995: Long-term savings $ 668,784 14,847,449 455 -
Life insurance 416,209 2,494,344 408,990 274,957
Accident and health
insurance 9,202 858,335 15,264 509,658
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,094,195 18,200,128 424,709 784,615
============== ===================== ================== ===============
1994: Long-term savings 663,696 13,300,015 240 -
Life insurance 387,486 2,245,375 397,174 209,538
Accident and health
insurance 12,977 776,071 13,414 324,524
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $1,064,159 16,321,461 410,828 534,062
============== ===================== ================== ===============
1993: Long-term savings 506,243 11,308,024 1,262 -
Life insurance 291,683 2,047,844 378,788 215,715
Accident and health
insurance 14,018 736,387 14,595 312,655
Corporate - - - -
-------------- --------------------- ------------------ ---------------
Total $ 811,944 14,092,255 394,645 528,370
============== ===================== ================== ===============
- - ----------------------------------- -------------- -------------------- ------------------ ----------------- --------------
Column A Column G Column H Column I Column J Column K
- - ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
Net Amortization Other
investment Benefits, claims, of deferred operating
Segment income losses and policy expenses Premiums
(3) settlement expenses acquisition costs (3) written
- - ----------------------------------- -------------- -------------------- ------------------- ------------------ ---------------
1995: Long-term savings $1,124,207 1,009,632 51,998 210,525
Life insurance 202,285 267,123 34,124 94,461
Accident and health
insurance 22,725 379,532 6,922 153,984 473,513
Corporate 133,763 - - -
-------------- -------------------- ------------------- ------------------
Total $1,482,980 1,656,287 93,044 458,970
============== ==================== =================== ==================
1994: Long-term savings 945,318 807,756 56,236 171,038
Life insurance 183,933 237,125 33,394 90,535
Accident and health
insurance 21,020 234,882 5,114 90,829 315,688
Corporate 139,230 - - -
-------------- -------------------- ------------------- ------------------
Total $1,289,501 1,279,763 94,744 352,402
============== ==================== =================== ==================
1993: Long-term savings 897,639 800,385 43,291 157,046
Life insurance 178,978 227,786 35,220 89,496
Accident and health
insurance 27,108 208,735 23,623 82,854 263,117
Corporate 100,701 - - -
-------------- -------------------- ------------------- ------------------
Total $1,204,426 1,236,906 102,134 329,396
============== ==================== =================== ==================
<FN>
(1) Unearned premiums are included in Column C amounts. (3) Allocations of net investment income and certain general
(2) Column E agrees to the sum of the consolidated balance expenses are based on a number of assumptions and
sheet captions, "Policyholders' dividend estimates, and reported operating results would
accumulations" and "Other policyholder funds". change by segment if different methods were applied.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 28
Schedule IV
-----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Reinsurance
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed from of amount
Gross amount other companies other companies Net amount assumed to net
------------------- ------------------ ----------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
1995:
Life insurance in force $51,613,116 6,865,011 742,451 45,490,556 1.6%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 281,687 12,817 6,087 274,957 2.2%
Accident and health
insurance 427,943 73,131 154,846 509,658 30.4%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 709,630 85,948 160,933 784,615 20.5%
=================== ================== ================= ================== ===============
1994:
Life insurance in force $46,262,595 5,289,259 819,799 41,793,135 2.0%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 209,918 7,551 7,171 209,538 3.4%
Accident and health
insurance 389,573 69,095 4,046 324,524 1.2%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 599,491 76,646 11,217 534,062 2.1%
=================== ================== ================= ================== ===============
1993:
Life insurance in force $39,417,116 4,352,071 180,739 35,245,784 0.5%
=================== ================== ================= ================== ===============
Premiums:
Life insurance 218,764 6,161 3,112 215,715 1.4%
Accident and health
insurance 398,289 88,506 2,872 312,655 0.9%
------------------- ------------------ ----------------- ------------------ ---------------
Total $ 617,053 94,667 5,984 528,370 1.1%
=================== ================== ================= ================== ===============
</TABLE>
See accompanying independent auditors' report.
<PAGE> 29
Schedule V
----------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
- - ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- - ------------------------------------------------- ---------------- ----------------------------- ------------- -------------
Balance at Charged to Balance at
beginning of costs and Charged to Deductions end of
Description period expenses other accounts (1) period
- - ------------------------------------------------- ---------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1995:
Valuation allowances - fixed maturity securities $ - 10,153 - 10,153 -
Valuation allowances - mortgage loans on real
estate 47,892 7,653 - 4,850 50,695
Valuation allowances - real estate 27,330 (1,080) - - 26,250
Valuation allowances - other long-term
investments - 457 - - 457
1994:
Valuation allowances - fixed maturity securities 6,680 (6,680) - - -
Valuation allowances - mortgage loans on real
estate 42,350 21,672 - 16,130 47,892
Valuation allowances - real estate 31,357 (4,027) - - 27,330
1993:
Valuation allowances - fixed maturity securities 5,746 934 - - 6,680
Valuation allowances - mortgage loans on real
estate 31,872 28,241 - 17,763 42,350
Valuation allowances - real estate 35,471 (4,114) - - 31,357
Valuation allowances - other long-term
investments 700 (700) - - -
<FN>
(1) Amounts represent direct write-downs charged against the valuation
allowance.
</TABLE>
See accompanying independent auditors' report.
<PAGE> 42
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: PAGE
(1) Financial statements and schedule included
in Prospectus
(Part A): N/A
(2) Financial statements and schedule included
in Part B as required:
Nationwide Variable Account-II: N/A
Nationwide Life Insurance Company:
Independent Auditors' Report. 41
Consolidated Balance Sheets as of December 42
31, 1995 and 1994.
Consolidated Statements of Income for the years ended 43
December 31, 1995, 1994 and 1993.
Consolidated Statements of Shareholder's Equity for 44
the years ended December 31, 1995,
1994 and 1993.
Consolidated Statements of Cash Flows for 45
the years ended December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements. 46
Schedule I - Summary of Investments - Other Than 66
Investments In Related Parties.
Schedule III - Supplementary Insurance Information. 67
Schedule IV - Reinsurance. 68
Schedule V - Valuation and Qualifying Accounts. 69
70 of 88
<PAGE> 43
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
71 of 88
<PAGE> 44
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olives, NC 28365
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
1100 East Main Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Henry S. Holloway Chairman of the
1247 Stafford Road Board
Darlington, MD 21034
D. Richard McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Director
115 Sprague Drive
Hebron, Ohio 43025
C. Ray Noecker Director
2770 State Route 674 South
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
72 of 88
<PAGE> 45
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, Ohio 43215
James E. Brock Senior Vice President -
One Nationwide Plaza Life Company Operations
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Deferred Compensation
Columbus, OH 43215
73 of 88
<PAGE> 46
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Individual Investment Products
Columbus, OH 43215
Joseph P. Rath Vice President -
One Nationwide Plaza Associate General Counsel
Columbus, OH 43215
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
74 of 88
<PAGE> 47
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE
INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Affiliate Agency, Inc. Delaware Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance
corporations worldwide
American Marine Underwriters, Florida Underwriting Manager
Inc.
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management California Investment Securities Agent
Company
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage Germany Insurance Broker
and Service GMBH
Companies Agency Insurance California Insurance Broker
Services of California
Companies Agency of Alabama, Alabama Insurance Broker
Inc.
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies
placed through Brokers
Companies Agency of Kentucky, Kentucky Insurance Broker
Inc.
Companies Agency of Massachusetts Insurance Broker
Massachusetts, Inc.
Companies Agency of New York, New York Insurance Broker
Inc.
Companies Agency of Pennsylvania Insurance Broker
Pennsylvania, Inc.
Companies Agency of Phoenix, Arizona Insurance Broker
Inc.
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Annuity Agency of Texas Insurance Broker
Texas, Inc.
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas Insurance Broker
Texas, Inc.
Countrywide Services Delaware Products Liability, Investigative and
Corporation Claims Management Services
Employers Insurance of Wausau Wisconsin Insurance Company
A Mutual Company
</TABLE>
75 of 88
<PAGE> 48
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
** Employers Life Insurance Wisconsin Life Insurance Company
Company of Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Iowa Insurance Company
Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Massachusetts Investment Company
Trust
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Self-Insurance Administration Claims
Nevada Examinations and Data Processing
Services
Gates, McDonald & Company of New York Workers Compensation Claims
New York, Inc. Administration
Greater La Crosse Health Plans, Wisconsin Writes Commercial Health and Medicare
Inc. Supplement Insurance
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Ohio Develops and operates Managed Care
Inc. Delivery System
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Key Health Plan, Inc. California Pre-paid health plans
Landmark Financial Services of New York Life Insurance Agency
New York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski
Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of Great Britain Insurance Company
America, Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
Nationwide Agribusiness Iowa Insurance Company
Insurance Company
Nationwide Cash Management Ohio Investment Securities Agent
Company
</TABLE>
76 of 88
<PAGE> 49
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Communications, Inc. Ohio Radio Broadcasting Business
Nationwide Community Urban Ohio Redevelopment of blighted areas within
Redevelopment Corporation the City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness,
securities, and contracts of other
persons, associations, corporations,
domestic or foreign and to form or acquire
the control of other corporations
Nationwide Development Ohio Owns, leases and manages commercial
Company real estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
** Nationwide Financial Services, Ohio Registered Broker-Dealer, Investment
Inc. Manager and Administrator
Nationwide General Insurance Ohio Insurance Company
Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Ohio Membership Non-Profit Corporation
Charities, Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer
Corporation
Nationwide Investors Services, Ohio Stock Transfer Agent
Inc.
** Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
** Nationwide Life Insurance Ohio Life Insurance Company
Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
Nationwide Mutual Insurance Ohio Insurance Company
Company
Nationwide Property and Ohio Insurance Company
Casualty Insurance Company
** Nationwide Property Ohio Owns, leases, manages and deals in Real
Management, Inc. Property
</TABLE>
77 of 88
<PAGE> 50
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
* Nationwide Separate Account Massachusetts Investment Company
Trust
NEA Valuebuilder Investor Alabama Life Insurance Agency
Services of Alabama, Inc.
NEA Valuebuilder Investor Arizona Life Insurance Agency
Services of Arizona, Inc.
NEA Valuebuilder Investor Massachusetts Life Insurance Agency
Services of Massachusetts, Inc.
NEA Valuebuilder Investor Montana Life Insurance Agency
Services of Montana, Inc.
NEA Valuebuilder Investor Nevada Life Insurance Agency
Services of Nevada, Inc.
NEA Valuebuilder Investor Ohio Life Insurance Agency
Services of Ohio, Inc.
NEA Valuebuilder Investor Oklahoma Life Insurance Agency
Services of Oklahoma, Inc.
NEA Valuebuilder Investor Texas Life Insurance Agency
Services of Texas, Inc.
NEA Valuebuilder Investor Wyoming Life Insurance Agency
Services of Wyoming
NEA Valuebuilder Investor Delaware Life Insurance Agency
Services, Inc.
NEA Valuebuilder Services Massachusetts Life Insurance Agency
Insurance Agency, Inc.
Neckura General Insurance Germany Insurance Company
Company
Neckura Holding Company Germany Administrative Service for Neckura
Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Massachusetts Markets and Administers Deferred
Insurance Agency, Inc. Compensation Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred
Compensation Plans for Public Employees
Pension Associates of Wausau, Wisconsin Pension plan administration, record
Inc. keeping and consulting and compensation
consulting
Public Employees Benefit Delaware Marketing and Administration of Deferred
Services Corporation Employee Compensation Plans for Public
Employees
Public Employees Benefit Alabama Markets and Administers Deferred
Services Corporation of Alabama Compensation Plans for Public Employees
</TABLE>
78 of 88
<PAGE> 51
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF CHART) UNLESS
COMPANY ORGANIZATION OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Public Employees Benefit Arkansas Markets and Administers Deferred
Services Corporation of Arkansas Compensation Plans for Public Employees
Public Employees Benefit Montana Markets and Administers Deferred
Services Corporation of Montana Compensation Plans for Public Employees
Public Employees Benefit New Mexico Markets and Administers Deferred
Services Corporation of New Compensation Plans for Public Employees
Mexico
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
SVM Sales GmbH, Neckura Germany Sales support for Neckura Insurance
Insurance Group Group
Wausau Business Insurance Illinois Insurance Company
Company
Wausau General Insurance Illinois Insurance Company
Company
Wausau Insurance Company United Kingdom Insurance and Reinsurance Company
(U.K.) Limited
Wausau International California Special Risks, Excess and Surplus Lines
Underwriters Insurance Underwriting Manager
** Wausau Preferred Health Wisconsin Insurance and Reinsurance Company
Insurance Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Wisconsin Insurance Company
Company
** West Coast Life Insurance California Life Insurance Company
Company
</TABLE>
79 of 88
<PAGE> 52
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
OF INDICATED
COMPANY ORGANIZATION PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-A Annuity Separate Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-B Annuity Separate Account
Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-C Annuity Separate Account
* Nationwide VA Separate Ohio Nationwide Life and Issuer of Annuity Contracts
Account-Q Annuity Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Ohio Nationwide Life Separate Issuer of Annuity Contracts
Variable Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Issuer of Life Insurance
Account-A Annuity Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Ohio Nationwide Life Separate Issuer of Life Insurance
Account-2 Account Contracts
* Nationwide VLI Separate Ohio Nationwide Life Separate Issuer of Life Insurance
Account-3 Account Contracts
* Nationwide DCVA II Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
</TABLE>
80 of 88
<PAGE> 53
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side}
______________________
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|______________________|
<S> <C> <C>
________________________________________________________________________________________________
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |_________________________________
| Contribution Note Cost |_________________________________
| ----------------- ---- |
| Casualty $400,000,000 |
|________________________________________________________________________________________________|
| |
_____________|_________________ _____________|__________________ _____________________ __________________
| WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | | | |
| (U.K.) LIMITED | | CORPORATION (WSC) | | | | |
| | | | | NATIONWIDE LLOYDS | | COMPANIES |
| Common Stock: 8,506,800 | | Common Stock: 1,000 | | | | |
| ------------- Shares | | ------------- Shares |_____| |_____| AGENCY OF |
| | | |_____| |_____| |
| Cost | | Cost | | | | TEXAS, INC. |
| ---- | | ---- | | A TEXAS LLOYDS | | |
| Employers-- | | Employers-- | | | | |
| 100% $15,683,300 | | 100% $106,763,000 | | | | |
|_______________________________| |________________________________| |_____________________| |__________________|
|
| ______________________________
| | WAUSAU BUSINESS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 10,900,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ----- |
| | WSC-100% $21,800,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU UNDERWRITERS |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 8,750 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $44,560,006 |
| |______________________________|
|
| ______________________________
| | GREATER LA CROSSE |
| | HEALTH PLANS, INC. |
| | |
| | Common Stock: 3,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-33.3% $861,761 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ALABAMA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF KENTUCKY, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PENNSYLVANIA, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $100 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF MASSACHUSETTS, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF NEW YORK, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF PHOENIX, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF IDAHO, INC. |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
|
| ______________________________
| | COUNTRYWIDE SERVICES |
| | CORPORATION |
| | |
| | Common Stock: 100 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $145,852 |
| |______________________________|
|
|
| ______________________________
| | WAUSAU GENERAL |
| | INSURANCE COMPANY |
| | |
| | Common Stock: 200,000 |
|____| ------------ Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $31,000,000 |
| |______________________________|
|
| ______________________________
| | WAUSAU INTERNATIONAL |
| | UNDERWRITERS |
| | |
| | Common Stock: 1,000 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $10,000 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | INSURANCE SERVICES |
| | OF CALIFORNIA |
| | |
|____| Common Stock: 1,000 |
| | ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $1,000 |
| |______________________________|
|
| ______________________________
| | AMERICAN MARINE |
| | UNDERWRITERS, INC. |
| | |
| | Common Stock: 20 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $248,222 |
| |______________________________|
|
| ______________________________
| | COMPANIES AGENCY |
| | OF ILLINOIS, INC. |
| | |
| | Common Stock: 250 |
|____| ------------- Shares |
| | |
| | Cost |
| | ---- |
| | WSC-100% $2,500 |
| |______________________________|
|
| ______________________________ _____________________________
| | COMPANIES AGENCY, INC. | | PENSION ASSOCIATES |
| | | | OF WAUSAU, INC. |
| | | | |
| | Common Stock: 100 | | Common Stock: 1,000 |
|____| ------------- Shares |____| ------------- Shares |
| | | |
| Cost | | Companies Cost |
| ---- | | Agency, Inc. ---- |
| WSC-100% $10,000 | | (Wisconsin) -- $10,000 |
|______________________________| | 100% |
|_____________________________|
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C> <C>
_________________________________
| |
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
|_________________________________|
_________________________________________ ___________________________
| | | |
___| NATIONWIDE MUTUAL |_____________________________________________| NATIONWIDE MUTUAL |
___| INSURANCE COMPANY |_____________________________________________| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
|_________________________________________| |___________________________|
| || |________________________________________________________________ |
| || | | |
______________|_______________ || | _____________________________ _____________|_______|______________
| | || | | | | |
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NATIONWIDE |
| | || | | INSURANCE COMPANY | | CORPORATION |
| Common Stock: 2,936 | || | | | | |
| ------------- Shares | || | | Common Stock: 20,000 Shares | | Common Stock: Control |
| Cost | || |___| ------------- | | ------------- ------- |
| ---- | || | | | | $13,642,432 100% |
| Casualty-26% $88,320 | || | | Cost | | |
| Fire-26% $88,463 | || | | ---- | | Shares Cost |
| Preferred Stock: 1,466 Shares| || | | Casualty-100% $5,944,422 | | ----- ---- |
| ---------------- | || | |_____________________________| | Casualty 12,992,922 $751,352,485 |
| Cost | || | | Fire 649,510 24,007,936 |
| ---- | || | | |
| Casualty-6.8% $100,000 | || | | (See Page 2) |
| Fire-6.8% $100,000 | || | |____________________________________|
|______________________________| || |
|| |
_________________________ || | _____________________________
| | || | | |
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY |
| INSURANCE COMPANY | || | | AND CASUALTY |
| | || | | INSURANCE COMPANY |
| Guaranty Fund |______|| | | |
| ------------- |_______| | | Common Stock: 60,000 Shares |
| Certificate | | | ------------- |
| ----------- | | | Cost |
| | | | ---- |
| Cost | | | Casualty-100% $6,000,000 |
| ---- | | |_____________________________|
| Casualty $500,000 | |
|_________________________| | _____________________________
| | | |
| | | COLONIAL INSURANCE |
_______________|___________ | | COMPANY OF CALIFORNIA |
| F & B, INC. | | | (COLONIAL) |
| | | | |
| Common Stock: 1 Share | |___| Common Stock: 1,750 Shares |
| ------------- | | | ------------- |
| | | | Cost |
| Cost | | | ---- |
| ---- | | | Casualty-100% $11,750,000 |
| Farmland Mutual- $10 | | |_____________________________|
| 100% | |
|___________________________| | _____________________________ __________________________
____________________________ | | | | |
| | | | SCOTTSDALE | | NATIONAL PREMIUM & |
| NATIONWIDE AGRIBUSINESS | | | INSURANCE COMPANY | | BENEFIT ADMINISTRATION |
| INSURANCE COMPANY | | | | | COMPANY |
| | | | Common Stock: 30,136 Shares | | |
| Common Stock: 1,000,000 |___|___| ------------- |______| Common Stock: 10,000 |
| ------------- Shares | | | | | ------------ Shares |
| | | | Cost | | |
| | | | ---- | | Cost |
| | | | Casualty-100% $150,000,000 | | ---- |
| Casualty-99.9% $26,714,335 | | |_____________________________| | Scottsdale-100% $10,000 |
| | | |__________________________|
| Other Capital: | |
| -------------- | |
| Casualty-Ptd. $ 713,567 | |
|____________________________| |
|
|
|
|
| _____________________________ ______________________________
| | NECKURA HOLDING | | NECKURA |
| | COMPANY (NECKURA) | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 10,000 Shares | | Common Stock: 6,000 Shares |
|___| ------------- |_____________________| ------------- |
| | | | | |
| | Cost | | | Cost |
| | --- | | | ---- |
| | Casualty-100% $87,943,140 | | | Neckura-100% DM 6,000,000 |
| |_____________________________| | |______________________________|
| |
| | _____________________________
| | | NECKURA LIFE |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 4,000 Shares |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 15,825,681 |
| | |_____________________________|
| |
| | _____________________________
| | | NECKURA GENERAL |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| |_____| ------------ |
| | | |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,656,925 |
| | |_____________________________|
| |
| | _____________________________
| | | COLUMBUS INSURANCE |
| | | BROKERAGE AND SERVICE |
| | | GmbH |
| | | |
| | | Common Stock: 1 Share |
| |_____| ------------- |
| | | |
| | | Cost |
| | | ----- |
| | | Neckura-100% DM 51,639 |
| | |_____________________________|
| |
| | _____________________________
| | | AUTO DIREKT |
| | | INSURANCE COMPANY |
| | | |
| | | Common Stock: 1,500 Shares |
| | | ------------- |
| |_____| |
| | | Cost |
| | | ---- |
| | | Neckura-100% DM 1,643,149 |
| | |_____________________________|
| |
| _____________________________ | ____________________________
| | NATIONWIDE | | | SVM SALES |
| | DEVELOPMENT COMPANY | | | GmbH |
| | | | | |
| | Common Stock: 99,000 Shares | | | Common Stock: 50 Shares |
| | ------------- | |_____| ------------- |
| | | | |
|___| Cost | | Cost |
| | --- | | ---- |
| | Casualty-100% $15,100,000 | | Neckura-100% DM 50,000 |
| | Other Capital: | |____________________________|
| | -------------- |
| | Casualty-Ptd. $ 2,796,100 |
| |_____________________________|
|
|
| _____________________________
| | SCOTTSDALE |
| | INDEMNITY COMPANY |
| | |
|___| Common Stock: 50,000 Shares |
| | ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $8,800,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE |
| | INDEMNITY COMPANY |
| | |
| | Common Stock: 28,000 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $294,529,000 |
| |_____________________________|
|
| _____________________________ __________________________
| | LONE STAR | | COLONIAL COUNTY MUTUAL |
| | GENERAL AGENCY, INC. | | INSURANCE COMPANY |
| | | | |
| | Common Stock: 1,000 Shares |______| Surplus Debentures: |
|___| ------------- |______| ------------------- |
| | | | |
| | Cost | | Cost |
| | ---- | | ---- |
| | Casualty-100% $5,000,000 | | Colonial $500,000 |
| |_____________________________| | Lone Star 150,000 |
| |__________________________|
|
| _____________________________
| | NATIONWIDE |
| | COMMUNITY URBAN |
| | REDEVELOPMENT |
| | CORPORATION |
| | |
| | Common Stock: 10 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,000 |
| |_____________________________|
|
| _____________________________
| | INSURANCE |
| | INTERMEDIARIES, INC. |
| | |
| | Common Stock: 1,615 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $1,615,000 |
| |_____________________________|
|
| _____________________________
| | NATIONWIDE CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 100 Shares |
| | ------------- |
|___| |
| | Cost |
| | ---- |
| | Casualty-90% $9,000 |
| | NW Fin Serv- 1,000 |
| | 10% |
| |_____________________________|
|
|
| _____________________________
| | CALIFORNIA CASH |
| | MANAGEMENT COMPANY |
| | |
| | Common Stock: 90 Shares |
|___| ------------- |
| | |
| | Cost |
| | ---- |
| | Casualty-100% $9,000 |
| |_____________________________|
|
|
| _____________________________ __________________________
| | NATIONWIDE | | THE BEAK AND |
| | COMMUNICATIONS, INC. | | WIRE CORPORATION |
| | | | |
| | Common Stock: 14,750 Shares | | Common Stock: 750 Shares |
|___| ------------- |_____| ------------- |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| Casualty-100% $11,510,000 | | NW Comm- $531,000 |
| | | 100% |
| Other Capital: | |__________________________|
| -------------- |
| Casualty-Ptd. 1,000,000 |
|_____________________________|
<FN>
Subsidiary Companies - Solid Line
Contractual Association - Double Line
December 31, 1995
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (left side)
<S> <C> <C>
_______________________________________
| |
| EMPLOYERS INSURANCE |___________________________________________
| OF WAUSAU |___________________________________________
| A MUTUAL COMPANY |
|_______________________________________|
__________________________
|
____________|_________________
| NATIONWIDE LIFE INSURANCE |
| COMPANY (NW LIFE) |
|Common Stock: 3,814,779 Shares|
| ------------- |
| |
| NW Corp.- Cost |
| 100% ---- |
| $950,226,915 |
|______________________________|
_________________________________________________________________________________|
____________|_____________ ___________|_______________ | ______________________________
| NATIONWIDE | | NATIONAL CASUALTY | | | NATIONWIDE LIFE AND |
| FINANCIAL SERVICES, INC. | | COMPANY (NC) | | | ANNUITY INSURANCE COMPANY |
| (NW FIN. SERV.) | | Common Stock: 100 Shares | | | |
______|Common Stock: 7,676 Shares| | ------------- | | | Common Stock: 66,000 Shares |
| ____|------------- | | | |_______| ------------- |
| | | Cost | | Cost | | | NW Life- Cost |
| | | ---- | | ---- | | | 100% ---- |
| | | NW Life-100% $5,996,261 | | NW Life-100% $66,132,811 | | | $58,070,003 |
| | |__________________________| |___________________________| | |______________________________|
| | __________________________ ___________|_______________ | ________________________________
| | | NATIONWIDE | | | | | WEST COAST LIFE |
| | | INVESTOR SERVICES, INC. | | | | | INSURANCE COMPANY |
| | | Common Stock: 5 Shares | | NCC OF AMERICA, INC. | | | Common Stock: 1,000,000 Shares|
| |___| ------------- | | (INACTIVE) | |_______| ------------- |
| | | NW Fin. Serv.-100% | | | | | |
| | | Cost | | NC-100% | | | Cost |
| | | ---- | | | | | ---- |
| | | $5,000 | | | | | NW Life-100% $133,809,265 |
| | |__________________________| |___________________________| | |________________________________|
| | __________________________ ______________________________ | ____________________________
| | | NATIONWIDE | | EMPLOYERS LIFE INSURANCE CO. | | | NATIONWIDE PROPERTY |
| | | INVESTING | | OF WAUSAU (ELIOW) | | | MANAGEMENT, INC. |
| | | FOUNDATION | | | | | Common Stock: 59 Shares |
| |___| | ______| Common Stock: 250,000 Shares |____|_______| ------------ |
| ___| | | | ------------- Cost | | | Cost |
| | | | | | ---- | | | ---- |
| | | | | | NW Life-100% $155,000,000 | | | NW Life-100% $1,907,896 |
| | | COMMON LAW TRUST | | |______________________________| | |__________________________ |
| | |__________________________| | | |
| | | _____________________________ | __________|_______________
| | __________________________ | | WAUSAU PREFERRED | | | MRM INVESTMENTS, INC. |
| | | NATIONWIDE | | | HEALTH INSURANCE CO. | | | |
| | | INVESTING | | | | | | Common Stock: 1 Share |
| |___| FOUNDATION II | |______| Common Stock: 200 Shares | | | ------------ |
| ___| | | | ------------- | | | |
| | | | | | Cost | | | Cost |
| | | | | | ---- | | | Nat. Prop. ---- |
| | | COMMON LAW TRUST | | | ELIOW -- 100% $57,413,193 | | | Mgmt.-100% $550,000 |
| | |__________________________| | |_____________________________| | |___________________________|
| | | |
| | | _____________________________ | ___________________________
| | __________________________ | | KEY HEALTH PLAN, INC. | | | NWE, INC. |
| | | NATIONWIDE | | | | | | |
| | | SEPARATE ACCOUNT | |______| Common Stock: 1,000 Shares | |______| Common Stock: 100 Shares |
| | | TRUST | | ------------- | | ------------ |
| |___| | | Cost | | Cost |
| ___| | | ---- | | ---- |
| | | COMMON LAW TRUST | | ELIOW-80% $2,700,000 | | NW Life-100% $35,971,375 |
| | | | |_____________________________| |___________________________|
| | |__________________________|
| |
| | __________________________
| | | FINANCIAL HORIZONS |
| | | INVESTMENT TRUST |
| |___| |
|_____| |
| COMMON LAW TRUST |
|__________________________|
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (middle)
<S> <C> <C> <C>
_______________________________________
| |
________________________________| NATIONWIDE MUTUAL |___________________________________________________________
________________________________| INSURANCE COMPANY |___________________________________________________________
| (CASUALTY) |
|_______________________________________|
| _______________________________________________________________
__________________|______________|___
| NATIONWIDE CORPORATION (NW Corp) |
| Common Stock: Control: |
| ------------- ------- |
| 13,642,432 100% |
| |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
|_____________________________________|
|
____________________________________________________|______________________________________________________________________________
| | |
___________|_________________ _____________|_____________ ____________|______________
| PUBLIC EMPLOYEES BENEFIT | | GATES, McDONALD | | NATIONWIDE FINANCIAL |
|SERVICES CORPORATION (PEBSCO) | | & COMPANY (GATES) | | INSTITUTION DISTRIBUTORS |
______| Common Stock: 236,494 Shares | | Common Stock: 254 Shares | | AGENCY, INC. (NFIDAI)|
| ____| ------------- | | ------------- |___ _____| Common Stock: 1,000 Shares|
| | | Cost | | | | | ___| ------------- |
| | | NW Corp.- ---- | | Cost | | | | | Cost |
| | | 100% $ 7,830,936 | | ---- | | | | | NW Corp. ---- |
| | |______________________________| | NW Corp.- $25,683,532 | | | | | 100% $19,501,000 |
| | | 100% | | | | |___________________________|
| | |___________________________| | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | | ___________________________
| | | PEBSCO SECURITIES | | OF NEW YORK, INC. | | | | | FINANCIAL HORIZONS |
| | | CORP. | | Common Stock: 3 Shares | | | | | DISTRIBUTORS AGY. |
| |____| Common Stock: 5,000 Shares | | ------------- |___| | | | OF ALABAMA, INC. |
| | | ------------- | | | | | |___|Common Stock: 10,000 Shares|
| | | Cost | | Cost | | | | |----------- |
| | | ---- | | ---- | | | | | Cost |
| | | PEBSCO-100% $25,000 | | Gates-100% $106,947 | | | | | ---- |
| | |____________________________| | | | | | | NFIDAI-100% $100 |
| | |___________________________| | | | |___________________________|
| | | | |
| | | | |
| | ___________________________ | | |
| | ____________________________ | GATES, McDONALD & COMPANY| | | |
| | | PEBSCO OF | | OF NEVADA | | | | ___________________________
| | | ALABAMA | | | | | | | LANDMARK FINANCIAL |
| | |Common Stock: 100,000 Shares| | Common Stock: 40 Shares |___| | | | SERVICES OF |
| |____|------------- | | | | | | NEW YORK, INC. |
| | | Cost | | Gates-100% Cost | | |___|Common Stock: 10,000 Shares|
| | | ---- | | ---- | | | |------------- |
| | | PEBSCO-100% $1,000 | | $93,750 | | | | Cost |
| | |____________________________| |___________________________| | | | ---- |
| | | | | NFIDAI-100% $10,100 |
| | | | |___________________________|
| | | |
| | | |
| | ____________________________ | |
| | | PEBSCO OF | | |
| | | ARKANSAS | | | ___________________________
| | | Common Stock: 50,000 Shares| | | | FINANCIAL HORIZONS |
| |____| ------------- | | | | SECURITIES CORP. |
| | | Cost | ________________________________|_|___|Common Stock: 10,000 Shares|
| | | ---- | | AFFILIATE AGENCY, INC. | | | |------------- |
| | | PEBSCO-100% $500 | | | | | | Cost |
| | |____________________________| | Common Stock: 100 Shares | | | | ---- |
| | | | | | | NFIDAI-100% $153,000 |
| | | NFIDAI-100% Cost | | | |___________________________|
| | | ---- | | |
| | ___________________________ | $100 | | |
| | | PEBSCO OF MASSACHUSETTS | |___________________________| | |
| | | INSURANCE AGENCY, INC. | | | ___________________________
| |____| Common Stock: 1,000 Shares| | | | |
| | | ------------- | | | | FINANCIAL HORIZONS |
| | | Cost | | |___| DISTRIBUTORS |
| | | ---- | | ___| AGENCY OF OHIO, |
| | | PEBSCO-100% $1,000 | | | | INC. |
| | |___________________________| | | |___________________________|
| | | |
| | | |
| | | |
| | ___________________________ | | ___________________________
| | | PEBSCO OF | | | | |
| | | MONTANA | | |___| FINANCIAL HORIZONS |
| |____| Common Stock: 500 Shares | | ___| DISTRIBUTORS AGENCY |
| | | ------------- | | | | OF OKLAHOMA, INC. |
| | | Cost | | | |___________________________|
| | | ---- | | |
| | | PEBSCO-100% $500 | | |
| | |___________________________| | |
| | | |
| | ___________________________ | |
| | | PEBSCO OF | | | ___________________________
| | | NEW MEXICO | | | | |
| | | | | |___| FINANCIAL HORIZONS |
| |____|Common Stock: 1,000 Shares | | ___| DISTRIBUTORS AGENCY |
| | |------------- | | | | OF TEXAS, INC. |
| | | Cost | | | |___________________________|
| | | ----- | | |
| | | PEBSCO-100% $1,000 | | |
| | |___________________________| | | ___________________________
| | | | | |
| | ___________________________ | |___| AFFILIATE |
| |____| | |_____| AGENCY OF |
|______| PEBSCO OF | | OHIO, INC. |
| TEXAS, INC. | | |
|___________________________| |___________________________|
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE INSURANCE COMPANY |
| (FIRE) |
|_______________________________________|
________________________________________|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | NATIONWIDE HMO, INC. |
| INVESTOR SERVICES, INC. | | | (NW HMO) |
| (NEA) | | | Common Stock: 100 Shares |
_______| Common Stock: 500 Shares | |_____| ------------ |
| _____| ------------- | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $14,603,732 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MANAGEMENT |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| |_____| OF ALABAMA, INC. | | | Common Stock: 100 Shares |
| | | Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW HMO ---- |
| | | NEA-100% $5,000 | | | INC.-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH |
| | | INVESTOR SERVICES | | | AGENCY, INC. |
| | | OF MONTANA, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | Cost |
| | | Cost | | NW HMO ---- |
| | | ----- | | INC.-99% $116,077 |
| | | NEA-100% $500 | |___________________________|
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF NEVADA, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF OHIO, INC. |
| | | Common Stock: 100 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-91% $5,000 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF WYOMING, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | |
| | | NEA VALUEBUILDER |
| |_____| INVESTOR SERVICES |
| | | OF TEXAS, INC. |
| | | |
| | |___________________________|
| |
| | ___________________________
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
</TABLE>
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
<PAGE> 58
Item 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
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 DCVA II,
Nationwide Variable Account-II, Nationwide Variable
Account-5, Nationwide Variable Account-6, Nationwide
Variable Account-8, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C, Nationwide VL Separate Account-A, Nationwide VLI
Separate Account-2, Nationwide VLI Separate Account-3, NACo
Variable Account and the Nationwide Variable Account, all of
which are separate investment accounts of the Company or its
affiliates.
NFS also acts as principal underwriter for the Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, and Nationwide
Investing Foundation II, which are open-end management
investment companies.
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, Ohio 43215
D. Richard McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Gordon E. McCutchan Executive Vice President-Law and
One Nationwide Plaza Corporate Services and Director
Columbus, OH 43215
Robert A. Oakley Executive Vice President - Chief
One Nationwide Plaza Financial Officer and Director
Columbus, Ohio 43215
</TABLE>
83 of 88
<PAGE> 59
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
<S> <C>
Robert J. Woodward Executive Vice President - Chief
One Nationwide Plaza Investment Officer and Director
Columbus, Ohio 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
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
William G. Goslee Treasurer
One Nationwide Plaza
Columbus, Ohio 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Financial
Services,
Inc.
</TABLE>
84 of 88
<PAGE> 60
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43216
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Code, is issued by the Registrant in reliance upon, and in
compliance with, the Securities and Exchange Commission's
no-action letter to the American Council of Life Insurance
(publicly available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with IRC Section
403(b)(11).
85 of 88
<PAGE> 61
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide Variable Account-II
Individual Deferred Variable Annuity Contract
PROSPECTUS
November 1, 1996
86 of 88
<PAGE> 62
ACCOUNTANT'S CONSENT AND INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated February 26, 1996, included the related financial statement
schedules as of December 31, 1995, and for each of the years in the three-year
period ended December 31, 1995, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
July 23, 1996
87 of 88
<PAGE> 63
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE
VARIABLE ACCOUNT-II, has caused this Registration Statement to be signed on its
behalf in the City of Columbus, and State of Ohio, on this 23rd day of July,
1996.
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 Registration Statement has been
signed by the following persons in the capacities indicated on the 23rd day of
July, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- - -----------------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- - -----------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- - -----------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- - -----------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- - -----------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief Operating Officer and Director
- - -----------------------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- - -----------------------------------------
Henry S. Holloway
D. RICHARD MCFERSON Chairman and Chief Executive Officer - Nationwide
- - ----------------------------------------- Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- - -----------------------------------------
David O. Miller
C. RAY NOECKER Director
- - -----------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President- Chief Financial Officer
- - -----------------------------------------
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- - ----------------------------------------- -----------------------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- - -----------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- - -----------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- - -----------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- - -----------------------------------------
Harold W. Weihl
</TABLE>
88 of 88
<PAGE> 64
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1993, as amended,
various Registration Statements and amendments thereto for the registration
under said Act of Individual Deferred Variable Annuity Contracts in connection
with the MFS Variable Account, Nationwide Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Fidelity Advisor Variable Account, Nationwide Multi-Flex Variable Account and
Nationwide Variable Account-8; and the registration of fixed interest rate
options subject to a market value adjustment offered under some or all of the
aforementioned individual Variable Annuity Contracts in connection with the
Nationwide Multiple Maturity Separate Account, and the registration of Group
Flexible fund Retirement Contracts in connection with the Nationwide DC
Variable Account, Nationwide DCVA III, and the NACo Variable Account; and the
registration of Group Common Stock Variable Annuity Contracts in connection
with Separate Account No. 1; and the registration of variable life insurance
policies in connection with the Nationwide VLI Separate Account, Nationwide
VLI Separate Account-2, Nationwide VLI Separate Account-3 of Nationwide Life
Insurance Company, hereby constitutes and appoints D. Richard McFerson, Joseph
J. Gasper, Gordon E. McCutchan, W. Sidney Druen, and Joseph P. Rath, and each
of them with power to act without the others, his/her attorney, with full power
of substitution and resubstitution, for and in his/her name, place and stead,
in any and all capacities, to approve, and sign such Registration Statements
and any and all amendments thereto, with power to affix the corporate seal of
said corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument
may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 4th day of April, 1996.
/s/ Lewis J. Alphin /s/ David O. Miller
- - ------------------------------------- -------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- - ------------------------------------- -------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard P. Engel /s/ Robert A. Oakley
- - ------------------------------------- -------------------------------------
Willard P. Engel, Director Robert A. Oakley, Executive Vice
President and Chief Financial Officer
/s/ Fred C. Finney
- - ------------------------------------- /s/ James F. Patterson
Fred C. Finney, Director -------------------------------------
James F. Patterson, Director
/s/ Charles L. Fuellgraf
- - ------------------------------------- /s/ Arden L. Shisler
Charles L. Fuellgraf, Director -------------------------------------
Arden L. Shisler, Director
/s/ Joseph J. Gasper
- - ------------------------------------- /s/ Robert L. Stewart
Joseph J. Gasper, President and Chief -------------------------------------
Operating Officer and Director Robert L. Stewart, Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- - ------------------------------------- -------------------------------------
Henry S. Holloway, Chairman of the Nancy C. Thomas, Director
Board, Director
/s/ Harold W. Weihl
/s/ D. Richard McFerson -------------------------------------
- - ------------------------------------- Harold W. Weihl, Director
D. Richard McFerson, Chairman and
Chief Executive Officer-Nationwide
Insurance Enterprise and Director
<PAGE> 1
EXHIBIT NO. 4
THE VARIABLE ANNUITY CONTRACT FORM
<PAGE> 2
[LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
(Hereinafter called the Company)
P.O. Box 182008
Columbus, Ohio 43218-2008
1-800-533-5622 (For any inquiries)
NATIONWIDE LIFE INSURANCE COMPANY will make annuity payments to the Annuitant
starting on the Annuitization Date, as set forth in the Contract.
This Contract is provided in return for the Purchase Payments made as required
in the Contract.
TEN DAY LOOK
TO BE SURE THAT THE OWNER IS SATISFIED WITH THIS CONTRACT, THE OWNER HAS TEN
DAYS TO EXAMINE THE CONTRACT AND RETURN IT TO THE HOME OFFICE FOR ANY REASON.
WHEN THE CONTRACT IS RECEIVED IN THE HOME OFFICE, THE COMPANY WILL RETURN THE
CONTRACT VALUE TO THE OWNER, WITHOUT DEDUCTION FOR ANY SALES CHARGES OR
ADMINISTRATION FEES AS OF THE DATE OF CANCELLATION, WHERE PERMITTED BY STATE
LAW.
Executed for the Company on the Date of Issue.
/s/ GORDON E. McCUTCHAN /s/ JOSEPH J. GASPER
Secretary President
READ YOUR CONTRACT CAREFULLY
Individual Flexible Premium Deferred Variable Annuity, Non-Participating
ANNUITY PAYMENTS, DEATH BENEFITS, AND OTHER CONTRACT VALUES PROVIDED BY THIS
CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE
VARIABLE, MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE FLUCTUATIONS IN THE
NET INVESTMENT FACTOR, AND ARE NOT GUARANTEED AS TO FIXED-DOLLAR AMOUNT.
NOTICE - The details of the variable provisions in the
Contract may be found on Pages 9, 13, 14 and 18.
<PAGE> 3
CONTENTS
DATA PAGE.................................................................INSERT
CONTENTS......................................................................2
DEFINITIONS...................................................................3
GENERAL PROVISIONS .......................................................... 6
ACCUMULATION PROVISIONS......................................................12
ANNUITIZATION PROVISIONS.................................................... 16
ANNUITY PAYMENT OPTIONS......................................................19
ANNUITY TABLES............................................................. 21
2
<PAGE> 4
DEFINITIONS
ACCUMULATION UNIT - An Accumulation Unit is an accounting unit of measure. It is
used to calculate the Variable Account Contract Value prior to the Annuitization
Date.
ANNUITANT - The Annuitant is the person designated to receive annuity payments
during Annuitization and upon whose life any annuity payment involving life
contingencies depends. This person must be age 85 or younger at the time of
Contract issuance, unless the Company has approved a request for an Annuitant of
greater age. The Annuitant may be changed prior to the Annuitization Date with
the consent of the Company.
ANNUITIZATION DATE - The Annuitization Date is the date annuity payments are
scheduled to begin.
ANNUITIZATION - Annuitization is the process of selecting an Annuity Payment
Option to begin the pay out phase of the Contract.
ANNUITY PAYMENT OPTION - The Annuity Payment Option is the chosen form of
annuity payments. Several options are available under this Contract.
ANNUITY UNIT - An Annuity Unit is an accounting unit of measure used to
calculate the value of Variable Annuity payments.
BENEFICIARY - The Beneficiary is the person who may 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.
COMPANY - The Company is the 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 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 - The Contingent Owner, if named, may succeed to the rights of
the Contract Owner upon the Contract Owner's death before the Annuitization
Date.
3
<PAGE> 5
CONTRACT - The Individual Flexible Premium Deferred Variable Annuity described
herein.
CONTRACT ANNIVERSARY - An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER(S) (OWNER) - The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, Contingent Owner, Annuitant, Contingent Annuitant,
Beneficiary, Contingent Beneficiary, Annuity Payment Option, and the
Annuitization Date.
CONTRACT VALUE - The Contract Value is the sum of the value of all Variable
Account Accumulation Units attributable to the Contract.
CONTRACT YEAR - A Contract Year is each year starting with the Date of Issue of
the Contract and each Contract Anniversary thereafter.
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 - A Distribution is any payment of part or all of the Contract
Value.
FIXED ANNUITY - A Fixed Annuity is a series of payments which are guaranteed by
the Company as to a dollar amount during the Annuitization period.
HOME OFFICE - The Home Office is the main office of the Company located in
Columbus, Ohio.
JOINT OWNER - The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Contract Owner. IF A JOINT OWNER IS
NAMED, REFERENCES TO "CONTRACT OWNER" OR "OWNER" IN THIS CONTRACT 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 CONTRACT - A Non-Qualified Contract is a Contract which does not
qualify for favorable tax treatment under the provisions of sections 401
4
<PAGE> 6
(qualified plans), 408 (individual retirement annuities) or 403(b) (tax
sheltered annuities) of the Internal Revenue Code of 1986.
PURCHASE PAYMENT - A Purchase Payment is a deposit of new value into the
contract. The term "Purchase Payment" does not include transfers among the
Sub-Accounts.
QUALIFIED CONTRACT - A Qualified Contract is a contract issued to fund a
qualified plan.
QUALIFIED PLANS - A retirement plan which receives favorable tax treatment under
the provisions of the Internal Revenue Code, including those described in
Section 401 and 403(a) of the Internal Revenue Code.
SUB-ACCOUNTS - Sub-Accounts are 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.
VALUATION DATE - A Valuation Date is each day the New York Stock Exchange and
the Company's Home Office are open for business. It may also be any other day
during which there is a sufficient degree of trading of the Variable Account's
Mutual Fund shares such that the current net asset value of its Accumulation
Units might be materially affected.
VALUATION PERIOD - A Valuation Period is the interval of time between one
Valuation Date and the next Valuation Date. It is measured from the closing of
business of the New York Stock Exchange and ending at the close of business for
the next succeeding Valuation Date.
VARIABLE ACCOUNT - The Variable Account is 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 - A Variable Annuity is a series of payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
5
<PAGE> 7
GENERAL PROVISIONS
DEDUCTION FOR PREMIUM TAXES
The Company will charge against the Contract Value the amount of any premium
taxes levied by a state or any other government entity upon Purchase Payments
received by the Company. The method used to recoup premium taxes 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.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a Mortality and Expense Risk Charge equal, on an annual
basis, to 1.25 % of the daily net asset value of the Variable Account. This
deduction is made to compensate the Company for assuming the mortality risks and
expense risks under this Contract. The Company assumes a "mortality risk" that
fixed and 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. The Company
also assumes a mortality risk by its promise to pay in certain circumstances a
Death Benefit that is greater than the Contract Value. The "expense risk"
involves the guaranty by the Company that it will not increase charges for
administration of the Contract regardless of the Company's actual administrative
expenses.
ADMINISTRATION CHARGE
The Company will deduct an Administration Charge equal, on an annual basis, to
0.20% of the daily net asset value of the Variable Account. This deduction is
made to reimburse the Company for expenses incurred in the administration of the
Contract and of the Variable Account.
BENEFICIARY PROVISIONS
The Beneficiary is the person or persons who may receive certain benefits under
the Contract in the event the Annuitant dies prior to the Annuitization Date. If
more than one Beneficiary survives the Annuitant, each will share equally unless
otherwise specified in the Beneficiary designation. If no Beneficiary survives
the Annuitant, all rights and interests 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 predeceases the Annuitant or if a
Contingent Beneficiary is not named, all rights and interests of the Contingent
Beneficiary will vest with the Contract Owner or the Contract
6
<PAGE> 8
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 and recording by the Company at the 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.
CONTRACT OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the Contract.
IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF AS OWNER, THE PURCHASER WOULD
HAVE NO RIGHTS UNDER THE CONTRACT. If a Joint Owner is named, the Joint Owner
will possess an undivided interest in the Contract. The Contract Owner has sole
rights in the Contract prior to the Annuitization Date. Unless otherwise
provided, when Joint Owners are named, the exercise of any ownership right in
the Contract (including the right to surrender or partially surrender the
Contract, to change the Owner, 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 the Owner and Joint
Owner. 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 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. Any change of Contract Owner
designation will automatically revoke any prior Contract Owner designation. Any
request for change of Contract Owner must be (1) made by proper written
application, and, (2) received and recorded by the Company at its Home Office,
and (3) may include a signature guarantee as specified in the "Surrender"
provision. 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 and recording by the Company at the 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.
7
<PAGE> 9
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. Such request must be
received by the Company at its Home Office prior to the Annuitization Date. Any
such change is subject to underwriting and approval by the Company.
CONTINGENT OWNER
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.
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
surviving spouse, the entire interest in the Contract must be distributed within
five years of the prior Contract Owner's death or be distributed 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 surviving spouse
of the prior Contract Owner, 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"
section.
8
<PAGE> 10
DEATH OF ANNUITANT PRIOR TO 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 the Contract Owner or the
Contract Owner's estate.
The value of the Death Benefit will be determined as of the Valuation Date
coincident with or next following the date the Company receives in writing at
the Home Office the following three items (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; and (3) any applicable state required form(s).
Proof of death is either:
(1) a copy of a certified death certificate;
(2) a copy of a certified decree of a court of competent jurisdiction as to the
finding of death;
(3) a written statement by a medical doctor who attended the deceased; or
(4) any other proof satisfactory to the Company.
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 Contract
Owner during the 90-day period commencing with the date written notice is
received by the Company. If no election has been made by the end of such 90-day
period, the Death Benefit will be paid in a single sum payment. If the Annuitant
dies prior to his 86th birthday, the value of the Death Benefit will be the
greatest of (1) the sum of all Purchase Payments, 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 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 a change of the Annuitant) will be treated like a death of the
9
<PAGE> 11
Contract Owner for purposes for the "Death of Contract Owner" provision, and
result in a distribution of either:
(a) the Death Benefit described above (if there is no Contingent Annuitant),
or
(b) the benefit described in the "Death of Contract Owner" provision (in all
other cases),
provided that any such distribution must be made within the time period
specified in the "Death of Contract Owner" provision.
DEATH OF ANNUITANT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable shall be paid according to the Annuity Payment Option selected.
ALTERATION OR MODIFICATION
All changes in or to the terms of the Contract must be: (1) made in writing; and
(2) signed by the President or Secretary of the Company. No other person can
alter or change any of the terms or conditions of this Contract.
ASSIGNMENT
Where permitted, the Owner may assign all rights under this Contract at any time
during the lifetime of the Annuitant, prior to the Annuitization Date. The
Company will not be bound by any assignment until written notice is received and
recorded at the Home Office. The Company is not responsible for the validity or
tax consequences of any assignment. An assignment will not apply to any payment
made or action taken by the Company prior to the time it was recorded.
If this Contract is issued to fund a retirement plan pursuant to Internal
Revenue Code Sections 401, 403, 404 or 408, it may not be assigned, pledged or
otherwise transferred except as permitted by applicable law.
The value of any portion of the Contract which is assigned, pledged or
transferred by gift may be treated like a cash withdrawal for federal tax
purposes and may be subject to a tax penalty. All rights in this Contract are
personal to the Contract Owner and may not be assigned without written consent
of the Company.
ENTIRE CONTRACT
This document is the whole Contract between the Owner and the Company. This
Contract, Data Page and Endorsement(s) (if any), make up the entire Contract.
10
<PAGE> 12
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, all payments and benefits
under this Contract will be adjusted. Payments and benefits will be made, based
on the correct age or sex. Proof of age of an Annuitant may be required at any
time, in a form satisfactory to the Company. When the age or sex of an Annuitant
has been misstated, the dollar amount of any overpayment will be deducted from
the next payment or payments due under this Contract. The dollar amount of any
underpayment made by the Company as a result of any such misstatement will be
paid in full with the next payment due under this Contract.
EVIDENCE OF SURVIVAL
Where any payments under this Contract depend on the recipient being alive on a
given date, proof that such person is living may be required by the Company.
Such proof may be required prior to making the payments.
PROTECTION OF PROCEEDS
Proceeds under this Contract are not assignable by any Beneficiary prior to the
time they are due. Proceeds are not subject to the claims of creditors or to
legal process, except as mandated by applicable laws.
REPORTS
At least once each year, prior to the Annuitization Date, a report showing the
Contract Value will be provided to the Owner.
INCONTESTABILITY
This Contract will not be contested.
CONTRACT SETTLEMENT
The Company may require this Contract to be returned to the Home Office prior to
making any payments. All sums payable to or by the Company under this Contract
are payable at the Home Office.
NUMBER AND GENDER
Unless otherwise provided, all references in this Contract which are in the
singular form will include the plural; all references in the plural form will
include the singular; and all references in the male gender will include the
female and neuter genders.
11
<PAGE> 13
NON-PARTICIPATING
This Contract is non-participating. It will not share in the surplus of the
Company.
ACCUMULATION PROVISIONS
SURRENDER
The Owner may surrender part or all of the Contract Value at any time this
Contract is in force and prior to the earlier of the Annuitization Date or the
death of the Annuitant or Contingent Annuitant if any. All surrenders will have
the following conditions:
1. The request for surrender must be in writing.
2. The contract value will be paid to the Owner after proper written
application and the Contract are received at the Home Office.
3. The Company reserves the right to 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. Payment of the Contract
Value will be made within seven days of receipt of both proper written
application and the Contract.
4. When written application and the Contract are received, the Company will
surrender the number of Variable Account Accumulation Units needed to equal
the dollar amount requested.
5. If a partial surrender is requested, the amounts surrendered will be
withdrawn on a pro-rata basis from the sub-accounts of the Variable
Account.
For tax purposes, a surrender is treated as a withdrawal of earnings first.
SURRENDER VALUE
The Surrender Value at any time will be the Contract Value.
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER
The Company has the right to suspend or delay the date of any Surrender payment
from the Variable Account for any period:
1. When the New York Stock Exchange is closed;
2. When trading on the New York Stock Exchange is restricted;
12
<PAGE> 14
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 fairly determine the value of the net assets of
the Variable Account;
4. During any other period when the Securities and Exchange Commission, by
order, so permits for the protection of security holders; or
5. When the request for Surrender is not made in writing.
Rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions set forth in numbers 2, 3, and 4 above exist.
FLEXIBLE PURCHASE PAYMENTS
The Contract is bought for the initial Purchase Payment and any subsequent
Purchase Payments. The cumulative total of all Purchase Payments under this and
any other annuity Contract(s) issued by the Company having the same Annuitant
may not exceed $1,000,000 without the prior consent of the Company.
The initial Purchase Payment is due on the Date of Issue and may not be less
than $15,000. Purchase payments, if any, after the initial Purchase Payment must
be a least $1,000 and may be made at any time.
If no considerations have been received under this Contract for a period of two
full years and the paid-up annuity benefit at maturity would be less than $20
monthly, the Company may at its option terminate the Contract by payment of the
accumulated value and by such payment be relieved of any further obligation
under the Contract.
ALLOCATION OF PURCHASE PAYMENTS
The Owner elects to have the Purchase Payments allocated among the Sub-Accounts
of the Variable Account at the time of application. The allocation of future
Purchase Payments may be changed by the owner by a written request that is
received and recorded by the Company.
CONTRACT VALUE
The Contract Value at any time will be the Variable Account Contract Value.
13
<PAGE> 15
VARIABLE ACCOUNT CONTRACT VALUE
The Variable Account Contract Value is the sum of the value of all Variable
Account Accumulation Units under this Contract.
If: (1) part or all of the Variable Account Contract Value is surrendered; or
(2) charges or deductions are made against the Variable Account Contract Value;
then, an appropriate number of Accumulation Units will be canceled or
surrendered to equal such amount.
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account of the Company. The
Company has allocated a part of its assets for this Contract and certain other
contracts to the Variable Account. Such assets of the Variable Account remain
the property of the Company. However, they may not be charged with the
liabilities from any other business in which the Company may take part.
The Variable Account is divided into Sub-Accounts which invest in shares of the
Mutual Funds. Purchase payments are allocated among one or more of these
Sub-Accounts, as designated by the Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Purchase Payments applied to the Variable Account will be invested at net
asset value in one or more of the Sub-Accounts.
VALUATION OF ASSETS
Mutual Fund shares in the Variable Account will be valued at their net asset
value.
VARIABLE ACCOUNT ACCUMULATION UNITS
The number of Accumulation Units for each Sub-Account of the Variable Account is
found by dividing: (1) the net amount allocated to the Sub-Account; by (2) the
Accumulation Unit value for the Sub-Account for the Valuation Period during
which the Company received the Purchase Payment.
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account of the Variable Account
was arbitrarily set at $10 when the first Mutual Fund shares were available for
purchase. The value for any later Valuation Period is found as follows:
14
<PAGE> 16
The Accumulation Unit Value for each Sub-Account for the last prior Valuation
Period is multiplied by the Net Investment Factor for the Sub-Account for the
next following Valuation Period. The result is the Accumulation Unit Value. The
value of an Accumulation Unit may increase or decrease from one Valuation Period
to the next. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The Net
Investment Factor may be greater or less than one; therefore, the value of an
Accumulation Unit may increase or decrease.
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by: dividing (1) by (2) and subtracting (3) from the result, where:
1. is the net result of:
a. the net asset value per share of the Mutual Fund held in the
Sub-Account, determined at the end of the current Valuation Period;
plus
b. the per share amount of any dividend or capital gain distributions
made by the Mutual Fund held in the Sub-Account, if the "ex-dividend"
date occurs during the current Valuation Period.
2. the net asset value per share of the Mutual Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
3. is a factor representing the Mortality and Expense Risk Charge deducted
from the Variable Account. Such factor is equal, on an annual basis, to
1.45% of the daily net asset value of the Variable Account.
For funds that credit dividends on a daily basis and pay such dividends once a
month, the Net Investment Factor allows for the monthly reinvestment of these
daily dividends.
TRANSFER PROVISIONS
Transfers among the Sub-Accounts are limited to twelve (12) transfers per year.
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
15
<PAGE> 17
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. 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 on or
after the next Contract Anniversary pursuant to a new request. The Contract
Owner may discontinue Systematic Withdrawals at any time by notifying the
Company in writing.
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.
DISTRIBUTION PROVISIONS
The following events will give rise to a Distribution:
1. Reaching the Annuitization Date - Distribution will be made pursuant to the
Annuity Payment Option selected.
2. Death of the Annuitant prior to the Annuitization Date - Distribution to be
made in accordance with the options available under the Death of Annuitant
provisions of this Contract.
3. Death of the Owner - Distribution to be made in a manner consistent with
the Death of Owner provisions of this Contract.
4. Other Surrender - Distribution to be made in accordance with the Surrender
provisions of this Contract.
ANNUITIZATION PROVISIONS
GENERAL
All of the provisions within this section are subject to the restrictions set
forth in the Section entitled "Death Of Owner".
ANNUITIZATION DATE
Such date may be the first day of a calendar month or any other agreed upon
date. It must be at least one year after the Date of Issue. The Annuitization
Date may not be later than the first day of the first calendar month after the
Annuitant's 86th birthday, unless a later date has been requested by the
Contract Owner; and approved by the Company. This date is selected by the
16
<PAGE> 18
Contract Owner at the time of application. Any applicable premium taxes not
already deducted may be deducted from the Contract Value at the Annuitization
Date. The remaining Contract Value will then be applied to the Annuity Payment
Option selected by the Owner.
CHANGE OF ANNUITIZATION DATE
The Owner may change the Annuitization Date. A change of Annuitization Date must
be made by written request. The request must be received at the Home Office
prior to both new and old Annuitization Dates. The date to which such a change
may be made must be the first day of a calendar month.
CHANGE OF ANNUITY PAYMENT OPTION
The Owner may change the Annuity Payment Option prior to the Annuitization Date.
A change of the Annuity Payment Option must be made by written request and must
be received at the Home Office prior to the Annuitization Date. After a change
of Annuity Payment Option is received at the Home Office, it will become
effective as of the date it was requested. A change of Annuity Payment Option
will not apply to any payment made or action taken by the Company before it is
received.
ANNUITY PAYMENT OPTIONSANNUITY PAYMENT OPTIONS
An Annuity Payment Option may be selected prior to Annuitization. Any Annuity
Payment Option not set forth in the Contract or a combination of available
options which is satisfactory to both the Company and the Annuitant may be
selected.
SUPPLEMENTARY AGREEMENT
A Supplementary Agreement will be issued within 30 days following the
Annuitization Date. The Supplementary Agreement will set forth the terms of the
Annuity Payment Option selected.
FREQUENCY AND AMOUNT OF PAYMENTS
Payments will be made based on the Annuity Payment Option selected and frequency
selected. However, if the net amount to be applied to any annuity payment option
at the Annuitization Date is less than $5000, the Company has the right to pay
such amount in one lump sum.
If any payment provided for would be or becomes less than $50, the Company has
the right to change the frequency of payment to an interval that will result in
payments of at least $50.
17
<PAGE> 19
FIXED ANNUITY PROVISIONS
A Fixed Annuity is an annuity with level payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. At the
Annuitization Date, the designated portion of the Contract Value will be applied
to the applicable Annuity Table. This will be done in accordance with the
Annuity Payment Option selected.
VARIABLE ANNUITY PROVISIONS
A Variable Annuity is a series of payments which are not predetermined or
guaranteed as to dollar amount and which vary in amount with the investment
experience of the Variable Account.
DETERMINATION OF FIRST VARIABLE ANNUITY PAYMENT
At the Annuitization Date, a designated portion of the Contract Value will be
applied to purchase rates based on the 1971 Individual Annuity Mortality Table
with ages set back one year and 3.5% interest.
ANNUITY UNIT VALUE
An Annuity Unit is used to calculate the value of annuity payments. The value of
an Annuity Unit for each Sub-Account was arbitrarily set at $10 when the first
Mutual Fund shares were bought. The value for any later Valuation Period is
found as follows:
1. The Annuity Unit Value for each Sub-Account for the last prior Valuation
Period is multiplied by the Net Investment Factor for the Sub-Account for
the Valuation Period for which the Annuity Unit Value is being calculated.
2. The result is multiplied by an interest factor. This is done because the
Assumed Investment Rate of 3.5% per year is built into the Annuity Tables.
VARIABLE ANNUITY PAYMENTS AFTER THE FIRST PAYMENT
Variable Annuity payments after the first vary in amount. The payment amount
changes with the investment performance of the Sub-Accounts within the Variable
Account. The dollar amount of such payments is determined as follows:
1. The dollar amount of the first annuity payment is divided by the unit value
as of the Annuitization Date. This result establishes the fixed number of
Annuity Units for each monthly annuity payment after the first. This number
of Annuity Units remains fixed during the annuity payment period.
18
<PAGE> 20
2. The fixed number of Annuity Units is multiplied by the Annuity Unit Value
for the Valuation Date for which the payment is due. This result
establishes the dollar amount of the payment.
The Company guarantees that the dollar amount of each payment after the first
will not be affected by variations in expenses or mortality experience.
ANNUITY PAYMENT OPTIONS
GENERAL
All annuity payments will be mailed within 10 working days of the first of the
month in which they are scheduled to be made. The following is a list of options
guaranteed to be made available by the Company.
LIFE ANNUITY
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. Payments will cease with the last payment due prior to the death of
the Annuitant.
JOINT AND LAST SURVIVOR ANNUITY
The amount to be paid under this option will be paid during the lifetimes of the
Annuitant and designated second person. Payments will continue as long as either
is living.
LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be selected. If the
Annuitant dies prior to the end of this guaranteed period, the recipient chosen
by the Annuitant to receive the remaining payments may choose to continue
receiving payments until the end of the guaranteed period, or receive the
commuted value of the remaining guaranteed payments in a lump sum. Such lump sum
payment will be equal to the present value of the remaining guaranteed payments.
The payment will be computed as of the date on which proof of the death of the
Annuitant is received at the Home Office and computed at an assumed investment
rate which is the greater of that used in the Annuity Tables in effect on the
date of the calculation of the lump sum and that used in the Annuity Tables in
effect on the Annuitization Date.
19
<PAGE> 21
ANY OTHER OPTION
The amount and period under any other option will be determined by the Company.
Payment options not set forth in the Contract are available only if they are
approved by both the Company and the Annuitant.
20
<PAGE> 22
MONTHLY BENEFITS PER $1000 APPLIED
ANNUITY TABLES
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS
ANNUITANT'S AGE LAST BIRTHDAY
<TABLE>
<CAPTION>
FEMALE AGE
----------
50 55 60 65 70
-- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
MALE AGE 50 3.36 3.46 3.56 3.64 3.71
-------- 55 3.42 3.56 3.69 3.82 3.93
60 3.47 3.64 3.82 3.99 4.16
65 3.70 3.92 4.15 4.39
70 4.00 4.30 4.61
</TABLE>
LIFE ANNUITY: MONTHLY ANNUITY PAYMENTS
<TABLE>
<CAPTION>
MALE GUARANTEED PERIOD FEMALE GUARANTEED PERIOD
ANNUITANT'S ATTAINED ANNUITANT'S ATTAINED
AGE LAST BIRTHDAY NONE 120 MONTHS 240 MONTHS AGE LAST BIRTHDAY NONE 120 MONTHS 240 MONTHS
-------------------- ---- ---------- ---------- ----------------- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
40 3.41 3.40 3.38 40 3.23 3.23 3.22
41 3.44 3.44 3.41 41 3.26 3.26 3.24
42 3.48 3.48 3.45 42 3.29 3.29 3.27
43 3.52 3.52 3.48 43 3.32 3.32 3.30
44 3.57 3.56 3.52 44 3.35 3.35 3.33
45 3.61 3.60 3.56 45 3.39 3.38 3.37
46 3.66 3.65 3.60 46 3.42 3.42 3.40
47 3.71 3.69 3.64 47 3.46 3.46 3.43
48 3.76 3.74 3.68 48 3.50 3.50 3.47
49 3.81 3.79 3.73 49 3.55 3.54 3.51
50 3.87 3.85 3.77 50 3.59 3.58 3.55
51 3.93 3.90 3.82 51 3.64 3.63 3.59
52 3.99 3.96 3.87 52 3.68 3.67 3.63
53 4.05 4.02 3.92 53 3.74 3.72 3.68
54 4.12 4.09 3.97 54 3.79 3.78 3.72
55 4.19 4.15 4.03 55 3.85 3.83 3.77
56 4.27 4.22 4.08 56 3.90 3.89 3.82
57 4.34 4.30 4.14 57 3.97 3.95 3.88
58 4.43 4.37 4.20 58 4.03 4.01 3.93
59 4.51 4.45 4.26 59 4.10 4.08 3.99
60 4.60 4.54 4.32 60 4.18 4.15 4.04
61 4.70 4.62 4.39 61 4.25 4.22 4.11
62 4.80 4.72 4.45 62 4.34 4.30 4.17
63 4.91 4.82 4.51 63 4.42 4.38 4.23
64 5.03 4.92 4.58 64 4.52 4.47 4.30
65 5.15 5.03 4.65 65 4.61 4.56 4.37
66 5.28 5.14 4.71 66 4.72 4.66 4.44
67 5.43 5.27 4.78 67 4.83 4.76 4.51
68 5.58 5.39 4.84 68 4.95 4.87 4.58
69 5.74 5.53 4.90 69 5.08 4.98 4.65
70 5.91 5.66 4.96 70 5.21 5.10 4.72
71 6.10 5.81 5.02 71 5.36 5.22 4.79
72 6.30 5.96 5.08 72 5.51 5.36 4.86
73 6.51 6.12 5.13 73 5.67 5.50 4.93
74 6.73 6.28 5.18 74 5.85 5.65 5.00
75 6.97 6.44 5.23 75 6.04 5.80 5.06
</TABLE>
21
<PAGE> 1
EXHIBIT NO. 5
THE VARIABLE ANNUITY APPLICATION FORM
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
[THE BEST NATIONWIDE LIFE INS. CO.
OF AMERICA ONE NATIONWIDE PLAZA / / NON-QUALIFIED / / 403(B) TRANSFERS
LOGO] P.O. BOX 182008 / / IRA SEP/IRA / / 401(A) (MONEY
COLUMBUS, OHIO 43218-2008 (OWNER AND ANNUITANT PURCHASE, PROFIT
MUST BE THE SAME) SHARING ONLY)
ANNUITY APPLICATION
$15,000 MINIMUM INITIAL PAYMENT
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACT OWNER
1
---------------------------------------------------------
CONTRACT (Print) Last First MI
OWNER(S)
---------------------------------------------------------
Address
---------------------------------------------------------
City State Zip
If no annuitant is
specified in
section 2, the
contract owner Soc. Sec. No./Tax I.D. Sex / / M
will be the - - / / F
annuitant. ---- -- ----
Date of MO. DAY YEAR
Birth --------- ---------- ---------
--------- ---------- ---------
- - --------------------------------------------------------------------------------
(If Applicable) / / JOINT OWNER / / CONTINGENT
(Spouse Only) OWNER
- - ----------------------------------------------------------------
Last First MI
- - ----------------------------------------------------------------
Address
- - ----------------------------------------------------------------
City State Zip
Soc. Sec. No./Tax I.D. Sex / / M
- - / / F
- - --- -- ----
Date of MO. DAY YEAR
Birth --------- ---------- ---------
--------- ---------- ---------
- - --------------------------------------------------------------------------------
2 ANNUITANT
ANNUITANT
---------------------------------------------------------
(Print) Last First MI
Complete only if ---------------------------------------------------------
different from Address
the contract owner.
---------------------------------------------------------
City State Zip
Soc. Sec. No./Tax I.D. Sex / / M
- - / / F
--- -- ----
Date of MO. DAY YEAR
Birth --------- ---------- ---------
--------- ---------- ---------
Annuitization Date
----------------------------------------
- - --------------------------------------------------------------------------------
/ / CONTINGENT ANNUITANT (If Applicable)
- - ------------------------------------------------------------
Last First MI
- - ------------------------------------------------------------
Address
- - ------------------------------------------------------------
City State Zip
Soc. Sec. No./Tax I.D. Sex / / M
- - / / F
--- -- ----
Date of MO. DAY YEAR
Birth --------- ---------- ---------
--------- ---------- ---------
- - --------------------------------------------------------------------------------
3 PRIMARY BENEFICIARY
BENEFICIARY
---------------------------------------------------------
(Print) Last First MI
---------------------------------------------------------
Relationship To Owner (s)
- - --------------------------------------------------------------------------------
/ / CONTINGENT BENEFICIARY
- - ---------------------------------------------------------------
(Print) Last First MI
- - ---------------------------------------------------------------
Relationship To Owner (s)
- - --------------------------------------------------------------------------------
4 FIRST PURCHASE PAYMENT $____________________________
ANNUITY PURCHASE Submitted herewith. A copy of this application duly
PAYMENTS signed by the agent will constitute receipt for such
amount. If this application is declined, there will be
no liability on the part of the company, and any sums
submitted with this application will be refunded.
(MINIMUM INITIAL PURCHASE PAYMENT OF $15,000)
- - --------------------------------------------------------------------------------
5 Will the proposed contract replace any existing annuity
or insurance contracts?
<TABLE>
<S> <C> <C> <C>
REPLACEMENT / / No / / Yes Existing Company
----------------------------------
</TABLE>
In accordance with TEFRA (1982), please provide the cost
basis of the contract.
<TABLE>
<S> <C> <C> <C> <C>
Pre - TEFRA $ Post - TEFRA $
----------------- ------------------------
</TABLE>
(Before August 14, 1982)
- - --------------------------------------------------------------------------------
6
REMARKS
- - --------------------------------------------------------------------------------
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
FIDELITY VARIABLE TCI PORTFOLIOS, INC.
7 INS. PRODUCTS FUND -------% TCI Balanced
-------% Growth Portfolio -------% TCI Growth
ALLOCATIONS -------% High Income Portfolio -------% TCI International
-------% Equity-Income Portfolio NATIONWIDE SEPARATE
INITIAL MINIMUM: -------% Overseas Portfolio ACCOUNT TRUST
$15,000 FIDELITY VARIABLE INS. -------% Capital App. Fund
PRODUCTS FUND II -------% Money Market Fund
IF NO ALLOCATIONS -------% Asset Manager Portfolio -------% Govt. Bond Fund
ARE SPECIFIED, -------% Contrafund Portfolio -------% Small Company Fund
THE ENTIRE AMOUNT DREYFUS -------% Total Return Fund
WILL BE ALLOCATED -------% Stock Index Fund NEUBERGER & BERMAN
TO THE NATIONWIDE -------% Socially Responsible AMT.
MONEY MARKET FUND Growth Fund -------% Growth Portfolio
PENDING INSTRUCTION STRONG VARIABLE -------% LTD Maturity Bond
FROM THE CONTRACT INSURANCE FUNDS, INC. Portfolio
OWNER. -------% Strong Discovery -------% Partners Portfolio
Fund II, Inc. OPPENHEIMER VARIABLE
-------% Strong Int'l Stock Fund II ACCOUNT FUNDS
------% Bond Fund
-------% STRONG SPECIAL ------% Multiple Strategies Fund
FUND II, INC. ------% Global Securities Fund
VAN ECK WORLDWIDE TRUST
-------% Worldwide Bond Fund VAN KAMPEN
-------% Gold & Natural AMERICAN CAPITAL LIFE
Resources Fund INVESTMENT TRUST
WHOLE WARBURG PINCUS TRUST -------% Real Estate
PERCENTAGES % International Equity Securities Fund
ONLY, Portfolio
MUST TOTAL 100% % Small Company Growth
Portfolio
</TABLE>
DOLLAR COST AVERAGING (OPTIONAL)
Transfers must be at least $100
Change of these instructions requires
completion of form provided by the
Company.
Please transfer $__________ per month
from the (check one)
[ ] Nationwide Money Market
Fund
[ ] Neuberger and Berman Limited
Maturity Bond Portfolio
(Fund Name, whole % only, totaling
100%)
______ % ________________________________
100 % TOTAL
Begin processing these transfer
instructions on __________________ 19____
Mo. Day Yr.
(ALL DCA TRANSACTIONS WILL BE
CONFIRMED ON QUARTERLY STATEMENTS.
PLEASE REVIEW THE INFORMATION IN
THESE STATEMENTS CAREFULLY. ALL
ERRORS OR CORRECTIONS MUST BE
REPORTED TO NATIONWIDE WITHIN 30
DAYS TO ASSURE PROPER CREDITING TO
YOUR CONTRACT.)
- - --------------------------------------------------------------------------------
8 OPTIONAL:
LIMITED
POWER OF
ATTORNEY
[ ] No [ ] Yes
_______________
Initiated by
Contract Owner
I (Contract Owner) appoint _______________________________ as my Limited
Attorney in fact. Once this appointment is received and recorded by Nationwide
Life Insurance Company, my Limited Attorney in fact may exchange contract values
in my name between and among the sub-accounts of my contract and change
allocations among the sub-accounts for my future contributions. I and my Limited
Attorney in Fact, agree, for ourselves, our heirs, the legal representative of
our estates, their successors and assigns, to release Nationwide Life Insurance
Company from any liability for acting in reliance on instructions given pursuant
to the Limited Power. We jointly and severally agree to indemnify Nationwide
Life Insurance Company from and against any claim, liability or expense arising
out of any action by Nationwide Life Insurance Company in reliance on such
instructions.
THIS POWER IS PERSONAL TO THE HOLDER AND MAY NOT BE DELEGATED TO ANY OTHER
PERSON OR ORGANIZATION. THE HOLDER MUST BE A CURRENTLY LICENSED AND
APPOINTED REPRESENTATIVE OF NATIONWIDE LIFE INSURANCE COMPANY AND MUST BE THE
AGENT OF RECORD FOR THIS CONTRACT, OR THE POWER WILL AUTOMATICALLY TERMINATE.
- - --------------------------------------------------------------------------------
9 [ ] Please send me a copy of the Statement of Additional
Information to the Prospectus.
Signed at: _________________________________ on _________________________
City State (Mo / Day / Year)
Contract Owner ________________________ Joint Owner _____________________
(If Applicable)
SIGNATURES
Witness ____________________________ #020-________________________________
(Signature of Producer) (Print Producer Name and Number)
Producer Phone # ( ) ______________ Address __________________________
Producer: Do you have reason to believe the contract applied for is to
replace existing annuities or insurance owned by the annuitant?
[ ] Yes [ ] No
Broker Dealer ______________________________ Telephone ________________
- - --------------------------------------------------------------------------------
SEND COMPLETED APPLICATION - WITH A CHECK MADE OUT TO NATIONWIDE LIFE INSURANCE
COMPANY TO:
FOR REGULAR MAIL: Nationwide Life Insurance Company
P.O. Box 182008
Columbus, Ohio 43218-2008
1-(800)-533-5622
<PAGE> 1
EXHIBIT NO. 9
OPINION OF COUNSEL
<PAGE> 2
[DRUEN, RATH & DIETRICH LETTERHEAD]
July 25, 1996
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43216
To the Company:
We have prepared the Registration Statement filed with the Securities and
Exchange Commission for the purpose of registering under the Securities Act of
1933, as amended, Individual Deferred Variable Annuity Contracts to be sold by
Nationwide Life Insurance Company ("NWL") and to be issued and administered
through the Nationwide Variable Account II. In connection therewith, we have
examined the Articles of Incorporation, Code of Regulations and Bylaws of NWL,
minutes of meetings of the Board of Directors, pertinent provisions of federal
and Ohio laws, together with such other documents as we have deemed relevant for
the purposes of this opinion. Based on the foregoing, it is our opinion that:
1. NWL is a stock life insurance corporation duly organized and
validly existing under the laws of the State of Ohio and duly
authorized to issue and sell life insurance and annuity
contracts.
2. The Nationwide Variable Account II has been properly created
and is a validly existing separate account pursuant to the
laws of the State of Ohio.
3. The issuance and sale of the Individual Deferred Variable
Annuity Contracts have been duly authorized by NWL. When
issued and sold in the manner stated in the prospectus
constituting a part of the Registration Statement, the
contracts will be legal and binding obligations of NWL in
accordance with their terms, except that
<PAGE> 3
Nationwide Life and Annuity Insurance Company
July 10, 1996
Page 2
clearance must be obtained, or the contract form must be
approved, prior to the issuance thereof in certain
jurisdictions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Opinions" in the prospectus contained in the Registration Statement.
Very truly yours,
/s/ Druen, Rath & Dietrich
- - --------------------------
DRUEN, RATH & DIETRICH
