<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 33-60063
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES [X]
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 4
NATIONWIDE VARIABLE ACCOUNT-II
(EXACT NAME OF REGISTRANT)
NATIONWIDE LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
GORDON E. MCCUTCHAN, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Name and Address of Agent for Service)
===============================================================================
This Post-Effective Amendment amends the Registration Statement in
respect of the Prospectus, the Statement of Additional Information and the
Financial Statements.
It is proposed that this filing will become effective (check
appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a
prior registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Pursuant to Paragraph (a)(3) thereof, a non-refundable fee
in the amount of $500 has been paid to the Commissioner. Registrant filed its
Rule 24f-2 Notice for the fiscal year ended December 31, 1995, on February 15,
1996.
1 of 106 REDLINED
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-II
REFERENCE TO ITEMS REQUIRED BY FORM N-4
Caption in Prospectus and Statement of Additional Information and Other
Information
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page........................................................................... 3
Item 2. Definitions.......................................................................... 5
Item 3. Synopsis or Highlights............................................................... 11
Item 4. Condensed Financial Information...................................................... N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies................ 11
Item 6. Deductions and Expenses.............................................................. 18
Item 7. General Description of Variable Annuity Contracts.................................... 18
Item 8. Annuity Period....................................................................... 21
Item 9. Death Benefit and Distributions...................................................... 23
Item 10. Purchases and Contract Value......................................................... 26
Item 11. Redemptions.......................................................................... 27
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........................................................................... 34
Item 16. Table of Contents.................................................................... 34
Item 17. General Information and History...................................................... 34
Item 18. Services............................................................................. 34
Item 19. Purchase of Securities Being Offered................................................. 34
Item 20. Underwriters......................................................................... 35
Item 21. Calculation of Performance Information............................................... 35
Item 22. Annuity Payments..................................................................... 36
Item 23. Financial Statements................................................................. 37
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.................................................... 87
Item 25. Directors and Officers of the Depositor.............................................. 89
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant....... 91
Item 27. Number of Contract Owners............................................................ 100
Item 28. Indemnification...................................................................... 100
Item 29. Principal Underwriter................................................................ 100
Item 30. Location of Accounts and Records..................................................... 101
Item 31. Management Services.................................................................. 101
Item 32. Undertakings......................................................................... 101
</TABLE>
2 of 106
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE
P.O. BOX 182356
COLUMBUS, OHIO 43216-2356, 1-800-243-6295
VOICE RESPONSE (AVAILABLE 24 HOURS) 1-800-848-8258, TDD 1-800-238-3035
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY THE NATIONWIDE VARIABLE ACCOUNT-II
OF NATIONWIDE LIFE INSURANCE COMPANY
This prospectus describes individual flexible Purchase Payment
deferred varaible annuity contracts (collectively referred to as the
"Contracts") issued by Nationwide Life Insurance Company (the
"Company"). Reference throughout the prospectus to such Contracts shall also
mean "Certificates" issued under Group Modified Single Premium Retirement
Contracts. For such Group Contracts, references to "Owner" shall mean the
"Participant" unless the Plan otherwise permits or requires the Owner to
exercise contractual rights under the authority of the Plan terms. The
Contracts are sold either as Non-Qualified Contracts or Individual Retirement
Annuities. 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 the Company. The Variable Account is
divided into Sub-Accounts, each of which invests in shares of one of the
underlying Mutual Fund options described below:
DREYFUS
Dreyfus Stock Index Fund The Dreyfus Socially Responsible Growth Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio Growth Portfolio High Income Portfolio*
Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
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. 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
Worldwide Bond Fund Gold and Natural Resources 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 Contracts issued by the Nationwide Variable Account-II before
investing. You should read it and keep it for future reference. A Statement of
Additional Information dated May 1, 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 182356, Columbus, Ohio 43216-2356.
INVESTMENT IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY CREDIT UNION OR OTHER FINANCIAL INSTITUTION. INVESTMENTS ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT
RISKS WHICH MAY INCLUDE THE LOSS OF PRINCIPAL.
1
3 of 106
<PAGE> 4
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1996 IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 29 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1996.
2
4 of 106
<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 90 or younger at the time of Contract issuance, unless
the Company has approved a request for an Annuitant of greater age. The
Annuitant may be changed prior to the Annuitization Date with the consent of the
Company.
ANNUITIZATION- The period during which annuity payments are actually received.
ANNUITIZATION DATE- The date on which annuity payments 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. 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 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.
CONTINGENT OWNER- A Contingent Owner, if named, may succeed to the rights of the
Contract Owner upon the Contract Owner's death before Annuitization. For
Contracts issued in the State of New York, references throughout this prospectus
to "Contingent Owner" shall mean "Owner's Beneficiary." A Contingent Owner may
not be named for Contracts issued as IRAs.
CONTRACT- The Individual Flexible Premium Deferred Variable Annuity Contract
described in this prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER (OWNER)- The Contract Owner is the person who possesses all
rights under the Contract, including the right to designate and change any
designations of the Owner, the Contingent Owner, Designated Annuitant,
Contingent Designated Annuitant, Beneficiary, Contingent Beneficiary, Annuity
Payment Option, or the Annuity Commencement Date.
CONTRACT VALUE- The sum of the Variable Account Accumulation Units attributable
to the Contract plus any amount held under the Contract in the Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit payable upon the death of the Designated Annuitant
(or Contingent Designated Annuitant, if applicable) prior to the Annuitization
Date. This benefit does not apply upon the death of the
3
5 of 106
<PAGE> 6
Contract Owner when the Owner and Designated Annuitant are not the same person.
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable shall be as specified in the Annuity Payment Option elected.
DESIGNATED ANNUITANT- The person designated prior to the Annuitization Date to
receive annuity payments. No change of Designated Annuitant may be made without
the prior consent of the Company.
DISTRIBUTION- Any payment of part or all of the Contract Value.
FIXED ACCOUNT- The Fixed Account is made up of all assets of the Company other
than those in the Variable Account or any other segregated asset account of the
Company.
FIXED ANNUITY- An annuity providing for payments which are guaranteed by the
Company as to dollar amount during Annuitization.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ANNUITY (IRA)- An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.
INTEREST RATE GUARANTEE PERIOD- An Interest Rate Guarantee Period is the
interval of time during which an interest rate credited to the Fixed Account
under the Contract is guaranteed to remain the same. For new Purchase Payments
allocated to the Fixed Account or transfers from the Variable Account, this
period begins upon the date of deposit or transfer and ends at the end of the
calendar quarter at least one year (but not more than 15 months) from deposit or
transfer. At the end of an Interest Rate Guarantee Period, a new interest rate
is declared with an Interest Rate Guarantee Period starting at the end of the
prior period and ending at the end of the calendar quarter one year later.
JOINT OWNER- The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Owner. IF A JOINT OWNER IS NAMED,
REFERENCES TO "CONTRACT OWNER" OR "OWNER" IN THIS PROSPECTUS WILL APPLY TO BOTH
THE OWNER AND JOINT OWNER. JOINT OWNERS MUST BE SPOUSES AT THE TIME JOINT
OWNERSHIP IS REQUESTED. IRAs may not be jointly owned.
MUTUAL FUND (FUND)- A registered management investment company in which the
assets of the Sub-Accounts of the Variable Account will be invested.
NON-QUALIFIED CONTRACT- A Contract which does not qualify for favorable tax
treatment under the provisions of Sections 401 or 403(a) (Qualified Plans), 408
(IRAs) or 403(b) (Tax-Sheltered Annuities) of the Code.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers among the Sub-Accounts.
QUALIFIED PLAN- A retirement plan which receives favorable tax treatment under
Section 401 and 403(a) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific 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- The Nationwide Variable Account-II, a separate investment
account of the Company into which Variable Account Purchase Payments are
allocated. The Variable Account is divided into Sub-Accounts, each of which
invests in the shares of a separate 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.
4
6 of 106
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.................................................... 3
SUMMARY OF CONTRACT EXPENSES................................................. 6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES....................................... 6
SYNOPSIS..................................................................... 9
NATIONWIDE LIFE INSURANCE COMPANY............................................ 9
THE VARIABLE ACCOUNT......................................................... 9
Underlying Mutual Fund Options...................................... 10
Fund Descriptions.......................................... 10
Voting Rights....................................................... 15
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS............ 16
Mortality Risk Charge............................................... 16
Premium Taxes....................................................... 16
Expenses of Variable Account........................................ 16
Investments of the Variable Account................................. 16
Right to Revoke..................................................... 16
Transfers........................................................... 17
Assignment.......................................................... 17
Ownership Provisions................................................ 18
Contingent Owner and Beneficiary Provisions......................... 18
Substitution of Securities.......................................... 19
Contract Owner Inquiries............................................ 19
ANNUITY PAYMENT PERIOD-VARIABLE ACCOUNT...................................... 19
Value of an Annuity Unit............................................ 19
Assumed Investment Rate............................................. 19
Frequency and Amount of Annuity Payments............................ 19
Annuity Commencement Date........................................... 20
Change in Annuity Commencement Date................................. 20
Change in Form of Annuity........................................... 20
Annuity Payment Options............................................. 20
Death of Contract Owner............................................. 21
Death of Designated Annuitant Prior to the Annuitization Date....... 21
Death of Annuitant After the Annuitization Date..................... 22
Required Distributions for Individual Retirement Annuities.......... 22
Generation-Skipping Transfers....................................... 22
GENERAL INFORMATION.......................................................... 23
Contract Owner Services............................................. 23
Statements and Reports.............................................. 23
Allocation of Purchase Payments and Contract Value.................. 24
Value of a Variable Account Accumulation Unit....................... 24
Net Investment Factor............................................... 24
Valuation of Assets................................................. 25
Determining the Contract Value...................................... 25
Surrender (Redemption).............................................. 25
Taxes............................................................... 25
Non-Qualified Contracts............................................. 26
Individual Retirement Annuities..................................... 27
Diversification..................................................... 27
Charge for Tax Provisions........................................... 28
Advertising......................................................... 28
LEGAL PROCEEDINGS............................................................ 29
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION..................... 29
APPENDIX..................................................................... 30
</TABLE>
5
7 of 106
<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
VARIABLE ACCOUNT ANNUAL EXPENSES
<TABLE>
<S> <C>
Mortality Risk Charges........................................... 0.80%
Administration Charge............................................ 0.00%
Total Variable Account Annual Expenses....................... 0.80%
</TABLE>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES1
(AS A PERCENTAGE OF 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 0.84% 0.10% 0.94%
Management Trust-Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.65% 0.10% 0.75%
Management Trust-Limited Maturity Bond Portfolio
- ---------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers 0.85% 0.30% 1.15%
Management Trust-Partners Portfolio
- ---------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Bond Fund 0.75% 0.05% 0.80%
- ---------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds -Global
Securities Fund 0.74% 0.15% 0.89%
- ---------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds -Multiple
Strategies Fund 0.74% 0.03% 0.77%
- ---------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
- ---------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Discovery
Fund II, Inc. 1.00% 0.31% 1.31%
- ---------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-
International Stock Fund II 1.00% 0.97% 1.97%
- ---------------------------------------------------------------------------------------------------------------
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 Resources Fund 0.80% 0.16% 0.96%
- ---------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide
Bond Fund 0.79% 0.15% 0.94%
- ---------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment
Trust-Real Estate Securities Fund 1.00% 1.90% 2.90%
- ---------------------------------------------------------------------------------------------------------------
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 separate account
assets or reductions from Contract Values. These underlying Mutual Fund
expenses are taken into consideration in computing each underlying
Mutual Fund's net asset value, which is the share price used to
calculate the unit values of the Variable Account. The management fees
and other expenses, some of which are subject to fee waivers or expense
reimbursements, are more fully described in the prospectuses of each
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.
6
8 of 106
<PAGE> 9
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your
at the end of the applicable Contract at the end of the
time period applicable time period
- ----------------------------------------------------------------------------------------------------------------
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>
Dreyfus Stock Index Fund 12 39 67 148 12 39 67 148
- ----------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund 22 67 115 247 22 67 115 247
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 15 46 79 174 15 46 79 174
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund -Growth Portfolio 16 49 84 184 16 49 84 184
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund -Overseas Portfolio 18 56 96 208 18 56 96 208
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund -High Income Portfolio 16 49 85 185 16 49 85 185
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio 17 52 89 194 17 52 89 194
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 16 50 85 186 16 50 85 186
- ----------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 14 44 76 166 14 44 76 166
- ----------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 14 43 74 162 14 43 74 162
- ----------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 14 43 74 163 14 43 74 163
- ----------------------------------------------------------------------------------------------------------------
NSAT-Small Company Fund 22 66 114 245 22 66 114 245
- ----------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 14 43 74 162 14 43 74 162
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 18 57 97 211 18 57 97 211
Trust-Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 16 50 87 190 16 50 87 190
Trust-Limited Maturity Bond Portfolio
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust- 20 63 109 234 20 63 109 234
Partners Portfolio
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
If you annuitize your Contract
at the end of the applicable
time period
- ------------------------------------------------------------------------------
1 Yr. 3 Yrs 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Stock Index Fund * 39 67 148
- ------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund * 67 115 247
- ------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio * 46 79 174
- ------------------------------------------------------------------------------
Fidelity VIP Fund -Growth Portfolio * 49 84 184
- ------------------------------------------------------------------------------
Fidelity VIP Fund -Overseas Portfolio * 56 96 208
- ------------------------------------------------------------------------------
Fidelity VIP Fund -High Income Portfolio * 49 85 185
- ------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio * 52 89 194
- ------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio * 50 85 186
- ------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund * 44 76 166
- ------------------------------------------------------------------------------
NSAT-Government Bond Fund * 43 74 162
- ------------------------------------------------------------------------------
NSAT-Money Market Fund * 43 74 163
- ------------------------------------------------------------------------------
NSAT-Small Company Fund * 66 114 245
- ------------------------------------------------------------------------------
NSAT-Total Return Fund * 43 74 162
- ------------------------------------------------------------------------------
Neuberger & Berman Advisers Management * 57 97 211
Trust-Growth Portfolio
- ------------------------------------------------------------------------------
Neuberger & Berman Advisers Management * 50 87 190
Trust-Limited Maturity Bond Portfolio
- ------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust- * 63 109 234
Partners Portfolio
- ------------------------------------------------------------------------------
</TABLE>
7
9 of 106
<PAGE> 10
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your
at the end of the applicable Contract at the end of the
time period applicable time period
- ----------------------------------------------------------------------------------------------------------------
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>
Oppenheimer Variable 17 52 90 195 17 52 90 195
Account Funds-Bond Fund
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 18 55 95 206 18 55 95 206
Account Funds -Global
Securities Fund
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 16 51 88 192 16 51 88 192
Account Funds -Multiple
Strategies Fund
- ----------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 21 65 111 240 21 65 111 240
- ----------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 22 68 117 251 22 68 117 251
Funds, Inc.-Discovery
Fund II, Inc.
- ----------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 29 89 152 320 29 89 152 320
Funds, Inc.-International
Stock Fund II
- ----------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 19 58 101 218 19 58 101 218
Balanced
- ----------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 19 58 101 218 19 58 101 218
Growth
- ----------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI 24 74 127 272 24 74 127 272
International
- ----------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 18 57 97 211 18 57 97 211
Insurance Trust-Worldwide
Bond Fund
- -----------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 18 57 98 213 18 57 98 213
Insurance Trust -Gold and
Natural Resources Fund
- -----------------------------------------------------------------------------------------------------------------
Van Kampen American 39 118 199 409 39 118 199 409
Capital Life Investment
Trust-Real Estate
Securities Fund
- -----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 24 72 124 265 24 72 124 265
International Equity
Portfolio
- -----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 22 66 114 245 22 66 114 245
Small Company Growth
Portfolio
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
If you annuitize your Contract
at the end of the applicable
time period
- ------------------------------------------------------------------------------
1 Yr. 3 Yrs 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable * 52 90 195
Account Funds-Bond Fund
- ------------------------------------------------------------------------------
Oppenheimer Variable * 55 95 206
Account Funds -Global
Securities Fund
- ------------------------------------------------------------------------------
Oppenheimer Variable * 51 88 192
Account Funds -Multiple
Strategies Fund
- ------------------------------------------------------------------------------
Strong Special Fund II, Inc. * 65 111 240
- ------------------------------------------------------------------------------
Strong Variable Insurance * 68 117 251
Funds, Inc.-Discovery
Fund II, Inc.
- ------------------------------------------------------------------------------
Strong Variable Insurance * 89 152 320
Funds, Inc.-International
Stock Fund II
- ------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI * 58 101 218
Balanced
- ------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI * 58 101 218
Growth
- ------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI * 74 127 272
International
- ------------------------------------------------------------------------------
Van Eck Worldwide * 57 97 211
Insurance Trust-Worldwide
Bond Fund
- ------------------------------------------------------------------------------
Van Eck Worldwide * 57 98 213
Insurance Trust -Gold and
Natural Resources Fund
- ------------------------------------------------------------------------------
Van Kampen American * 118 199 409
Capital Life Investment
Trust-Real Estate
Securities Fund
- ------------------------------------------------------------------------------
Warburg Pincus Trust- * 72 124 265
International Equity
Portfolio
- ------------------------------------------------------------------------------
Warburg Pincus Trust- * 66 114 245
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
Variable Account as well as those of the underlying Mutual Fund options are
reflected in the Example. For more and complete descriptions of the expenses of
the Variable Account, see "Variable Account Charges, Purchase Payments, and
Other Deductions." For more 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").
8
10 of 106
<PAGE> 11
SYNOPSIS
There are two types of Contracts: Non-Qualified Contracts may be
purchased with money from any source or an Individual Retirement Annuity may be
purchased with annual IRA contributions or contributions rolled-over from
Qualified Plans, Tax-Sheltered Annuities custodial accounts.
The Company does not deduct a sales charge from Purchase Payments made
for these Contracts. The Company deducts a Mortality Risk Charge equal to an
annual rate of 0.80% of the daily net asset value of the Variable Account for
mortality risk assumed by the Company (see "Mortality Risk Charge").
There are no minimum initial Purchase Payment or minimum
subsequent Purchase Payment requirements. 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
prior to the allocation of any Purchase Payment to any underlying Mutual Fund
option (see "Premium Taxes").
To be sure that the Contract Owner is satisfied with the Contract,
the Contract Owner has a ten day free look. Within ten days of the day the
Contract is received, it may be returned to the Home Office of the Company, at
the address shown on page 1 of this prospectus. When the Contract is received by
the Company, the Company will void the Contract and refund the Contract Value in
full unless otherwise required by state and/or federal law. All Individual
Retirement Annuity refunds will be 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 1929. The Company is a member of the Nationwide
Insurance Enterprise, with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43216-6609. The Company offers a complete line of life insurance, including
annuities and accident and health insurance. It is admitted to do business in
all states, the District of Columbia and Puerto Rico.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on October 7,
1981, pursuant to the provisions of Ohio law. The Company has caused the
Variable Account to be registered with the Securities and Exchange Commission as
a unit investment trust pursuant to the provisions of the Investment Company Act
of 1940. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
The Variable Account is a separate investment account of the
Company and, as such, is not chargeable with liabilities arising out of any
other business the Company may conduct. The Company does not guarantee the
investment performance of the Variable Account. Obligations under the Contracts,
however, are obligations of the Company. Income, gains and losses, whether or
not realized, from the assets of the Variable Account are, in accordance with
the Contracts, credited to or charged against the Variable Account without
regard to other income, gains, or losses of the Company.
Purchase Payments are allocated within the Variable Account among
one or more Sub-Accounts made up of shares in the underlying Mutual Fund
option(s) designated by the Contract Owner. A separate Sub-Account is
established within the Variable Account for each of the underlying Mutual Fund
options that may be designated by the Contract Owner.
9
11 of 106
<PAGE> 12
UNDERLYING MUTUAL FUND OPTIONS
Contract Owners may choose from among a number of different Sub-Account
options. A summary of investment objectives is contained in the descriptions of
each underlying Mutual Fund option below. THERE CAN BE NO ASSURANCE THAT THE
FUNDS' INVESTMENT OBJECTIVES WILL BE ACHIEVED.
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. Wells Fargo Nikko
Investment Advisors serves as the Fund's index fund manager. As of May 1, 1994,
the Dreyfus Life and Annuity Index Fund began doing business as the Dreyfus
Stock Index Fund.
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 Funds
shares are purchased by insurance companies to fund benefits under variable
insurance and annuity policies. Fidelity Management & Research Company ("FMR")
is the Fund's manager.
- - EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily
in income-producing equity securities. In choosing these securities FMR
also will consider the potential for capital appreciation. The
Portfolio's goal is to achieve a yield which exceeds the composite
yield on the securities comprising the Standard & Poor's 500 Composite
Stock Price Index.
- - 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
10
12 of 106
<PAGE> 13
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated
or that are unrated. Lower-rated securities are usually defined as Ba
or lower by Moody's; BB or lower by Standard & Poor's and may be deemed
to be of a speculative nature. The Portfolio may also purchase
lower-quality bonds such as those rated Ca3 by Moody's or C- by
Standard & Poor's which provide poor protection for payment of
principal and interest (commonly referred to as "junk bonds"). For a
further discussion of lower-rated securities, please see the "Risks of
Lower-Rated Debt Securities" section of the Portfolio's prospectus.
- - OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Variable Insurance Products Fund II is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
March 21, 1988. The Fund's shares are purchased by insurance companies to fund
benefits under variable insurance and annuity policies. 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 objective. 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. of 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 than $1 billion at the
11
13 of 106
<PAGE> 14
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 Associates Corporation, Strong Capital
Management, Inc. and Warburg, Pincus Counsellors, Inc. These
sub-advisers were chosen because they utilize a number of different
investment styles when investing in small company stocks. By utilizing
a number of different 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.
- - OPPENHEIMER BOND FUND
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
the Fund seeks capital growth when consistent with its primary
objective.
12
14 of 106
<PAGE> 15
- - OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by
investing a substantial portion of assets in securities of foreign
issuers, "growth-type" companies, cyclical industries and special
situations which are considered to be speculative.
- - OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds
and other debt securities, and "money market" securities.
STRONG SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. is a diversified, an 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.
The Strong Variable Insurance Funds, Inc. ("Corporation") is an
open-end management investment company, commonly referred to as a mutual fund.
Incorporated in Wisconsin, the Corporation has been authorized to issue shares
of common stock and series and classes of series 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 life policies and variable annuity contracts. Strong
Capital Management, Inc. (the "Adviser") is the investment advisor for each of
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
13
15 of 106
<PAGE> 16
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.
- - 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 Worldwide Insurance Trust is an open-end management investment
company organized as a "Business Trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Trust shares are offered only to separate
accounts of various insurance companies to fund the benefits of variable
insurance and annuity policies. The investment adviser and manager is Van Eck
Associates Corporation.
- - WORLDWIDE BOND FUND
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.
- - AMERICAN CAPITAL 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
14
16 of 106
<PAGE> 17
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 Warburg Trust offers its shares to insurance companies for
allocation to separate accounts for the purpose of funding variable annuity and
variable life contracts. Trust portfolios are managed by Warburg, Pincus
Counsellors, Inc. ("Counsellors.")
- - INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: To seek long-term capital appreciation by
investing primarily in a broadly diversified portfolio of equity
securities of companies, wherever organized, that in the judgment of
"Counsellors" have their principal business activities and interests
outside the United States. The Portfolio will ordinarily invest
substantially all of its assets, but no less than 65% of its total
assets, in common stocks, warrants and securities convertible into or
exchangeable for common stocks. The Portfolio intends to invest
principally in the securities of financially strong companies with
opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets.
- - SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a
portfolio of equity securities of small-sized domestic companies. The
Portfolio ordinarily will invest at least 65% of its total assets in
common stocks or warrants of small-sized companies (i.e., companies
having stock market capitalizations of between $25 million and $1
billion at the time of purchase) that represent attractive
opportunities for capital growth. The Portfolio intends to invest
primarily in companies whose securities are traded on domestic stock
exchanges or in the over-the-counter market. The Portfolio's
investments will be made on the basis of their equity characteristics
and securities ratings generally will not be a factor in the selection
process.
More detailed information may be found in the current prospectus for
each underlying Mutual Fund offered. Such a prospectus for the underlying Mutual
Fund options 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 1-800-243-6295, Voice
Response (available 24 hours) 1-800-848-8258, TDD 1-800-238-3035 or writing P.O.
Box 182356, Columbus, Ohio 43216-2356.
The underlying Mutual Fund options may also be available to registered
separate accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate any
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts participating in the underlying Mutual Fund options. 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 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 shares attributable to each Contract Owner is
determined by dividing the Contract Owner's interest in each
15
17 of 106
<PAGE> 18
respective Sub-Account of the Variable Account by the net asset value of the
applicable share 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 chosen by the Company not more than 90 days prior to
the meeting of the underlying Mutual Fund and voting instructions will be
solicited by written communication at least 15 days prior to such meeting.
Underlying Mutual Fund shares held in the Variable Account as to which
no timely instructions are received will be voted by the Company in the same
proportion as the voting instructions which are received with respect to all
Contracts participating in the Variable Account.
Each person having a voting interest in the Variable Account will
receive periodic reports relating to the underlying Mutual Fund, proxy material
and a form with which to give such voting instructions.
VARIABLE ACCOUNT CHARGES, PURCHASE PAYMENTS, AND OTHER DEDUCTIONS
MORTALITY RISK CHARGE
The Company assumes a "mortality risk" by virtue of annuity rates
incorporated in 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 basis to 0.80% of the daily net asset value of the
Variable Account. The Company expects to generate a profit through assessing
this charge.
PREMIUM TAXES
The Company will charge against the Contract Value the amount of any
premium taxes levied by a state or any other governmental entity upon Purchase
Payments received by the Company. Premium taxes currently imposed by certain
jurisdictions range from 0% to 3.5%. This range is subject to change. The method
used to recoup premium tax expense will be determined by the Company at its sole
discretion and in compliance with applicable state law. The Company currently
deducts such charges from a Contract Owner's Contract Value either: (1) at the
time the Contract is surrendered, (2) at Annuitization, or (3) at such earlier
date as the Company may become subject to such taxes.
EXPENSES OF VARIABLE ACCOUNT
Expenses of the Variable Account with respect to the Contracts
described herein include mortality expenses relating to the guarantee of annuity
purchase rates at issue for the life of the Contract and the payment of minimum
death benefits prior to the Designated Annuitant's 86th birthday regardless of
the investment experience of the Variable Account.
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 Fund options. Shares of the respective underlying Mutual Fund
options 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
application, 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 and
conditions applicable to such transactions as may be imposed by each of the
underlying Mutual Funds, in addition to those set forth in the Contracts.
RIGHT TO REVOKE
The Contract Owner may revoke the Contract at any time between the Date
of Issue and the date 10 days after receipt of the Contract and receive a refund
of the Contract Value unless otherwise required by state and/or federal law. All
Individual Retirement Annuity refunds will be a return of Purchase Payments. In
order to revoke the Contract, 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
16
18 of 106
<PAGE> 19
received, written notice must be mailed or delivered to the Home Office at the
mailing address shown on page 1 of this prospectus.
The liability of the Variable Account under this provision is limited
to the Contract Value in each Sub-Account on the date of revocation. Any
additional amounts refunded to the Contract Owner will be paid by the Company.
TRANSFERS
The Company currently allows transfers up to 100% of the Variable
Account Contract Value from the Variable Account to the Fixed Account, without
penalty or adjustment. However, the Company reserves the right to restrict
transfers from the Variable Account to the Fixed Account to 10% of the Variable
Account Contract Value for any 12 month period. All amounts transferred to the
Fixed Account must remain on deposit in the Fixed Account until the expiration
of the Interest Rate Guarantee Period. Transfers from the Fixed Account may not
be made prior to the end of the then current Interest Rate Guarantee. The
Interest Rate Guarantee Period for any amount allocated to the Fixed Account
expires on the final day of a calendar quarter during which the one year
anniversary of the allocation to the Fixed Account occurs. Transfers must also
be made prior to the Annuitization Date. For all transfers involving the
Variable Account, the Contract Owner's value in each Sub-Account will be
determined as of the date the transfer request is received in the Home Office in
good order. The Company reserves the right to refuse transfers or Purchase
Payments into the Fixed Account if the Fixed Account is greater than or equal to
30% of the Contract Value.
The Contract Owner may at the maturity of an Interest Rate Guarantee
Period, transfer a portion of the value of the Fixed Account to the Variable
Account. The amount that may be transferred from the Fixed Account to the
Variable Account will be determined by the Company, at its sole discretion, but
will not be less than 10% of the total value of the portion of the Fixed Account
that is maturing. The amount that may be transferred from the Fixed Account will
be declared upon the expiration date of the then current Interest Rate Guarantee
Period. The specific percentage will be declared upon the expiration date of the
guaranteed period. Transfers from the Fixed Account must be made within 45 days
after the expiration date of the Interest Rate Guarantee Period. Contract Owners
who have entered into a Dollar Cost Averaging agreement with the Company (see
"Dollar Cost Averaging") may transfer from the Fixed Account to the Variable
Account under the terms of that agreement.
Transfers 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.
Although failure to follow reasonable procedures may result in the
Company's liability for any losses due to unauthorized or fraudulent telephone
transfers, the Company will not be liable for following instructions
communicated by telephone which it reasonably believes to be genuine. Any losses
incurred pursuant to actions taken by the Company in reliance on telephone
instructions reasonably determined to be genuine shall be borne by the Contract
Owner. The Company may withdraw the telephone exchange privilege upon 30 days'
written notice to Contract Owners.
ASSIGNMENT
Where permitted, the Contract Owner may assign some or all of the
rights under the Contract at any time during the lifetime of the Designated
Annuitant prior to the Annuitization Date. Such assignment will take effect upon
receipt and recording by the Company at its Home Office of a written notice
thereof executed by the Contract Owner. The Company assumes no responsibility
for the validity or tax consequences of any assignment. The Company shall not be
liable as to any payment or other settlement made by the Company before
recording of the assignment. 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. Assignment of the entire Contract Value may cause
the portion of
17
19 of 106
<PAGE> 20
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. In
addition, any Contract Values assigned may, under certain conditions, be subject
to a tax penalty equal to 10% of the amount which is included in gross income.
All rights in this Contract are personal to the Contract Owner and may not be
assigned without written consent of the Company. Individual Retirement Accounts
and Individual Retirement Annuities are not eligible for assignment.
OWNERSHIP PROVISIONS
Unless otherwise provided, the Contract Owner has all rights under the
Contract. IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF OR HERSELF AS OWNER,
THE PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT. If a Joint Owner is named,
the Joint Owner will possess an undivided interest in the Contract. Prior to the
Annuitization Date, a surviving Joint Owner shall retain sole rights in the
Contract upon the other Joint Owner's death if the deceased Joint Owner was not
also the Designated Annuitant. If the deceased Joint Owner was also the
Designated Annuitant, disposition of the Contract will be determined based on
the "Death of Designated Annuitant Prior to the Annuitization Date" provision.
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.
Prior to the Annuitization Date, the Contract Owner may name a new
Contract Owner. Such change may be subject to state and federal gift taxes, and
may also result in current federal income taxation (see "Taxes"). Any change of
Contract Owner will automatically revoke any prior Contract Owner designation.
Any request for change of Contract Owner must be (1) made by proper written
application, (2) received and recorded by the Company at its Home Office, and
(3) may include a signature guarantee as specified in the "Surrender" provision.
The change will become effective as of the date the written request is signed. A
new choice of Contract Owner will not apply to any payment made or action taken
by the Company prior to the time it was received and recorded.
The Contract Owner may request a change in the 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 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. 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/Designated Annuitant dies. If a
Contract Owner/Designated 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 interest of the Beneficiary shall vest in the Contingent
18
20 of 106
<PAGE> 21
Beneficiary, and if more than one Contingent Beneficiary survives, each will
share equally unless otherwise specified in the Contingent Beneficiary
designation. If a Contingent Beneficiary is not named or predeceases the
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 in view of the
purposes of the Contract, 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 182356, Columbus, Ohio 43216-2356 , or calling
1-800-243-6295, Voice Response (available 24 hours) 1-800-848-8258, 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 (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
19
21 of 106
<PAGE> 22
in one lump sum in lieu of the payments otherwise provided for. In addition, if
the payments provided for would be or become less than $50, the Company shall
have the right to change the frequency of payments to such intervals as will
result in payments of at least $50. In no event will the Company make payments
under an annuity option less frequently than annually.
ANNUITY COMMENCEMENT DATE
The Contract Owner selects an Annuity Commencement Date at the time of
application. Such date may be the first day of a calendar month or any other
agreed upon date.
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. The amount of the
Death Benefit will be limited to the Contract Value if the Annuity
Commencement Date is postponed beyond the Annuitant's 86th birthday.
CHANGE IN FORM OF ANNUITY
The Contract Owner may, upon prior written notice to the Company, at
any time prior to the Annuitization Date, elect one of the Annuity Payment
Options.
ANNUITY PAYMENT OPTIONS
Any of the following Annuity Payment Options may be elected:
Option 1-Life Annuity-An annuity payable monthly during the lifetime of
the Annuitant, ceasing with the last payment due prior to the death of
the Annuitant. IT WOULD BE POSSIBLE UNDER THIS OPTION FOR THE ANNUITANT
TO RECEIVE ONLY ONE ANNUITY PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT DATE, TWO ANNUITY PAYMENTS IF HE OR SHE DIED BEFORE THE
THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2-Joint and Last Survivor Annuity-An annuity payable monthly
during the joint lifetimes of the Annuitant and designated second
person and continuing thereafter during the lifetime of the survivor.
AS IS THE CASE UNDER OPTION 1 ABOVE, THERE IS NO MINIMUM NUMBER OF
PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE DEATH OF
THE LAST SURVIVING ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS
RECEIVED.
Option 3-Life Annuity With 120 or 240 Monthly Payments Guaranteed-An
annuity payable monthly during the lifetime of the Annuitant with the
guarantee that if at the death of the Annuitant payments have been made
for fewer than 120 or 240 months, as selected, payments will be made as
follows:
(1) If the Annuitant is the payee, any guaranteed annuity payments
will be continued during the remainder of the selected period to
such recipient as chosen by the Annuitant at the time the Annuity
Payment Option was selected. In the alternative, the recipient
may, at any time, elect to have the present value of the
guaranteed number of annuity payments remaining paid in a lump
sum as specified in section (2) below.
(2) If someone other than the Annuitant is the payee, the present
value, computed as of the date on which notice of death is
received by the Company at its Home Office, of the guaranteed
number of annuity payments remaining after receipt of such notice
and to which the deceased would have been entitled had he or she
not died, computed at the Assumed Investment Rate effective in
determining the Annuity Tables, shall be paid in a lump sum.
Some of the stated Annuity Options may not be available in all states.
The Owner may request an alternative non-guaranteed option by giving notice in
writing prior to Annuitization. If such a request is approved by the Company, it
will be permitted under the Contract.
If the Owner fails to elect an Annuity Payment Option, the Contract
Value will continue to accumulate. Individual Retirement Annuities are subject
to the minimum Distribution requirements set forth in the Code.
20
22 of 106
<PAGE> 23
DEATH OF CONTRACT OWNER
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, then the Contract may be continued without any required
Distribution.
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
Annuitant Prior to the Annuitization Date" Division below. All Distributions
made as a result of the death of the Contract Owner shall be made within the
time limits set forth above. If a Contract Owner/Designated Annuitant dies
prior to the Annuitization Date, and the Beneficiary is the Contract
Owner/Designated Annuitant's spouse, such spouse may elect to continue the
Contract as the Contract Owner and Annuitant.
Individual Retirement Annuities will be subject to other specific rules
set forth in the Code concerning Distributions upon the death of the Contract
Owner (see "Required Distributions for Individual Retirement Annuities").
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
(1) due proof of the Designated Annuitant's death, (2) an election for
either a single sum payment or an Annuity Payment Option and (3) any form
required by state insurance laws. If a single sum payment is requested, payment
will be made in accordance with any applicable laws and regulations governing
the payment of Death Benefits. If an Annuity Payment Option is requested,
election must be made by the 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 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 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.
If the Contract Owner is not a natural person, the death of the
Designated Annuitant (or a change in the Designated Annuitant), regardless of
whether a Contingent Designated Annuitant has been named, will be treated like
a death of the Contract Owner for purposes of the "Death of Contract Owner"
provision and will result in a Distribution of either:
(a) the Death Benefit described in this provision (if there is no
Contingent Designated Annuitant and the Designated Annuitant has
died), or in all other cases
(b) a Distribution to the Contract Owner if the Designated Annuitant
has been changed.
provided that any such Distribution must be made within the time period
specified in the "Death of Contract Owner" provision.
21
23 of 106
<PAGE> 24
DEATH OF ANNUITANT AFTER THE ANNUITIZATION DATE
If the Annuitant dies after the Annuitization Date, any benefit that
may be payable shall be as specified in the Annuity Payment Option selected.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distribution from an Individual Retirement Annuity must begin not later
than April 1 of the calendar year following the calendar year in which the
Contract Owner attains age 70-1/2. Distribution may be accepted in a lump sum or
in nearly equal payments over: (a) the Contract Owner's life or the lives of the
Contract Owner and the Contract Owner's spouse or designated Beneficiary, or (b)
a period not extending beyond the life expectancy of the Contract Owner and the
life expectancy of the Contract Owner's spouse or designated Beneficiary.
If the Contract Owner dies prior to the commencement of the
Distribution, the interest in the Individual Retirement Annuity must be
distributed by December 31 of the year in which the fifth anniversary of the
Contract Owner's death occurs unless:
(a) The Contract Owner has named his or her surviving spouse as the
designated Beneficiary and such spouse elects to:
(i) treat the annuity as an Individual Retirement Annuity established
for his or her benefit; or
(ii) receive Distribution of the account in nearly equal payments over
his or her life (or a period not exceeding his or her life
expectancy) and commencing not later than December 31 of the year
in which the Contract Owner would have attained age 70-1/2; or
(b) The Contract Owner has named a Beneficiary other than his or her
surviving spouse and such Beneficiary elects to receive a Distribution
of the account in nearly equal payments over his or her life (or a
period not exceeding his or her life expectancy) commencing not later
than December 31 of the year following the year in which the Contract
Owner dies.
If the Contract Owner dies after Distribution has commenced, the
Distribution must continue at least as rapidly as under the schedule being used
prior to the Contract Owner's death, except to the extent that a surviving
spouse Beneficiary may elect to treat the Contract as his or her own, in the
same manner as is described in section (a)(i) of this provision.
If the amounts distributed to the Contract Owner are less than those
mentioned above, penalty tax of 50% is levied on the amount that should have
been distributed for that year.
A pro-rata portion of all Distributions will be included in the gross
income of the person receiving the Distribution and taxed at ordinary income tax
rates. The portion of the Distribution which is taxable is based on the ratio
between the amount by which non-deductible contributions exceed prior
non-taxable Distributions and total account balances at the time of the
Distribution. The Contract Owner must annually report the amount of
non-deductible contributions, the amount of any Distribution, the amount by
which non-deductible contributions for all years exceed non-taxable
Distributions for all years, and the total balance of all Individual Retirement
Annuities.
Individual Retirement Annuity Distributions will not receive the
benefit of the tax treatment of a lump sum Distribution from a Qualified Plan.
If the Contract Owner dies prior to the time Distribution of the Contract
Owner's interest in the annuity is completed, the balance will also be included
in the Contract Owner's gross estate.
GENERATION-SKIPPING TRANSFERS
The Company may 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.
22
24 of 106
<PAGE> 25
GENERAL INFORMATION
CONTRACT OWNER SERVICES
ASSET REBALANCING - The Contract Owner may direct the automatic
reallocation of Contract Values to the underlying Mutual Fund options on a
predetermined percentage basis every three months. If the last day of the three
month period falls on a Saturday, Sunday, recognized holiday or any other day
when the New York Stock Exchange is closed, the Asset Rebalancing exchange will
occur on the last business day before that day. Asset Rebalancing will not
affect future allocations of Purchase Payments. An Asset Rebalancing request
must be in writing on a form provided by the Company. The Contract Owner may
wish to contact a financial adviser in order to discuss the use of Asset
Rebalancing in his or her Contract.
The Company reserves the right to discontinue offering Asset
Rebalancing upon 30 days' written notice; such discontinuation however will
not affect Asset Rebalancing programs which have already commenced. The
Company also reserves the right to assess a processing fee for this service.
DOLLAR COST AVERAGING- The Contract Owner may direct the Company to
automatically transfer a specified amount from the Money Market Fund Sub-Account
or the Fixed Account to any other Sub-Account within the Variable Account on a
monthly basis. This service is intended to allow the Contract Owner to utilize
Dollar Cost Averaging, a long-term investment program which provides for
regular, level investments over time. The Company makes no guarantees that
Dollar Cost Averaging will result in a profit or protect against loss in a
declining market. Transfers for purposes of Dollar Cost Averaging can only be
made from the Money Market Fund Sub-Account or the Fixed Account. The minimum
monthly Dollar Cost Averaging transfer is $100. In addition, Dollar Cost
Averaging monthly transfers from the Fixed Account must be equal to or less than
1/30th of the Fixed Account value when the Dollar Cost Averaging program is
requested. Transfers out of the Fixed Account, other than Dollar Cost Averaging,
may be subject to certain additional restrictions (see "Transfers"). A written
election of this service, on a form provided by the Company, must be completed
by the Contract Owner in order to begin transfers. Once elected, transfers from
the Money Market Fund Sub-Account or the Fixed Account will be processed monthly
until the value in the Money Market Fund Sub-Account or the Fixed Account is
completely depleted or the Contract Owner instructs the Company in writing to
cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost
Averaging upon 30 days' written notice; such discontinuation however will not
affect Dollar Cost Averaging programs already commenced. The Company also
reserves the right to assess a processing fee for this service.
SYSTEMATIC WITHDRAWALS- The Contract Owner may elect in writing on a
form provided by the Company to take Systematic Withdrawals of a specified
dollar amount (of at least $100) on a monthly, quarterly, semi-annual or annual
basis. The Company will process the withdrawals as directed by surrendering on a
pro-rata basis Accumulation Units from all of the Sub-Accounts in which the
Contract Owner has an interest. Each Systematic Withdrawal is subject to federal
income taxes on the taxable portion. In addition, a 10% federal penalty tax may
be assessed on Systematic Withdrawals if the Contract Owner is under age 59-1/2.
If directed by the Contract Owner, the Company will withhold federal income
taxes from each Systematic Withdrawal. A Systematic Withdrawal program will
terminate automatically at the end of each Contract Year and may be reinstated
only pursuant to a new request. The Contract Owner may discontinue Systematic
Withdrawals at any time by notifying the Company in writing.
Systematic Withdrawals are not available prior to the expiration of the
ten day free look provision of the Contract. The Company also reserves the right
to assess a processing fee for this service.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address
of record, any statements and reports required by applicable law or regulation.
Contract Owners should therefore give 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
23
25 of 106
<PAGE> 26
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.
There are no minimum initial or subsequent Purchase Payment
requirements. The cumulative total of all Purchase Payments under Contracts
issued on the life of any one Designated Annuitant may not exceed $1,000,000
without prior consent of the Company.
The initial Purchase Payment allocated to designated Sub-Accounts of
the Variable Account will be priced not later than 2 business days after receipt
of an order to purchase, if the application and all information necessary for
processing the purchase order are complete. 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 made available for purchase. The value for any subsequent
Valuation Period is determined by multiplying the Accumulation Unit value for
each Sub-Account for the immediately preceding Valuation Period by the Net
Investment Factor for the Sub-Account during the subsequent Valuation Period.
The value of an Accumulation Unit may increase or decrease from Valuation Period
to Valuation Period. The number of Accumulation Units will not change as a
result of investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by
dividing (a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the current Valuation
Period, plus
(2) the per share amount of any dividend or capital gain
Distributions made by the underlying Mutual Fund held in the
Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period.
(b) the net of:
(1) the net asset value per share of the underlying Mutual Fund held
in the Sub-Account determined at the end of the immediately
preceding Valuation Period, plus or minus
(2) The per share charge or credit, if any, for any taxes reserved
for in the immediately preceding Valuation Period (see "Charge
For Tax Provisions").
(c) is a factor representing the daily Mortality Risk Charge deducted from
the Variable Account. Such factor is equal to an annual rate of 0.80%
of the daily net asset value of the Variable Account.
24
26 of 106
<PAGE> 27
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 the Mortality Risk Charge.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at
their net asset value.
DETERMINING THE CONTRACT VALUE
The sum of the value of all Variable Account Accumulation Units
attributable to the Contract and amounts credited to the Fixed Account is the
Contract Value. The number of Accumulation Units credited each Sub-Account is
determined by dividing the net amount allocated to the Sub-Account by the
Accumulation Unit Value for the Sub-Account during the Valuation Period in which
the Purchase Payment is received by the Company. In the event part or all of the
Contract Value is surrendered or charges or deductions are made against the
Contract Value, an appropriate number of Accumulation Units from the Variable
Account and an appropriate amount from the Fixed Account will be deducted in the
same proportion that the Contract Owner's interest in the Variable Account bears
to the total Contract Value.
SURRENDER (REDEMPTION)
While the Contract is in force and prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant, the Company will,
upon proper written application by the Contract Owner deemed by the Company to
be in good order, allow the Contract Owner to surrender a portion or all of
the Contract Value. "Proper written application" means that the Contract Owner
must request the surrender in writing and include the Contract. The Company
may require that the signature(s) be guaranteed by a member firm of a major
stock exchange or other depository institution qualified to give such a
guaranty.
The Company will, upon receipt of any such written request, surrender a
number of Accumulation Units from the Variable Account and an amount from the
Fixed Account necessary to equal the gross dollar amount requested. In the event
of a partial surrender, the Company will, unless instructed to the contrary,
surrender Accumulation Units from all Sub-Accounts in which the Contract Owner
has an interest, and the Fixed Account. The number of Accumulation Units
surrendered from each Sub-Account and the amount surrendered from the Fixed
Account will be in the same proportion that the Contract Owner's interest in the
Sub-Accounts and the Fixed Account bears to the total Contract Value.
The Company will pay any funds applied for from the Variable Account
within 7 days of receipt of such application in the Company's Home Office.
However, the Company reserves the right to suspend or postpone the date of any
payment of any benefit or values for any Valuation Period (1) when the New York
Stock Exchange ("Exchange") is closed, (2) when trading on the Exchange is
restricted, (3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Variable Account's net
assets, or (4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security holders;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (2) and (3)
exist. The Contract Value on surrender may be more or less than the total of
Purchase Payments made by a Contract Owner, depending on the market value of the
underlying Mutual Fund shares.
TAXES
The Company does not make any guarantee regarding the tax status for
any Contract or any transaction involving the Contracts. Contract Owners should
consult their financial or tax advisers to discuss in detail their particular
tax situation and the use of the Contracts.
Section 72 of the Code governs taxation of annuities in general. That
section sets forth different rules for annuities purchased as Non-Qualified
Contracts and annuities which are purchased as Individual Retirement Annuities.
Non-Qualified Contracts and Individual Retirement Annuities are discussed
separately below.
25
27 of 106
<PAGE> 28
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.
NON-QUALIFIED CONTRACTS
The rules applicable to Non-Qualified Contracts provide that a portion
of each annuity payment received is excludable from taxable income based on the
ratio between the Contract Owner's investment in the Contract and the expected
return on the Contract. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date
are taxable to the Contract Owner to the extent that the cash value of the
Contract exceeds the Contract Owner's investment at the time of the
Distribution. Distributions, for this purpose, include partial surrenders,
dividends, loans, or any portion of the Contract which is assigned or pledged;
or for Contracts issued after April 22, 1987, any portion of the Contract
transferred by gift. For these purposes, a transfer by gift may occur upon
Annuitization if the Contract Owner and the Annuitant are not the same
individual. In determining the taxable amount of a Distribution, all annuity
contracts issued after October 21, 1988, by the same company to the same
contract owner during any 12 month period, will be treated as one annuity
contract. Additional limitations on the use of multiple contracts may be
imposed by Treasury Regulations. Distributions prior to the Annuitization Date
with respect to that portion of the Contract invested prior to August 14, 1982,
are treated first as a recovery of the investment in the Contract as of that
date. A Distribution in excess of the amount of the investment in the Contract
as of August 14, 1982, will be treated as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
Purchase Payments made to the Contract after February 28, 1986. There are
exceptions for immediate annuities and certain Contracts owned for the benefit
of an individual. An immediate annuity, for purposes of this discussion, is a
single premium Contract on which payments begin within one year of purchase. 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 or disability of the Contract Owner. The penalty
does not apply if the Distribution is one of a series of substantially equal
periodic payments made over the life or life expectancy (or joint lives or life
expectancies) of the Annuitant (and the Annuitant's Beneficiary), or for the
purchase of an immediate annuity, or is allocable to an investment in the
Contract before August 14, 1982. A Contract Owner wishing to begin taking
Distributions to which the 10% tax penalty does not apply should forward a
written request to the Company. Upon receipt of a written request from the
Contract Owner, the Company will inform the Contract Owner of the procedures
pursuant to Company policy and subject to limitations of the Contract including
but not limited to first year withdrawals. If the Contract Owner or 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 Contract Owner or
Annuitant will also pay interest on the amount of the penalty from the date it
would have originally applied until it is actually paid.
In order to qualify as an annuity Contract under Section 72 of the
Code, the Contract must provide for Distribution to be made upon the death of
the Contract Owner. In such case, the Contingent Owner or other named recipient
must receive the Distribution within 5 years of the Owner's death. However, the
recipient may elect for payments to be made over their life or life expectancy
if such payments begin within one year from the death of the Contract Owner. If
the Contingent Owner or other named recipient is the surviving spouse, such
spouse may be treated as the Contract Owner and the Contract may be continued
throughout the life of the surviving spouse. In the event the Contract Owner
dies on or after the Annuitization Date and before the entire
26
28 of 106
<PAGE> 29
interest has been distributed, the remaining portion must be distributed at
least as rapidly as under the method of Distribution being used as of the date
of the Contract Owner's death. If the Contract Owner is not an individual, the
death of the Designated Annuitant (or a change in the Designated Annuitant)
will result in a Distribution pursuant to these rules, regardless of whether a
Contingent Designated Annuitant has been named.
The Company is required to withhold tax from certain Distributions to
the extent that such Distribution would constitute income to the Contract Owner.
The Contract Owner is entitled to elect not to have federal income tax withheld
from any such Distribution, but may be subject to penalties in the event
insufficient federal income tax is withheld during a calendar year.
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.
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 under 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.
INDIVIDUAL RETIREMENT ANNUITIES
The Contract may be purchased as an Individual Retirement Annuity under
Section 408(b) of the Code. Such an Individual Retirement Annuity Contract may
be purchased in connection with a rollover of amounts from a Qualified Plan,
Tax-Sheltered Annuity or Individual Retirement Account. The Contract Owner
should seek competent advice as to the tax consequences associated with the use
of a Contract as an Individual Retirement Annuity.
Recent changes to the Code permit the rollover of most Distributions
from Qualified Plans to other Qualified Plans or IRAs. Most Distributions from
Tax-Sheltered Annuities may be rolled into another Tax-Sheltered Annuity or IRA.
Distributions which may not be rolled over are those which are:
1. one of a series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the employee,
b) the joint lives (or joint life expectancies) of the employee and the
employee's designated Beneficiary, or c) for a specified period of ten
years or more, or
2. a required minimum Distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a rate of twenty percent (20%) unless the Distribution is
transferred directly to an appropriate plan as described 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 any
surrenders), it is possible the Internal Revenue Service could determine that
the Individual Retirement Account or Individual Retirement Annuity did not
qualify for the desired tax treatment.
DIVERSIFICATION
The Internal Revenue Service has promulgated regulations under Section
817(h) of the 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 will meet
these diversification standards.
27
29 of 106
<PAGE> 30
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 may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in the 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.
ADVERTISING
A "yield" and "effective yield" may be advertised for Nationwide
Separate Account Trust Money Market Fund Sub-Account. "Yield" is a measure of
the net dividend and interest income earned over a specific seven-day period
(which period will be stated in the advertisement) expressed as a percentage of
the offering price of the Sub-Account's units. Yield is an annualized figure,
which means that it is assumed that the Sub-Account generates the same level of
net income over a 52-week period. The "effective yield" is calculated similarly
but includes the effect of assumed compounding, calculated under rules
prescribed by the Securities and Exchange Commission. The effective yield will
be slightly higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of the
Sub-Account of the Variable Account relative to the performance of other
variable annuity sub-accounts or underlying mutual funds with similar or
different objectives, or the investment industry as a whole. Other investments
to which the Sub-Accounts may be compared include, but are not limited to:
precious metals; real estate; stocks and bonds; closed-end funds; CDs; bank
money market deposit accounts and passbook savings; and the Consumer Price
Index.
The Sub-Accounts of the Variable Account may also be compared to
certain market indexes, which may include, but are not limited to: S&P 500;
Shearson/Lehman Intermediate Government/Corporate Bond Index; Shearson/Lehman
Long-Term Government/Corporate Bond Index; Donoghue Money Fund Average; U.S.
Treasury Note Index; Bank Rate Monitor National Index of 2 Year CD Rates; and
Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent
tracking services and publications of general interest including, but not
limited to: Lipper Analytical Services, Inc., CDA/ Wiesenberger, Morningstar,
Donoghue's; magazines such as Money, Forbes, Kiplinger's Personal Finance
Magazine, Financial World, Consumer Reports, Business Week, Time, Newsweek,
National Underwriter, U.S. News and World Report; rating services such as LIMRA,
Value, Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports;
and other publications such as the Wall Street Journal, Barron's, Investor's
Daily, and Standard & Poor's Outlook. In addition, Variable Annuity Research &
Data Service (The VARDS Report) is an independent rating service that ranks over
500 variable annuity funds based upon total return performance. These rating
services and publications rank the performance of the underlying Mutual Funds
against all underlying Mutual Funds over specified periods and against
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.
28
30 of 106
<PAGE> 31
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
non standardized "total return." "Average annual total return" will show the
percentage rate of return of a hypothetical initial investment of $1,000 for at
least the most recent one, five and ten year period, or for a period covering
the time the underlying Mutual Fund option held in the Sub-Account has been in
existence, if the underlying Mutual Fund option has not been in existence for
one of the prescribed periods. This calculation reflects the deduction of all
applicable charges made to the Contracts except for premium taxes, which may be
imposed by certain states.
Non standardized "total return" will be calculated in a similar manner
and for the same time periods as the average annual total return. An assumed
initial investment of $10,000 will be used because that figure more closely
approximates the size of a typical Contract than does the $1,000 figure used in
calculating the standardized average annual total return quotations.
For those underlying Mutual Fund options which have not been held as
Sub-Accounts within the Variable Account for one of the quoted periods, the
standardized average annual total return and non-standardized total return
quotations will show the investment performance such underlying Mutual Fund
options would have achieved (reduced by the applicable charges) had they been
held as Sub-Accounts within the Variable Account for the period quoted.
ALL PERFORMANCE INFORMATION AND COMPARATIVE MATERIAL ADVERTISED BY THE
COMPANY IS HISTORICAL IN NATURE AND IS NOT INTENDED TO REPRESENT OR GUARANTEE
FUTURE RESULTS. A CONTRACT OWNER'S CONTRACT VALUE AT REDEMPTION MAY BE MORE OR
LESS THAN ORIGINAL COST.
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine
litigation incidental to the business to which the Company and the Variable
Account are parties or to which any of their property is the subject.
The General Distributor, Nationwide Financial Services, Inc., is not
engaged in any litigation of any material nature.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History....................................... 1
Services.............................................................. 1
Purchase of Securities Being Offered.................................. 1
Underwriters.......................................................... 2
Calculations of Performance........................................... 2
Fund Performance Summary.............................................. N/A
Annuity Payments...................................................... 3
Financial Statements.................................................. 4
</TABLE>
29
31 of 106
<PAGE> 32
APPENDIX
FIXED ACCOUNT
Purchase Payments under the Fixed Account portion of the Contract and
transfers to the Fixed Account portion become part of the general account of the
Company, which supports insurance and annuity obligations. Because of exemptive
and exclusionary provisions, interests in the general account have not been
registered under the Securities Act of 1933 ("1933 Act"), nor is the general
account registered as an investment company under the Investment Company Act of
1940 ("1940 Act"). Accordingly, neither the general account nor any interest
therein are generally subject to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in this prospectus which relate to the guaranteed
interest portion. Disclosures regarding the Fixed Account portion of the
Contract and the general account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company,
other than those in the Variable Account and any other segregated asset account.
Fixed Account Purchase Payments will be allocated to the Fixed Account by
election of the Contract Owner at the time of purchase.
The Company will invest the assets of the Fixed Account in those
investments chosen by the Company and allowed by applicable law. Investment
income from such Fixed Account investments will be allocated by the Company
between itself and the Contracts participating in the Fixed Account.
The level of annuity payments made to Annuitants under the Contracts
will not be affected by the mortality experience (death rate) of persons
receiving such payments or of the general population. The Company assumes this
"mortality risk" by virtue of annuity rates incorporated in the Contract which
cannot be changed. In addition, the Company guarantees that it will not increase
charges for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Account allocated to the Company
includes compensation for mortality and expense risks borne by the Company in
connection with Fixed Account Contracts. The amount of such investment income
allocated to the Contracts will vary from year to year in the sole discretion of
the Company at such rate or rates as the Company prospectively declares from
time to time. Any such rate or rates so determined will remain effective for a
period of not less than twelve months, and remain at such rate unless changed.
However, the Company guarantees that it will credit interest at not less than
3.0% per year (or as otherwise required under state law, or at such minimum rate
as stated in the contract when sold). ANY INTEREST CREDITED TO AMOUNTS ALLOCATED
TO THE FIXED ACCOUNT IN EXCESS OF 3.0% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM GUARANTEE OF
3.0% FOR ANY GIVEN YEAR. New Purchase Payments deposited to the Contract which
are allocated to the Fixed Account may receive a different rate of interest than
money transferred from the Variable Sub-Accounts to the Fixed Account and
amounts maturing in the Fixed Account at the expiration of an Interest Rate
Guarantee Period.
The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of the Purchase Payments allocated to the
Fixed Account, plus interest credited as described above, less the sum of all
administrative charges, any applicable premium taxes, and less any amounts
surrendered.
TRANSFERS
Contract Owners may at the maturity of an Interest Rate Guarantee
Period, transfer a portion of the value of the Fixed Account to the Variable
Account. The maximum percentage that may be transferred will be determined by
the Company at its sole discretion, but will not be less than 10% of the total
value of the portion of the Fixed Account that is maturing and will be declared
upon the expiration date of the then current Interest Rate Guarantee Period. The
Interest Rate Guarantee Period expires on the final day of a calendar quarter.
Transfers under this provision must be made within 45 days after the expiration
date of the guarantee period.
30
32 of 106
<PAGE> 33
Owners who have entered into a Dollar Cost Averaging agreement with the
Company (see "Dollar Cost Averaging") may transfer from the Fixed Account to the
Variable Account under the terms of that agreement.
ANNUITY PAYMENT PERIOD-FIXED ACCOUNT
FIRST AND SUBSEQUENT PAYMENTS
A Fixed Annuity is an annuity with payments which are guaranteed by the
Company as to dollar amount during the annuity payment period. The first Fixed
Annuity payment will be determined by applying the Fixed Account Contract Value
to the applicable Annuity Table in accordance with the Annuity Payment Option
elected. This will be done at the Annuitization Date on an age last birthday
basis. Fixed Annuity payments after the first will not be less than the first
Fixed Annuity payment.
The Company does not credit discretionary interest to Fixed Annuity
payments during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of such Fixed Annuity payments.
31
33 of 106
<PAGE> 34
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
INDIVIDUAL MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED BY
THE NATIONWIDE VARIABLE ACCOUNT-II
OF NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than set forth in the
prospectus and should be read in conjunction with the prospectus dated, May 1,
1996. The prospectus may be obtained from Nationwide Life Insurance Company by
writing P.O. Box 182356, Columbus, Ohio 43216-2356, or calling 1-800-243-6295,
Voice Response (available 24 hours) 1-800-848-8258, TDD 1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History....................................... 1
Services.............................................................. 1
Purchase of Securities Being Offered.................................. 1
Underwriters.......................................................... 2
Calculations of Performance........................................... 2
Fund Performance Summary.............................................. N/A
Annuity Payments...................................................... 3
Financial Statements.................................................. 4
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide Variable Account-II is a separate investment account of
Nationwide Life Insurance Company ("Company"). The Company is a member of the
Nationwide Insurance Enterprise and all of the Company's common stock is owned
by Nationwide Corporation. Nationwide Corporation is a holding company. All of
its common stock is held by Nationwide Mutual Insurance Company (95.3%) and
Nationwide Mutual Fire Insurance Company (4.7%).
SERVICES
The Company, which has responsibility for administration of the
Contracts and the Variable Account, maintains records of the name, address,
taxpayer identification number, and other pertinent information for each
Contract Owner and the number and type of Contract issued to each such Contract
Owner and records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The
Company will maintain a record of all purchases and redemptions of shares of the
underlying Mutual Funds. The Company, or affiliates 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 and schedules have been included herein in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, Two Nationwide Plaza, Columbus, Ohio 43215, and upon the authority
of said firm as experts in accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states
where the Contracts may be lawfully sold. Such agents will be registered
representatives of broker-dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
("NASD").
The Contract Owner may transfer up to 100% of the Contract Value from
the Variable Account to the Fixed Account. However, the Company, at its sole
discretion reserves the right to limit such transfers to 25% of the Contract
Value for any 12 month period. Contract Owners may at the maturity of an
Interest Rate Guarantee Period transfer a portion of the Contract Value of the
Fixed Account to the Variable Account. Such
1
34 of 106
<PAGE> 35
portion will be determined by the Company at its sole discretion (but will not
be less than 10% of the total value of the portion of the Fixed Account that is
maturing), and will be declared upon the expiration date of the then current
Interest Rate Guarantee Period. The Interest Rate Guarantee Period expires on
the final day of a calendar quarter. Transfers under this provision must be made
within 45 days after the termination date of the guarantee period. Owners who
have entered into a Dollar Cost Averaging Agreement with the Company may
transfer from the Fixed Account under the terms of that agreement.
Transfers from the Fixed and Variable Accounts may not be made prior to
the first Contract Anniversary. Transfers from the Fixed Account may not be made
within 12 months of any prior Transfers. Transfers must also be made prior to
the Annuitization Date.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by
Nationwide Financial Services, Inc. ("NFS"), One Nationwide Plaza, Columbus,
Ohio, 43216, a wholly owned subsidiary of the Company. During the fiscal year
ended December 31, 1995, 1994 and 1993, no underwriting commissions were paid by
the Company to NFS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Nationwide Separate Account Trust
Money Market Fund Sub-Account, subject to Rule 482 of the Securities Act of
1933, shall consist of a seven calendar day historical yield, carried at least
to the nearest hundredth of a percent. The yield shall be calculated by
determining the net change, exclusive of capital changes, in the value of
hypothetical pre-existing account having a balance of one accumulation unit at
the beginning of the base period, subtracting a hypothetical charge reflecting
deductions from Contract Owner accounts, and dividing the net change in account
value by the value of the account at the beginning of the period to obtain a
base period return, and multiplying the base period return by (365/7) or (366/7)
in a leap year. As of December 31, 1995, the Nationwide Separate Account Trust
Money Market Fund Sub-Account's seven-day current unit value yield was 4.29%.
The Nationwide Separate Account Trust Money Market Fund Sub-Account's effective
yield shall be computed similarly but includes the effect of assumed compounding
on an annualized basis of the current unit value yield quotations of the
Nationwide Separate Account Trust Money Market Fund, and for the period ending
December 31, 1995 was 4.38%.
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 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.
Income generated within a bond Sub-Account may be reflected in "30 Day
Yield" quotations. Such quotations are computed by dividing the net investment
income per Accumulation Unit during the 30 day period by the maximum unit value
per Accumulation Unit on the last day of the period. The formula for arriving at
bond fund yield quotations is as follows: 2[((a-b)/cd+1)6-1] where: a = net
investment income earned by the applicable portfolio; b = expenses for the
period, including contract level fees and charges; c = the average daily number
of Accumulation Units outstanding during the period; and d = the maximum
offering price per Accumulation Unit on the last day of the period.
All performance advertising shall also include quotations of
standardized average annual total return, calculated in accordance with a
standard method prescribed by rules of the Securities and Exchange Commission,
to facilitate comparison with standardized Average annual total return
advertised for a specific period is found by first taking a hypothetical $1,000
investment in each of the Sub-Accounts' units on the first day of the period at
the offering price, which is the Accumulation Unit Value per unit ("initial
investment") and computing the ending redeemable value ("redeemable value") of
that investment at the end of the period. The redeemable value is then divided
by the initial investment and this quotient is taken to the Nth root (N
represents the number of years in the period) and 1 is subtracted from the
result which is then expressed as a percentage, carried to at least the nearest
hundredth of a percent. Standardized average annual total return reflects the
deduction of a .80% Mortality Charge. No deduction is made for premium taxes
which may be
2
35 of 106
<PAGE> 36
assessed by certain states. Non standardized total return may also
be advertised, and is calculated in a manner similar to standardized average
annual total return except the non standardized total return is based on a
hypothetical initial investment of $25,000. An assumed initial investment of
$25,000 will be used because that figure more closely approximates the size of a
typical Contract than does the $1,000 figure used in calculating the
standardized average annual total return quotations.
The standardized average annual total return and non standardized 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 non standardized total return
will be based on rolling calendar quarters and will cover periods of one, five,
and ten years, or a period covering the time the underlying Mutual Fund option
held in the Sub-Account has been in existence, if the underlying Mutual Fund
option has not been in existence for one of the prescribed periods. For those
underlying Mutual Fund options which have not been held as Sub-Accounts within
the Variable Account for one of the quoted periods, the standardized average
annual total return and non standardized total return quotations will show the
investment performance such underlying Mutual Fund options would have achieved
(reduced by the applicable charges) had they been held as Sub-Accounts within
the Variable Account for the period quoted.
Quotations of standardized average annual total return and
non-standardized total return are based upon historical earnings and will
fluctuate. Any quotation of performance, therefore, would not be considered a
guarantee of future performance. Factors affecting a Sub-Account's performance
include general market conditions, operating expenses and investment management.
A Contract Owner's account when redeemed may be more or less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments", located in the
prospectus.
3
36 of 106
<PAGE> 37
<PAGE> 1
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide Variable Account-II
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-II as of December 31,
1995, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the three
year period then ended. These financial statements and schedules of changes in
unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and the
transfer agents of the underlying mutual funds. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide Variable Account-II as of December 31, 1995, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American VI Series - Growth Fund (AVISGro)
623,618 shares (cost $17,102,560) ............................. $ 23,585,245
American VI Series - High-Yield Bond Fund (AVISHiYld)
209,306 shares (cost $2,846,218) .............................. 2,911,446
American VI Series - U.S. Government/AAA-Rated
Securities Fund (AVISGvt)
873,261 shares (cost $9,829,632) .............................. 10,016,309
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
1,283,878 shares (cost $19,489,630) ........................... 22,223,921
Dreyfus Stock Index Fund (DryStkIx)
8,082,567 shares (cost $126,497,616) .......................... 139,020,158
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
70,933,143 shares (cost $1,121,753,271) ....................... 1,366,881,661
Fidelity VIP - Growth Portfolio (FidGro)
41,657,161 shares (cost $1,007,914,736) ....................... 1,216,389,107
Fidelity VIP - High Income Portfolio (FidHiInc)
35,625,333 shares (cost $396,271,298) ......................... 429,285,265
Fidelity VIP - Overseas Portfolio (FidOSeas)
30,101,938 shares (cost $483,895,870) ......................... 513,238,037
Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr)
53,135,805 shares (cost $754,251,432) ......................... 839,014,368
Fidelity VIP-II - Contrafund Portfolio (FidContP)
8,756,011 shares (cost $119,727,547) .......................... 120,657,834
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
2,445,307 shares (cost $29,478,590) ........................... 32,962,742
Nationwide SAT - Government Bond Fund (NWGvtBd)
22,840,938 shares (cost $250,126,269) ......................... 259,473,061
Nationwide SAT - Money Market Fund (NWMyMkt)
645,520,465 shares (cost $645,520,465) ........................ 645,520,465
Nationwide SAT - Small Company Fund (NWSmCoFd)
1,101,835 shares (cost $11,998,226) ........................... 12,582,961
Nationwide SAT - Total Return Fund (NWTotRet)
30,093,969 shares (cost $308,837,627) ......................... 347,284,398
Neuberger & Berman - Growth Portfolio (NBGro)
14,090,647 shares (cost $320,541,062) ......................... 364,384,131
Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat)
12,726,836 shares (cost $181,308,175) ......................... 187,211,761
Neuberger & Berman - Partners Portfolio (NBPart)
7,301,731 shares (cost $87,389,993) ........................... 96,601,896
Oppenheimer - Bond Fund (OppBdFd)
12,804,993 shares (cost $146,405,041) ......................... 151,611,114
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Oppenheimer - Global Securities Fund (OppGlSec)
13,111,179 shares (cost $203,180,884) ................................ 196,667,679
Oppenheimer - Multiple Strategies Fund (OppMult)
11,577,330 shares (cost $155,408,345) ................................ 168,450,154
Strong VIP - Strong Discovery Fund II, Inc. (StDisc2)
17,003,436 shares (cost $198,646,115) ................................ 228,526,175
Strong VIP - Strong International Stock Fund II, Inc. (StIntStk2)
244,173 shares (cost $2,469,688) ..................................... 2,495,453
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
25,493,567 shares (cost $377,099,377) ................................ 434,410,378
TCI Portfolios - TCI Balanced (TCIBal)
12,691,118 shares (cost $77,814,222) ................................. 89,345,470
TCI Portfolios - TCI Growth (TCIGro)
41,306,546 shares (cost $402,345,402) ................................ 498,156,942
TCI Portfolios - TCI International (TCIInt)
9,214,985 shares (cost $46,379,231) .................................. 49,115,872
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
8,270,057 shares (cost $115,551,771) ................................. 119,254,224
Van Eck - Worldwide Bond Fund (VEWrldBd)
9,525,862 shares (cost $104,143,426) ................................. 106,118,098
Van Kampen American Capital - Real Estate Securities Fund (VKACRESec)
674,076 shares (cost $7,031,745) ..................................... 7,239,575
Warburg Pincus - International Equity Portfolio (WPIntEq)
5,874,837 shares (cost $61,513,027) .................................. 62,567,014
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
7,488,672 shares (cost $84,455,241) .................................. 93,683,286
--------------
Total assets ......................................................... 8,836,886,200
ACCOUNTS PAYABLE .............................................................. 1,990,179
--------------
CONTRACT OWNERS' EQUITY (NOTE 4) .............................................. $8,834,896,021
==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends ................. $ 255,746,278 219,361,059 87,058,811
--------------- ------------- -------------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares ... 2,702,034,116 2,081,239,624 1,118,924,497
Cost of mutual fund shares sold ................... (2,527,741,633) (1,966,796,733) (1,023,878,546)
--------------- ------------- -------------
Realized gain (loss) on investments ............... 174,292,483 114,442,891 95,045,951
Change in unrealized gain (loss) on investments ... 974,875,269 (372,586,662) 239,514,450
--------------- ------------- -------------
Net gain (loss) on investments ............... 1,149,167,752 (258,143,771) 334,560,401
--------------- ------------- -------------
Net investment activity ................. 1,404,914,030 (38,782,712) 421,619,212
--------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners ........ 2,272,793,729 2,110,347,434 1,441,981,228
Redemptions ............................................ (445,809,864) (229,544,830) (142,035,153)
Annuity benefits ....................................... (401,351) (155,993) (112,491)
Adjustments to maintain reserves ....................... (180,793) 29,075 (21,397)
--------------- ------------- -------------
Net equity transactions ................. 1,826,401,721 1,880,675,686 1,299,812,187
--------------- ------------- -------------
EXPENSES (NOTE 2):
Contract charges ....................................... (99,429,327) (67,631,096) (42,061,726)
Contingent deferred sales charges ...................... (7,795,056) (4,253,379) (2,613,738)
--------------- ------------- -------------
Total expenses .......................... (107,224,383) (71,884,475) (44,675,464)
--------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ....................... 3,124,091,368 1,770,008,499 1,676,755,935
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ................. 5,710,804,653 3,940,796,154 2,264,040,219
--------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ....................... $ 8,834,896,021 5,710,804,653 3,940,796,154
=============== ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT - II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-II (the Account) was established pursuant
to a resolution of the Board of Directors of Nationwide Life Insurance Company
(the Company) on October 7, 1981. The Account has been registered as a unit
investment trust under the Investment Company Act of 1940.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts, and Individual Modified Single Premium
Deferred Variable Annuity Contracts through the Account. The primary
distribution for the contracts is through the brokerage community; however,
other distributors are utilized.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase. See note
2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in the following:
Funds of the American Variable Insurance Series (American VI Series)
(available only for contracts issued on or after May 1, 1987 and before
September 1, 1989);
American VI Series - Growth Fund (AVISGro)
American VI Series - High-Yield Bond Fund (AVISHiYld)
American VI Series - U.S. Government/AAA-Rated Securities Fund
(AVISGvt)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)(formerly Dreyfus Life and Annuity
Index Fund, Inc. (DLAI))
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity
VIP);
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
Fidelity VIP - Growth Portfolio (FidGro)
Fidelity VIP - High Income Portfolio (FidHiInc)
Fidelity VIP - Overseas Portfolio (FidOSeas)
Portfolio of the Fidelity Variable Insurance Products Fund II (Fidelity
VIP- II);
Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr)
Fidelity VIP-II - Contrafund Portfolio (FidContP)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed
for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
Nationwide SAT - Government Bond Fund (NWGvtBd)
Nationwide SAT - Money Market Fund (NWMyMkt)
Nationwide SAT - Small Company Fund (NWSmCoFd)
Nationwide SAT - Total Return Fund (NWTotRet)
Portfolios of the Neuberger & Berman Advisers Management Trust (Neuberger
& Berman);
Neuberger & Berman - Growth Portfolio (NBGro)
Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat)
Neuberger & Berman - Partners Portfolio (NBPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer);
Oppenheimer - Bond Fund (OppBdFd)
Oppenheimer - Global Securities Fund (OppGlSec)
Oppenheimer - Multiple Strategies Fund (OppMult)
<PAGE> 6
Funds of the Strong Variable Insurance Products Funds (Strong VIP);
Strong VIP - Strong Discovery Fund II, Inc. (StDisc2)
Strong VIP - Strong International Stock Fund II, Inc. (StIntStk2)
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
Portfolios of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Balanced (TCIBal)
TCI Portfolios - TCI Growth (TCIGro)
TCI Portfolios - TCI International (TCIInt)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck) (formerly Van
Eck Investment Trust);
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
Van Eck - Worldwide Bond Fund (VEWrldBd)
(formerly Van Eck - Global Bond Fund (VEGlobBd))
Fund of the Van Kampen American Capital Life Investment Trust (Van
Kampen American Capital);
Van Kampen American Capital - Real Estate Securities Fund (VKACRESec)
Portfolios of the Warburg Pincus Trust (Warburg Pincus);
Warburg Pincus - International Equity Portfolio (WPIntEq)
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1995, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain contract expenses (see
note 2).
The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their contracts and
exclude any purchase payments for fixed dollar benefits, the latter being
included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1995. The cost of investments sold is
determined on a specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the Internal
Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments
received from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the Company will, with certain exceptions, deduct
from a contract owner's contract value a contingent deferred sales charge. For
contracts issued prior to December 15, 1988, the contingent deferred sales
charge will be equal to 5% of the lesser of the total of all purchase payments
made within 96 months prior to the date of the request for surrender or the
amount surrendered. For contracts issued on or after December 15, 1988, the
Company will deduct a contingent deferred sales charge not to exceed 7% of the
lesser of purchase payments or the amount surrendered, such charge declining 1%
per year, to 0%, after the purchase payment has been held in the contract for 84
months. No sales charges are deducted on redemptions used to purchase units in
the fixed investment options of the Company.
<PAGE> 7
The following administrative charges are deducted by the Company: (a) for
The BEST OF AMERICA(R) contracts an annual contract maintenance charge of $30,
with certain exceptions, which is satisfied by surrendering units; and (b) for
The BEST OF AMERICA(R) contracts issued prior to December 15, 1988, a charge for
mortality and expense risk assessed through the daily unit value calculation
equal to an annual rate of 0.80% and 0.50%, respectively; for The BEST OF
AMERICA(R) contracts issued on or after December 15, 1988, a mortality risk
charge, an expense risk charge and an administration charge assessed through the
daily unit value calculation equal to an annual rate of 0.80%, 0.45% and 0.05%,
respectively; for The BEST OF AMERICA(R) America's Vision Annuity contracts, a
mortality risk charge, an expense risk charge and an administration charge
assessed through the daily unit value calculation equal to an annual rate of
0.80%, 0.45% and 0.15%, respectively; and for The BEST OF AMERICA(R) Nationwide
Insurance Enterprise Annuity contracts, a mortality risk charge assessed through
the daily unit value calculation equal to an annual rate of 0.80%.
(3) SCHEDULE I
Schedule I presents the components of the change in the unit values,
which are the basis for contract owners' equity. This schedule is presented for
each series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to capital
gains and dividend distributions from the underlying mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, an expense risk charge and an administration
charge discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
<PAGE> 8
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31,
1995, for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
----- ----------
<S> <C> <C> <C>
Contracts in accumulation phase:
The BEST OF AMERICA(R) Nationwide Insurance
Enterprise Annuity contracts:
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified ........................................ 806 $10.330490 $ 8,326
Non-tax qualified .................................... 232 10.330490 2,397
Dreyfus Stock Index Fund:
Tax qualified ........................................ 750 10.575706 7,932
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................................ 2,701 10.729806 28,981
Non-tax qualified .................................... 920 10.729806 9,871
Fidelity VIP - Growth Portfolio:
Tax qualified ........................................ 5,324 9.643317 51,341
Non-tax qualified .................................... 4,256 9.643317 41,042
Fidelity VIP - High Income Portfolio:
Tax qualified ........................................ 806 10.155366 8,185
Non-tax qualified .................................... 525 10.155366 5,332
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................................ 111 10.484931 1,164
Non-tax qualified .................................... 24 10.484931 252
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ........................................ 488 10.533861 5,141
Non-tax qualified .................................... 69 10.533861 727
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ........................................ 484 10.207482 4,940
Non-tax qualified .................................... 1,565 10.207482 15,975
Nationwide SAT - Government Bond Fund:
Tax qualified ........................................ 329 10.262495 3,376
Nationwide SAT - Money Market Fund:
Tax qualified ........................................ 1,951 10.076854 19,660
Non-tax qualified .................................... 578 10.076854 5,824
Nationwide SAT - Small Company Fund:
Tax qualified ........................................ 1,552 11.411037 17,710
Non-tax qualified .................................... 676 11.411037 7,714
Nationwide SAT - Total Return Fund:
Tax qualified ........................................ 42 10.500717 441
Non-tax qualified .................................... 450 10.500717 4,725
Neuberger & Berman - Growth Portfolio:
Tax qualified ........................................ 2,596 9.971367 25,886
Non-tax qualified .................................... 1,831 9.971367 18,258
Neuberger & Berman - Limited Maturity
Bond Portfolio:
Non-tax qualified .................................... 18,239 10.180593 185,684
Neuberger & Berman - Partners Portfolio:
Tax qualified ........................................ 934 10.570046 9,872
Non-tax qualified .................................... 233 10.570046 2,463
Oppenheimer - Bond Fund:
Non-tax qualified .................................... 71 10.287129 730
Oppenheimer - Global Securities Fund:
Non-tax qualified .................................... 44 10.087683 444
Oppenheimer - Multiple Strategies Fund:
Non-tax qualified .................................... 78 10.302692 804
Strong VIP - Strong Discovery Fund II, Inc.:
Tax qualified ........................................ 418 10.468286 4,376
Non-tax qualified .................................... 1,763 10.468286 18,456
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Strong VIP - Strong Special Fund II, Inc.:
Tax qualified ........................................ 491 10.587949 5,199
Non-tax qualified .................................... 309 10.587949 3,272
TCI Portfolios - TCI Growth:
Tax qualified ........................................ 2,625 9.880281 25,936
Non-tax qualified .................................... 2,306 9.880281 22,784
TCI Portfolios - TCI International:
Tax qualified ........................................ 72 10.355977 746
Non-tax qualified 741 10.355977 7,674
Van Eck - Gold and Natural Resources Fund:
Tax qualified ........................................ 305 11.060595 3,373
Non-tax qualified .................................... 194 11.060595 2,146
Van Eck - Worldwide Bond Fund:
Tax qualified ........................................ 496 10.113918 5,017
Van Kampen American Capital - Real Estate
Securities Fund:
Tax qualified ........................................ 231 10.597781 2,448
Non-tax qualified .................................... 235 10.597781 2,490
Warburg Pincus - International Equity Portfolio:
Tax qualified ........................................ 56 10.363169 580
Warburg Pincus - Small Company Growth Portfolio:
Tax qualified ........................................ 3,368 11.154927 37,570
Non-tax qualified .................................... 959 11.154927 10,698
The BEST OF AMERICA(R) contracts:
American VI Series - Growth Fund:
Tax qualified ........................................ 533,382 21.880052 11,670,426
Non-tax qualified .................................... 544,338 21.880052 11,910,144
American VI Series - High-Yield Bond Fund:
Tax qualified ........................................ 74,984 20.729452 1,554,377
Non-tax qualified .................................... 65,007 20.729452 1,347,559
American VI Series - U.S. Government/AAA-Rated
Securities Fund:
Tax qualified ........................................ 315,331 18.077072 5,700,261
Non-tax qualified .................................... 238,614 18.077072 4,313,442
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified ........................................ 640,387 14.239508 9,118,796
Non-tax qualified .................................... 421,093 14.239508 5,996,157
Dreyfus Stock Index Fund:
Tax qualified ........................................ 3,284,707 13.619180 44,735,016
Non-tax qualified .................................... 2,805,145 13.619180 38,203,775
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................................ 21,482,777 24.863579 534,138,723
Non-tax qualified .................................... 21,094,657 24.863579 524,488,671
Fidelity VIP - Growth Portfolio:
Tax qualified ........................................ 15,252,906 34.006052 518,691,115
Non-tax qualified .................................... 13,813,237 34.006052 469,733,656
Fidelity VIP - High Income Portfolio:
Tax qualified ........................................ 6,464,833 21.817076 141,043,753
Non-tax qualified .................................... 7,993,534 21.817076 174,395,539
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................................ 14,272,080 14.832631 211,692,496
Non-tax qualified .................................... 14,672,390 14.832631 217,630,147
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ........................................ 22,704,319 18.056027 409,949,797
Non-tax qualified .................................... 16,037,811 18.056027 289,579,148
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ........................................ 3,025,498 11.071500 33,496,801
Non-tax qualified .................................... 3,490,716 11.071500 38,647,462
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
Nationwide SAT - Capital Appreciation Fund:
Tax qualified......................................... 897,315 14.442619 12,959,579
Non-tax qualified..................................... 904,797 14.442619 13,067,638
Nationwide SAT - Government Bond Fund:
Tax qualified......................................... 4,150,795 29.663756 123,128,170
Non-tax qualified..................................... 3,385,486 29.585401 100,160,961
Nationwide SAT - Money Market Fund:
Tax qualified......................................... 9,961,763 21.334141 212,525,656
Non-tax qualified..................................... 10,688,426 21.334141 228,028,387
Nationwide SAT - Small Company Fund:
Tax qualified......................................... 157,084 11.410135 1,792,350
Non-tax qualified..................................... 607,477 11.410135 6,931,395
Nationwide SAT - Total Return Fund:
Tax qualified......................................... 2,843,673 52.147953 148,291,726
Non-tax qualified..................................... 2,833,128 50.805130 143,937,436
Neuberger & Berman - Growth Portfolio:
Tax qualified......................................... 5,919,670 27.626244 163,538,248
Non-tax qualified..................................... 5,358,461 27.626244 148,034,151
Neuberger & Berman - Limited Maturity
Bond Portfolio:
Tax qualified......................................... 4,061,293 16.311479 66,245,695
Non-tax qualified..................................... 3,866,535 16.311479 63,068,904
Neuberger & Berman - Partners Portfolio:
Tax qualified......................................... 2,151,917 13.494251 29,038,508
Non-tax qualified..................................... 2,173,222 13.494251 29,326,003
Oppenheimer - Bond Fund:
Tax qualified......................................... 3,369,101 16.781326 56,537,982
Non-tax qualified..................................... 3,073,942 16.781326 51,584,823
Oppenheimer - Global Securities Fund:
Tax qualified......................................... 6,518,772 11.411200 74,387,011
Non-tax qualified..................................... 4,810,440 11.411200 54,892,893
Oppenheimer - Multiple Strategies Fund:
Tax qualified......................................... 4,418,303 15.831164 69,946,879
Non-tax qualified..................................... 3,837,204 15.831164 60,747,406
Strong VIP - Strong Discovery Fund II, Inc.:
Tax qualified......................................... 5,223,195 16.212409 84,680,574
Non-tax qualified..................................... 5,248,509 16.212409 85,090,975
Strong VIP - Strong International Stock Fund II, Inc.:
Tax qualified......................................... 78,603 10.226470 803,831
Non-tax qualified..................................... 86,735 10.226470 886,993
Strong VIP - Strong Special Fund II, Inc.:
Tax qualified......................................... 9,874,627 18.071722 178,451,514
Non-tax qualified..................................... 8,712,015 18.071722 157,441,113
TCI Portfolios - TCI Balanced:
Tax qualified......................................... 2,978,792 12.912980 38,465,082
Non-tax qualified..................................... 2,471,621 12.912980 31,915,993
TCI Portfolios - TCI Growth:
Tax qualified......................................... 9,867,412 25.074858 247,423,955
Non-tax qualified..................................... 7,570,906 25.074858 189,839,393
TCI Portfolios - TCI International:
Tax qualified......................................... 1,565,354 10.402550 16,283,673
Non-tax qualified..................................... 1,498,305 10.402550 15,586,193
Van Eck - Gold and Natural Resources Fund:
Tax qualified......................................... 3,166,034 13.944310 44,148,160
Non-tax qualified..................................... 3,714,045 13.944310 51,789,795
Van Eck - Worldwide Bond Fund:
Tax qualified......................................... 2,993,355 14.433345 43,204,125
Non-tax qualified..................................... 3,020,939 14.433345 43,602,255
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
Van Kampen American Capital - Real Estate
Securities Fund:
Tax qualified......................................... 161,110 10.765351 1,734,406
Non-tax qualified..................................... 310,010 10.765351 3,337,366
Warburg Pincus - International Equity Portfolio:
Tax qualified......................................... 1,798,470 10.661059 19,173,595
Non-tax qualified..................................... 2,012,385 10.661059 21,454,155
Warburg Pincus - Small Company Growth Portfolio:
Tax qualified......................................... 2,450,661 12.430073 30,461,895
Non-tax qualified..................................... 2,574,975 12.430073 32,007,127
The BEST OF AMERICA(R) America's Vision
Annuity(SM) contracts:
The Dreyfus Socially Responsible Growth Fund, Inc.:
Tax qualified......................................... 195,462 13.462638 2,631,434
Non-tax qualified..................................... 331,788 13.462638 4,466,742
Dreyfus Stock Index Fund:
Tax qualified......................................... 1,651,153 13.549203 22,371,807
Non-tax qualified..................................... 2,487,342 13.549203 33,701,502
Fidelity VIP - Equity-Income Portfolio:
Tax qualified......................................... 8,772,439 14.333670 125,741,246
Non-tax qualified..................................... 12,709,387 14.333670 182,172,159
Fidelity VIP - Growth Portfolio:
Tax qualified......................................... 6,525,239 13.458405 87,819,309
Non-tax qualified..................................... 10,395,158 13.458405 139,902,246
Fidelity VIP - High Income Portfolio:
Tax qualified......................................... 4,074,649 11.707151 47,702,531
Non-tax qualified..................................... 5,647,831 11.707151 66,120,010
Fidelity VIP - Overseas Portfolio:
Tax qualified......................................... 3,053,190 11.394419 34,789,326
Non-tax qualified..................................... 4,289,622 11.394419 48,877,750
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified......................................... 5,437,140 11.038610 60,018,468
Non-tax qualified..................................... 7,152,807 11.038610 78,957,047
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified......................................... 1,651,204 11.065996 18,272,217
Non-tax qualified..................................... 2,730,876 11.065996 30,219,863
Nationwide SAT - Capital Appreciation Fund:
Tax qualified......................................... 217,088 12.811228 2,781,164
Non-tax qualified..................................... 324,265 12.811228 4,154,233
Nationwide SAT - Government Bond Fund:
Tax qualified......................................... 1,375,356 11.196001 15,398,487
Non-tax qualified..................................... 1,845,640 11.196001 20,663,787
Nationwide SAT - Money Market Fund:
Tax qualified......................................... 7,418,948 10.683538 79,260,613
Non-tax qualified..................................... 11,573,455 10.683538 123,645,446
Nationwide SAT - Small Company Fund:
Tax qualified......................................... 61,355 11.408018 699,939
Non-tax qualified..................................... 274,709 11.408018 3,133,885
Nationwide SAT - Total Return Fund:
Tax qualified......................................... 1,799,440 12.801951 23,036,343
Non-tax qualified..................................... 2,431,303 12.801951 31,125,422
Neuberger & Berman - Growth Portfolio:
Tax qualified......................................... 1,628,798 12.286164 20,011,679
Non-tax qualified..................................... 2,653,678 12.286164 32,603,523
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
Neuberger & Berman - Limited Maturity
Bond Portfolio:
Tax qualified......................................... 2,080,555 10.786223 22,441,330
Non-tax qualified..................................... 3,264,440 10.786223 35,210,978
Neuberger & Berman - Partners Portfolio:
Tax qualified......................................... 1,257,295 13.474969 16,942,011
Non-tax qualified..................................... 1,579,425 13.474969 21,282,703
Oppenheimer - Bond Fund:
Tax qualified......................................... 1,725,638 11.228877 19,376,977
Non-tax qualified..................................... 2,135,137 11.228877 23,975,191
Oppenheimer - Global Securities Fund:
Tax qualified......................................... 2,901,407 10.479380 30,404,946
Non-tax qualified..................................... 3,528,736 10.479380 36,978,965
Oppenheimer - Multiple Strategies Fund:
Tax qualified......................................... 1,296,727 11.763879 15,254,540
Non-tax qualified..................................... 1,911,329 11.763879 22,484,643
Strong VIP - Strong Discovery Fund II, Inc.:
Tax qualified......................................... 1,701,819 13.432714 22,860,048
Non-tax qualified..................................... 2,670,161 13.432714 35,867,509
Strong VIP - Strong International Stock Fund II, Inc.:
Tax qualified......................................... 25,615 10.224570 261,902
Non-tax qualified..................................... 53,080 10.224570 542,720
Strong VIP - Strong Special Fund II, Inc.:
Tax qualified......................................... 3,116,534 13.287288 41,410,285
Non-tax qualified..................................... 4,296,074 13.287288 57,083,173
TCI Portfolios - TCI Balanced:
Tax qualified......................................... 602,257 11.914266 7,175,450
Non-tax qualified..................................... 989,420 11.914266 11,788,213
TCI Portfolios - TCI Growth:
Tax qualified......................................... 1,787,046 12.792935 22,861,563
Non-tax qualified..................................... 2,955,898 12.792935 37,814,611
TCI Portfolios - TCI International:
Tax qualified......................................... 647,594 10.387676 6,726,997
Non-tax qualified..................................... 1,011,780 10.387676 10,510,043
Van Eck - Gold and Natural Resources Fund:
Tax qualified......................................... 720,611 11.453100 8,253,230
Non-tax qualified..................................... 1,314,047 11.453100 15,049,912
Van Eck - Worldwide Bond Fund:
Tax qualified......................................... 688,208 11.473340 7,896,044
Non-tax qualified..................................... 986,151 11.473340 11,314,446
Van Kampen American Capital - Real Estate
Securities Fund:
Tax qualified......................................... 69,755 10.759998 750,564
Non-tax qualified..................................... 131,252 10.759998 1,412,271
Warburg Pincus - International Equity Portfolio:
Tax qualified......................................... 707,567 10.655759 7,539,663
Non-tax qualified..................................... 1,351,263 10.655759 14,398,733
Warburg Pincus - Small Company Growth Portfolio:
Tax qualified......................................... 972,182 12.423899 12,078,291
Non-tax qualified..................................... 1,536,271 12.423899 19,086,476
Reserves for annuity contracts in payout phase: ========= =========
Tax qualified......................................... 1,425,295
Non-tax qualified..................................... 1,518,928
--------------
$8,834,896,021
==============
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 13
- --------------------------------------------------------------------------------
SCHEDULE I
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R)
NATIONWIDE INSURANCE ENTERPRISE ANNUITY CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULE OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
DrySRGro DryStkIx FkdEqInc FidGro FidHiInc FidOSeas FidAsMgr
---------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1995**
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .284361 .133565 .055400 .000000 .000000 .000000 .000000
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .059585 .455824 .688141 (.343684) .168653 .498416 .547401
- ---------------------------------------------------------------------------------------------------------------------
Contract charges (.013456) (.013683) (.013735) (.012999) (.013287) (.013485) (.013540)
- ---------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.330490 10.575706 10.729806 9.643317 10.155366 10.484931 10.533861
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 3%(b) 6%(b) 7%(b) (4)%(b) 2%(b) 5%(b) 5%(b)
=====================================================================================================================
<CAPTION>
FidContP NWGvtBd
--------- ---------
<S> <C> <C>
1995**
Beginning unit value - Jan. 1 10.000000 10.000000
- ---------------------------------------------------------
Reinvested capital gains
and dividends .131621 .160077
- ---------------------------------------------------------
Unrealized gain (loss) .089202 .115777
- ---------------------------------------------------------
Contract charges (.013341) (.013359)
- ---------------------------------------------------------
Ending unit value - Dec. 31 10.207482 10.262495
- ---------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 2%(b) 3%(b)
=========================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** These investment options were not available prior to 1995 and no other
investment options were being utilized.
<PAGE> 14
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R)
NATIONWIDE INSURANCE ENTERPRISE ANNUITY CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULE OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NWMyMkt NWSmCoFd NWTotRet NBGro NBLtdMat
------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C>
1995**
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .090135 .017460 .616695 .000000 .000000
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.407776 (.102353) (.015308) .193905
- ---------------------------------------------------------------------------------------------
Contract charges (.013281) (.014199) (.013625) (.013325) (.013312)
- ---------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.076854 11.411037 10.500717 9.971367 10.180593
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 1%(b) 14%(b) 5%(b) 0%(b) 2%(b)
=============================================================================================
<CAPTION>
NBPart OppBdFd OppGlSec OppMult
------ ------- -------- -------
<S> <C> <C> <C> <C>
1995**
Beginning unit value - Jan. 1 10.000000 10.000000 10.000000 10.000000
- -------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .170891 .000000 .105143
- -------------------------------------------------------------------------------
Unrealized gain (loss) .583646 .129602 .100810 .210984
- -------------------------------------------------------------------------------
Contract charges (.013600) (.013364) (.013127) (.013435)
- -------------------------------------------------------------------------------
Ending unit value - Dec. 31 10.570046 10.287129 10.087683 10.302692
- -------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 6%(b) 3%(b) 1%(b) 3%(b)
===============================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** These investment options were not available prior to 1995 and no other
investment options were being utilized.
<PAGE> 15
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R)
NATIONWIDE INSURANCE ENTERPRISE ANNUITY CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULE OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
StDisc2 StSpec2 TCIgro TCIInt VEGoldNR
------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
1995**
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .134105 .031024 .000000 .000000 .053476
- ---------------------------------------------------------------------------------------------
Unrealized gain (loss) .347815 .570573 (.106657) .369293 1.021372
- ---------------------------------------------------------------------------------------------
Contract charges (.013634) (.013648) (.013062) (.013316) (.014253)
- ---------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.468286 10.587949 9.880281 10.355977 11.060595
- ---------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 5%(b) 6%(b) (1)%(b) 4%(b) 11%(b)
=============================================================================================
<CAPTION>
VEwrldBd VKACRESec WPintEQ WPSmCoGr
-------- --------- ------- --------
<S> <C> <C> <C> <C>
1995**
Beginning unit value - Jan. 1 10.000000 10.000000 10.000000 10.000000
- -----------------------------------------------------------------------------
Reinvested capital gains
and dividends .187333 .090508 .075167 .000000
- -----------------------------------------------------------------------------
Unrealized gain (loss) (.060143) .520696 .301322 1.168850
- -----------------------------------------------------------------------------
Contract charges (.013272) (.013423) (.013320) (.013923)
- -----------------------------------------------------------------------------
Ending unit value - Dec. 31 10.113918 10.597781 10.363169 11.154927
- -----------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 1%(b) 6%(b) 4%(b) 12%(b)
=============================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** These investment options were not available prior to 1995 and no other
investment options were being utilized.
<PAGE> 16
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R) CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
AVISGro+ AVISHiYld+ AVISGvt+ DrySRGro DryStkIx FidEqInc FidGro
-------- ---------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $16.632869 17.247186 15.872495 10.721141 10.087774 18.646331 25.451479
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.970200 1.862872 1.241711 .391978 .361278 1.458073 .140639
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.537128 1.870069 1.184664 3.289326 3.325716 5.043000 8.817717
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.260145) (.250675) (.221798) (.162937) (.155588) (.283825) (.403783)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $21.880052 20.729452 18.077072 14.239508 13.619180 24.863579 34.006052
- --------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 32% 20% 14% 33% 35% 33% 34%
====================================================================================================================
1994
Beginning unit value - Jan. 1 $16.767635 18.696382 16.810323 10.702195 10.130946 17.644458 25.790764
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .539769 1.648226 1.072204 .276343 .283238 1.324090 1.551366
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.458197) (2.863015) (1.799954) (.117315) (.195244) (.084066) (1.565204)
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.216338) (.234407) (.210078) (.140082) (.131166) (.238151) (.325447)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.632869 17.247186 15.872495 10.721141 10.087774 18.646331 25.451479
- --------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (1)% (8)% (6)% 0% 0% 6% (1)%
====================================================================================================================
1993
Beginning unit value - Jan. 1 $14.603954 16.269615 15.319654 10.000000 10.000000 15.123262 21.890060
- --------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .676117 1.606197 1.097138 .031105 1.497786 .440973 .486821
- --------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.690570 1.051273 .607970 .703067 (1.333974) 2.298480 3.727181
- --------------------------------------------------------------------------------------------------------------------
Contract charges (.203006) (.230703) (.214439) (.031977) (.032866) (.218257) (.313298)
- --------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.767635 18.696382 16.810323 10.702195 10.130946 17.644458 25.790764
- --------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 15% 15% 10% 7%(b) 1%(b) 17% 18%
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FidHiInc FidOSeas FidAsMgr FidContP NWCapApp
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 18.327364 13.701507 15.641016 10.000000 11.311683
- -------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.326946 .104797 .328525 .142778 .642190
- -------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.428014 1.210063 2.303674 .998371 2.653706
- -------------------------------------------------------------------------------------------
Contract charges (.265248) (.183736) (.217188) (.069649) (.164960)
- -------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 21.817076 14.832631 18.056027 11.071500 14.442619
- -------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 19% 8% 15% 11%(b) 28%
===========================================================================================
1994
Beginning unit value - Jan. 1 18.859652 13.646118 16.874276 ** 11.564256
- -------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.728139 .070437 .820188 .182737
- -------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.016825) .168983 (1.841072) (.286833)
- -------------------------------------------------------------------------------------------
Contract charges (.243602) (.184031) (.212376) (.148477)
- -------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 18.327364 13.701507 15.641016 11.311683
- -------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (3)% 0% (7)% (2)%
===========================================================================================
1993
Beginning unit value - Jan. 1 15.855840 10.074553 14.123234 ** 10.689287
- -------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.303797 .235418 .655581 .260100
- -------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.928892 3.494272 2.296222 .755961
- -------------------------------------------------------------------------------------------
Contract charges (.228877) (.158125) (.200761) (.141092)
- -------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 18.859652 13.646118 16.874276 11.564256
- -------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 19% 35% 19% 8%
===========================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance
charge discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
+ See note 1(b).
<PAGE> 17
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R) CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NWGvtBd NWGvtBd NWTotRet NWTotRet
Qual Non-Qual NWMyMkt NWSmCoFd Qual Non-Qual
---------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $25.309101 25.242252 20.457373 10.000000 40.926247 39.872391
---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.790910 1.786181 1.150096 .017459 4.054856 3.950443
---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.924333 2.916602 .000000 1.418317 7.778269 7.577969
---------------------------------------------------------------------------------------------------------------------------
Contract charges (.360588) (.359634) (.273328) (.025641) (.611419) (.595673)
---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $29.663756 29.585401 21.334141 11.410135 52.147953 50.805130
---------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 17% 17% 4% 14%(b) 27% 27%
===========================================================================================================================
1994
Beginning unit value - Jan. 1 $26.497619 26.427634 19.951530 ** 41.023082 39.966728
---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.662261 1.657870 .769331 2.069920 2.016621
---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.516459) (2.509816) .000000 (1.626696) (1.584802)
---------------------------------------------------------------------------------------------------------------------------
Contract charges (.334320) (.333436) (.263488) (.540059) (.526156)
---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $25.309101 25.242252 20.457373 40.926247 39.872391
---------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (4)% (4)% 3% 0% 0%
===========================================================================================================================
1993
Beginning unit value - Jan. 1 $24.513489 24.448737 19.672720 ** 37.471598 36.506693
---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.565876 1.561741 .538378 1.528737 1.489372
---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .758226 .756217 .000000 2.538282 2.472924
---------------------------------------------------------------------------------------------------------------------------
Contract charges (.339972) (.339061) (.259568) (.515535) (.502261)
---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $26.497619 26.427634 19.951530 41.023082 39.966728
---------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 8% 8% 1% 9% 9%
===========================================================================================================================
<CAPTION>
NBGro NBLtdMat NBPart OppBdFd OppGlSec OppMult
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 21.247525 14.896724 10.017795 14.531774 11.307851 13.216172
---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .751645 .827026 .081856 1.000174 .297358 1.064619
---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.960166 .791918 3.550121 1.454423 (.045704) 1.742703
---------------------------------------------------------------------------------------------------------------------------
Contract charges (.333092) (.204189) (.155521) (.205045) (.148305) (.192330)
---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 27.626244 16.311479 13.494251 16.781326 11.411200 15.831164
---------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 30% 9% 35% 15% 1% 20%
===========================================================================================================================
1994
Beginning unit value - Jan. 1 22.656907 15.115753 10.000000 15.013579 12.151882 13.655607
---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.730116 .638336 .000000 .845781 .214070 .695235
---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (3.855326) (.662388) .072563 (1.135198) (.900281) (.959283)
---------------------------------------------------------------------------------------------------------------------------
Contract charges (.284172) (.194977) (.054768) (.192388) (.157820) (.175387)
---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 21.247525 14.896724 10.017795 14.531774 11.307851 13.216172
---------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (6)% (1)% 0%(b) (3)% (7)% (3)%
===========================================================================================================================
1993
Beginning unit value - Jan. 1 21.495392 14.362908 ** 13.456350 10.000000 11.932236
---------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .498087 .590488 .935484 .000000 .527244
---------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .947061 .357208 .810882 2.187556 1.363520
---------------------------------------------------------------------------------------------------------------------------
Contract charges (.283633) (.194851) (.189137) (.035674) (.167393)
---------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 22.656907 15.115753 15.013579 12.151882 13.655607
---------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 5% 5% 12% 22%(b) 14%
===========================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance
charge discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
<PAGE> 18
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R) CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
StDisc2 StIntStk2 StSpec2 TCIBal TCIGro TCIInt
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $12.143604 10.000000 14.551898 10.801286 19.378026 9.392316
--------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .211635 .041084 .752969 .305744 .022298 .000000
--------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 4.041557 .209464 2.978530 1.961261 5.972516 1.136498
--------------------------------------------------------------------------------------------------------------------------------
Contract charges (.184387) (.024078) (.211675) (.155311) (.297982) (.126264)
--------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.212409 10.226470 18.071722 12.912980 25.074858 10.402550
--------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 34% 2%(b) 24% 20% 29% 11%
================================================================================================================================
1994
Beginning unit value - Jan. 1 $13.003747 ** 14.230988 10.876699 19.864882 10.000000
--------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .971108 .407882 .260548 .002124 .000000
--------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.670219) .103551 (.194362) (.235006) (.554314)
--------------------------------------------------------------------------------------------------------------------------------
Contract charges (.161032) (.190523) (.141599) (.253974) (.053370)
--------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $12.143604 14.551898 10.801286 19.378026 9.392316
--------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (7)% 2% (1)% (2)% (6)%(b)
================================================================================================================================
1993
Beginning unit value - Jan. 1 $10.796708 ** 11.519061 10.232829 18.244594 **
--------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains.
and dividends .809269 .057233 .193822 .049563
--------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.547378 2.824331 .588305 1.819573
--------------------------------------------------------------------------------------------------------------------------------
Contract charges (.149608) (.169637) (.138257) (.248848)
--------------------------------------------------------------------------------------------------------------------------------
Ending unit value Dec. 31 $13.003747 14.230988 10.876699 19.864882
--------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 20% 24% 6% 9%
================================================================================================================================
<CAPTION>
VEGoldNR VEWrldBd VKACRESec WPIntEq WPSmCoGr
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 12.728311 12.465907 10.000000 10.000000 10.000000
----------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .125379 1.008457 .091958 .077344 .000000
----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.262065 1.139655 .739393 .650502 2.501564
----------------------------------------------------------------------------------------------------------------------------
Contract charges (.171445) (.180674) (.066000) (.066787) (.071491)
----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 13.944310 14.433345 10.765351 10.661059 12.430073
----------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 10% 16% 8%(b) 7%(b) 24%(b)
============================================================================================================================
1994
Beginning unit value - Jan. 1 13.544828 12.798654 ** ** **
----------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .068031 .051478
----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.711769) (.222396)
----------------------------------------------------------------------------------------------------------------------------
Contract charges (.172779) (.161829)
----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 12.728311 12.465907
----------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (6)% (3)%
============================================================================================================================
1993
Beginning unit value - Jan. 1 8.325308 12.031194 ** ** **
----------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains.
and dividends .039162 .966990
----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.323236 (.037324)
----------------------------------------------------------------------------------------------------------------------------
Contract charges (.142878) (.162206)
----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 13.544828 12.798654
----------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 63% 6%
============================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
- --------------------------------------------------------------------------------
<PAGE> 19
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R)
AMERICA'S VISION ANNUITY(SM) CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DrySRGro DryStkIx FidEqInc FidGro FidHiInc
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.146464 10.046079 10.760332 10.082986 9.844496
--------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .370596 .359517 .841191 .055711 .712698
--------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.111650 3.310456 2.908537 3.491973 1.303393
--------------------------------------------------------------------------------------------------------------------
Contract charges (.166072) (.166849) (.176390) (.172265) (.153436)
--------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.462638 13.549203 14.333670 13.458405 11.707151
--------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 33% 35% 33% 33% 19%
====================================================================================================================
1994***
Beginning unit value - Jan. 1 $10.138790 10.099271 10.192462 10.227729 10.140663
--------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .261532 .282153 .764674 .615160 .929117
--------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.110944) (.194528) (.048662) (.620912) (1.084223)
--------------------------------------------------------------------------------------------------------------------
Contract charges (.142914) (.140817) (.148142) (.138991) (.141061)
--------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.146464 10.046079 10.760332 10.082986 9.844496
--------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 0% (1)% 6% (1)% (3)%
====================================================================================================================
<CAPTION>
FidOSeas FidAsMgr FidContP NWCapApp NWGvtBd
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 10.536141 9.571852 10.000000 10.044095 9.562079
--------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .080579 .201029 .142710 .569727 .676196
--------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .929853 1.408870 .998320 2.355148 1.104438
--------------------------------------------------------------------------------------------------------------------
Contract charges (.152154) (.143141) (.075034) (.157742) (.146712)
--------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.394419 11.038610 11.065996 12.811228 11.196001
--------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 8% 15% 11%(b) 28% 17%
====================================================================================================================
1994***
Beginning unit value - Jan. 1 10.504149 10.337032 ** 10.278752 10.021251
--------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .054214 .502389 .162311 .628252
--------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .130333 (1.127465) (.254834) (.951262)
--------------------------------------------------------------------------------------------------------------------
Contract charges (.152555) (.140104) (.142134) (.136162)
--------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 10.536141 9.571852 10.044095 9.562079
--------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 0% (7)% (2)% (5)%
====================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
*** These investment options were not available prior to 1994.
<PAGE> 20
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R)
AMERICA'S VISION ANNUITY(SM) CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
NWMyMkt NWSmCoFd NWTotRet NBGro NBLtdMat NBPart
------- -------- -------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.254838 10.000000 10.057257 9.458916 9.860649 10.013591
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .576257 .017456 .995563 .334560 .547347 .081808
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.418186 1.910936 2.652367 .523785 3.546970
- -------------------------------------------------------------------------------------------------------
Contract charges (.147557) (.027624) (.161805) (.159679) (.145558) (.167400)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.683538 11.408018 12.801951 12.286164 10.786223 13.474969
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 4% 14%(b) 27% 30% 9% 35%
=======================================================================================================
1994***
Beginning unit value - Jan. 1 $10.011385 ** 10.091256 10.096549 10.015749 10.000000
- -------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .385849 .508763 1.216477 .422915 .000000
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (.399693) (1.717723) (.438889) .072593
- -------------------------------------------------------------------------------------------------------
Contract charges (.142396) (.143069) (.136387) (.139126) (.059002)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.254838 10.057257 9.458916 9.860649 10.013591
- -------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 2% 0% (6)% (2)% 0%(b)
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
OppBdFd OppGlSec OppMult StDisc2
------- -------- ------- -------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 9.733460 10.394970 9.830640 10.071698
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .669514 .273289 .791531 .175352
- ------------------------------------------------------------------------------
Unrealized gain (loss) .973805 (.042048) 1.295766 3.350345
- ------------------------------------------------------------------------------
Contract charges (.147902) (.146831) (.154058) (.164681)
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.228877 10.479380 11.763879 13.432714
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 15% 1% 20% 33%
==============================================================================
1994***
Beginning unit value - Jan. 1 10.066342 11.182167 10.167774 10.796000
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .566682 .196942 .517326 .805515
- ------------------------------------------------------------------------------
Unrealized gain (loss) (.760661) (.827742) (.713828) (1.385836)
- ------------------------------------------------------------------------------
Contract charges (.138903) (.156397) (.140632) (.143981)
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 9.733460 10.394970 9.830640 10.071698
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (3)% (7)% (3)% (7)%
==============================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
*** These investment options were not available prior to 1994.
</TABLE>
<PAGE> 21
SCHEDULE I, CONTINUED
NATIONWIDE VARIABLE ACCOUNT - II
THE BEST OF AMERICA(R)
AMERICA'S VISION ANNUITY(SM) CONTRACTS
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
StIntStk2 StSpec2 TCIBal TCIGro TCIInt VEGoldNR
--------- ------- ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.000000 10.710138 9.975959 9.896469 9.388381 10.464922
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .041077 .553997 .282199 .011387 .000000 .103018
- --------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .209428 2.190922 1.810577 3.048970 1.135219 1.036957
- --------------------------------------------------------------------------------------------------------
Contract charges (.025935) (.167769) (.154469) (.163891) (.135924) (.151797)
- --------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.224570 13.287288 11.914266 12.792935 10.387676 11.453100
- --------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 2%(b) 24% 19% 29% 11% 9%
========================================================================================================
1994***
Beginning unit value - Jan. 1 ** $10.484543 10.055760 10.155359 10.000000 11.147499
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .300283 .240728 .001086 .000000 .055957
- --------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .076473 (.179560) (.120150) (.554133) (.585405)
- --------------------------------------------------------------------------------------------------------
Contract charges (.151161) (.140969) (.139826) (.057486) (.153129)
- --------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.710138 9.975959 9.896469 9.388381 10.464922
- --------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 2% (1)% (3)% (6)%(b) (6)%
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEWrldBd VKACRESec WPIntEq WPSmCoGr
-------- --------- ------- --------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 9.919400 10.000000 10.000000 10.000000
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .802034 .091916 .077309 .000000
- ------------------------------------------------------------------------------
Unrealized gain (loss) .906733 .739173 .650383 2.500906
- ------------------------------------------------------------------------------
Contract charges (.154827) (.071091) (.071933) (.077007)
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.473340 10.759998 10.655759 12.423899
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) 16% 8%(b) 7%(b) 24%(b)
==============================================================================
1994***
Beginning unit value - Jan. 1 10.194477 ** ** **
- ------------------------------------------------------------------------------
Reinvested capital gains
and dividends .040987
- ------------------------------------------------------------------------------
Unrealized gain (loss) (.177244)
- ------------------------------------------------------------------------------
Contract charges (.138820)
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 9.919400
- ------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* (a) (3)%
==============================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
*** These investment options were not available prior to 1994.
</TABLE>
See note 3.
<PAGE> 38
<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> 39
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
(a) Financial Statements: PAGE
<S> <C> <C>
(1) Financial statements and schedules included
in Prospectus
(Part A):
Condensed Financial Information. N/A
(2) Financial statements and schedules included
in Part B:
Those financial statements and schedules 37
required by Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account-II:
Independent Auditors' Report. 37
Statement of Assets, Liabilities and Contract 38
Owners' Equity as of December 31, 1995.
Statements of Operations and Changes in 40
Contract Owners' Equity for the years ended
December 31, 1995, 1994 and 1993.
Notes to Financial Statements. 41
Schedules of Changes in Unit Value. 49
Nationwide Life Insurance Company:
Independent Auditors' Report. 58
Consolidated Balance Sheets as of December 59
31, 1995 and 1994.
Consolidated Statements of Income for the 60
years ended December 31, 1995, 1994 and
1993.
Consolidated Statements of Shareholder's 61
Equity for the years ended December 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows for 62
the years ended December 31, 1995, 1994
and 1993.
Notes to Consolidated Financial Statements. 63
Schedule I - Summary of Investments - Other Than
Investments in Related Parties. 96
Schedule III - Supplementary Insurance Information. 97
Schedule IV - Reinsurance. 98
Schedule V - Valuation and Qualifying Accounts. 99
</TABLE>
87 of 106
<PAGE> 40
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 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 by reference.
(4) The form of the variable annuity contract
(5) Variable Annuity Application - Filed previously
with the Registration Statement for Nationwide
Variable Account-II (File No. 33-60063) on October
25, 1993 and hereby incorporated by reference.
(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 by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with the
Registration Statement for Nationwide Variable
Account-II (File No. 33-60063) on October 25, 1993
and hereby incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
88 of 106
<PAGE> 41
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount 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
</TABLE>
89 of 106
<PAGE> 42
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Gordon E. McCutchan Executive Vice President,
One Nationwide Plaza Law and Corporate Services
Columbus, OH 43215 and Secretary
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, 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
</TABLE>
90 of 106
<PAGE> 43
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Annuity and Pension Actuarial
Columbus, OH 43215
Ronald L. Eppley Vice President-
One Nationwide Plaza Pensions
Columbus, OH 43215
Timothy E. Murphy Vice President-
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
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
91 of 106
<PAGE> 44
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION 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, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Investment Securities Agent
Colonial County Mutual insurance Texas Insurance Company
Company
Colonial Insurance Company of California Insurance Company
California
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Illinois, Inc. Illinois Acts as Collection Agent for Policies
placed through Brokers
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Insurance Broker
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Annuity Agency of Texas, Texas Insurance Broker
Inc.
Countrywide Services Corporation Delaware Products Liability, Investigative and
Claims Management Services
Employers Insurance of Wausau A Wisconsin Insurance Company
Mutual Company
</TABLE>
92 of 106
<PAGE> 45
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Insurance 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 Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing
Services
Gates, McDonald & Company of New New York Workers Compensation Claims
York, Inc. Administration
Greater La Crosse Health Plans, Inc. Wisconsin Writes Commercial Health and Medicare
Supplement Insurance
InHealth Agency, Inc. Ohio Insurance Agency
InHealth Management Systems, Inc. Ohio Develops and operates Managed Care
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 New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and operates a Recreational Ski
Facility
** National Casualty Company Michigan Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
</TABLE>
93 of 106
<PAGE> 46
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Nationwide Cash Management Company Ohio Investment Securities Agent
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 Company Ohio Owns, leases and manages commercial
real estate
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
** Nationwide Financial Services, Inc. Ohio Registered Broker-Dealer, Investment
Manager and Administrator
Nationwide General Insurance Company Ohio Insurance Company
Nationwide HMO, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Mutual Fire Insurance Ohio Insurance Company
Company
</TABLE>
94 of 106
<PAGE> 47
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Nationwide Mutual Insurance Company Ohio Insurance Company
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
** Nationwide Property Management, Inc. Ohio Owns, leases, manages and deals in
Real Property
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Massachusetts Life Insurance Agency
Massachusetts, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura
Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred
Agency, Inc. Compensation Plans for Public
PEBSCO of Texas, Inc. Texas Employees Markets and Administers
Deferred Compensation Plans for Public
Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record
keeping and consulting and
compensation consulting
</TABLE>
95 of 106
<PAGE> 48
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
Public Employees Benefit Services Delaware Marketing and Administration of
corporation Deferred Employee Compensation Plans
for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred
Corporation of Alabama Compensation Plans for Public
Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred
Corporation of Arkansas Compensation Plans for Public
Employees
Public Employees Benefit Services Montana Markets and Administers Deferred
Corporation of Montana Compensation Plans for Public
Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred
Corporation of New Mexico Compensation Plans for Public
Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance
Group Group
Wausau Business Insurance Company Illinois Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus
Lines Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
** West Coast Life Insurance Company California Life Insurance Company
</TABLE>
96 of 106
<PAGE> 49
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART)
STATE UNLESS OTHERWISE
COMPANY OF ORGANIZATION INDICATED PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Life Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Contracts
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Contracts
</TABLE>
97 of 106
<PAGE> 50
<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> 51
<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> 52
<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> 53
<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> 54
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE (right side)
<S> <C> <C>
_______________________________________
| |
______________________| NATIONWIDE MUTUAL |
______________________| FIRE INSURANCE COMPANY |
| (FIRE) |
|_______________________________________|
________________________________________|
____________________________________________________________________
| | |
_____________|_____________ | ____________|______________
| NEA VALUEBUILDER | | | NATIONWIDE HMO, INC. |
| INVESTOR SERVICES, INC. | | | (NW HMO) |
| (NEA) | | | Common Stock: 100 Shares |
_______| Common Stock: 500 Shares | |_____| ------------ |
| _____| ------------- | | | Cost |
| | | Cost | | | ---- |
| | | NW Corp.- ---- | | | NW Corp.- |
| | | 100% $5,000 | | | 100% $14,603,732 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH MANAGEMENT |
| | | INVESTOR SERVICES | | | SYSTEMS, INC. |
| |_____| OF ALABAMA, INC. | | | Common Stock: 100 Shares |
| | | Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | | |
| | | Cost | | | Cost |
| | | ---- | | | NW HMO ---- |
| | | NEA-100% $5,000 | | | INC.-100% $25,149 |
| | |___________________________| | |___________________________|
| | |
| | ___________________________ | ___________________________
| | | NEA VALUEBUILDER | | | INHEALTH |
| | | INVESTOR SERVICES | | | AGENCY, INC. |
| | | OF MONTANA, INC. | | | Common Stock: 100 Shares |
| |_____| Common Stock: 500 Shares | |_____| ------------- |
| | | ------------- | | Cost |
| | | Cost | | NW HMO ---- |
| | | ----- | | INC.-99% $116,077 |
| | | NEA-100% $500 | |___________________________|
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF NEVADA, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF OHIO, INC. |
| | | Common Stock: 100 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-91% $5,000 |
| | |___________________________|
| |
| | ___________________________
| | | NEA VALUEBUILDER |
| | | INVESTOR SERVICES |
| |_____| OF WYOMING, INC. |
| | | Common Stock: 500 Shares |
| | | ------------- Cost |
| | | ---- |
| | | NEA-100% $500 |
| | |___________________________|
| |
| | ___________________________
| | | |
| | | NEA VALUEBUILDER |
| |_____| INVESTOR SERVICES |
| | | OF TEXAS, INC. |
| | | |
| | |___________________________|
| |
| | ___________________________
| | | |
| |_____| NEA VALUEBUILDER |
|_______| INVESTOR SERVICES |
| OF OKLAHOMA, INC. |
| |
|___________________________|
</TABLE>
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
December 31, 1995
Page 2
<PAGE> 55
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 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.
<TABLE>
<CAPTION>
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
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
One Nationwide Plaza Executive Vice President-Law and
Columbus, OH 43215 Corporate Services and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, Ohio 43215
</TABLE>
100 of 106
<PAGE> 56
<TABLE>
<CAPTION>
(b) NATIONWIDE FINANCIAL SERVICES, INC.
DIRECTORS AND OFFICERS
<S> <C>
Robert J. Woodward Executive Vice President - Chief Investment
One Nationwide Plaza 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>
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
industry-wide 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).
101 of 106
<PAGE> 57
ACCOUNTANTS' CONSENT AND INDEPENDENT AUDITORS' REPORT ON FINANCIAL
STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners' of Nationwide Variable Account II:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated February 26, 1996, included the related financial statement
schedules as of December 31, 1995, and for each of the years in the three-year
period ended December 31, 1995, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1996
102 of 106
<PAGE> 58
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE
VARIABLE ACCOUNT-II, certifies that it meets the requirements of Securities Act
485(b) for effectiveness of this Post-Effective Amendment and has caused this
Post-Effective Amendment to be signed on its behalf in the City of Columbus, and
State of Ohio, on this 26th day of April, 1996.
NATIONWIDE VARIABLE ACCOUNT-II
--------------------------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
--------------------------------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
--------------------------------------------------------------------
Joseph P. Rath
Vice President and
Associate General Counsel
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on the 26th day
of April, 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
Chairman and Chief Executive Officer - Nationwide
D. RICHARD MCFERSON 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
ARDEN L. SHISLER Director Attorney-in-Fact
- ------------------------------------------
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>
103 of 106
<PAGE> 59
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
